Odd Lots Viktor Shvets on Why We Might Be Heading for a Deflationary Bust
Mar 28, 2022
Viktor Shvets, Head of Global and Asia-Pacific Strategy at Macquarie Capital, dives deep into the complexities of global economics. He challenges the common perception that we're on a 1970s inflation track, suggesting a reevaluation could point to a potential deflationary bust. Shvets emphasizes the risks of central banks raising rates too rapidly, which could push economies into recession. He also highlights the intricate relationship between monetary policy, wealth distribution, and navigating the shifting geopolitical investment landscape.
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Not the 70s
- Current economic uncertainty prompts historical parallels, most recently the 1970s.
- Viktor Shvets suggests the 1910s, 1920s, or 1940s offer better comparisons due to similar financial and labor dynamics.
Post-Spanish Flu Inflation
- Post-Spanish Flu inflation, driven by supply chain disruptions and capacity destruction, led to a deflationary bust in 1921-22 after policy tightening.
- This highlights the risks of premature tightening, offering a potential parallel to today's situation.
Today's Inflation Drivers
- Unlike the 1940s, current inflation is driven by demand shifts and supply chain disruptions, not solely increased demand.
- Premature tightening risks a deflationary bust, especially as fiscal and monetary policies already contract.