Gary Shilling Has Very Different Views on Inflation than Buffett

Over the past several months, there has been a lively debate between those who see rampant inflation ahead and others who believe that deflation is more likely. While inflation expectations implied by the bond market are still relatively tame, the market price for gold, oil, and other commodities has been increasing while the dollar has been in decline.

Warren Buffett has commented on massive “greenback emissions” and the tendency of politicians to favor monetizing debt rather than imposing more obvious choices such as tax increases or spending cuts. Gary Shilling, President of A. Gary Shilling & Co., has taken the other side of the debate in a recent interview with Steve Forbes. Mr. Shilling has a long track record of prescient macroeconomic forecasts and was one of the few economists to predict the disinflation of the 1980s.

Previously, we discussed the topic of confirmation bias and the danger this psychological tendency can present for investors. From our observations, it appears that the case for high inflation is very strong. However, part of this belief clearly is related to the strong influence of Mr. Buffett’s views. It is important to seek out opposing points of view in such circumstances. In that spirit, please view Mr. Shilling’s views on inflation among many other topics by clicking on the image displayed below or reading the interview transcript.

Comments

[The Geoffster:]

Conventional monetary theory suggests that the Fed holds the key to turning on inflation. This does not seem true in the current environment because of the massive debt overhang. We are still in a solvency crisis and the Fed's easing to date has merely staunched the blood letting. Monetary policy has yet to kick start the economy and fiscal stimulus has merely pulled demand forward. Gold and commodity prices are reacting to a weak dollar and uncertainty as much as inflation fears.

Nov 16 10:11 AM

[Gedankonomist:]

The fed wants to inflate asset prices? What is that supposed to mean?

Inflation is the increase in money supply. The FED has been doing that since 1913. The FED has been increasing the money supply (i.e. simply printing money) just for that purpose, so it's owners can have free money.

As a kickback, some of the proceeds go to the politicians, so that they don't have to raise taxes or cut spending.

This reply (below) is a perfect example of why this scam has gone on for so long. The people in the US have no clue! This is because you get all your info from public schools, and the boob tube and other mass media, which are all essentially owned/operated/manipul... by the same people who control this scam, or who at least profit from it.

On Nov 16 07:24 AM test213 wrote:

> The Fed wants to inflate asset prices to make the bank balance sheets
> better. Therefore, they will do whatever it takes to accomplish it.
> Inflation will be the outcome, but deflation has been what we got
> so far and until we get to inflation in a year or two.
>
> test213
> admin at invetrics.com

Nov 16 10:43 AM

[Gedankonomist:]

Here's another example (quoted below) of someone who doesn't understand the scam, and so has no idea what he is talking about. He is just regurgitating the same gibberish he has learned from the managed sources of information he has chosen to limit himself to.

On Nov 16 10:11 AM The Geoffster wrote:

> Conventional monetary theory suggests that the Fed holds the key
> to turning on inflation. This does not seem true in the current environment
> because of the massive debt overhang. We are still in a solvency
> crisis and the Fed's easing to date has merely staunched the blood
> letting. Monetary policy has yet to kick start the economy and fiscal
> stimulus has merely pulled demand forward. Gold and commodity prices
> are reacting to a weak dollar and uncertainty as much as inflation
> fears.

Nov 16 10:46 AM

[JLarkin:]

Shilling is spot on with both his view of China and the trillions of dollars of credit destruction in the US. China is building bridges to nowhere and empty, new cities. The Fed may try to reinflate assets, but too much debt is sitting there and now the deficits are getting some attention, so maybe the Fed's hands are about to be tied. Fabulous interview and realistic outlook.

Nov 16 03:43 PM

[The Geoffster:]

Gold standard?


On Nov 16 10:46 AM Gedankonomist wrote:

> Here's another example (quoted below) of someone who doesn't understand
> the scam, and so has no idea what he is talking about. He is just
> regurgitating the same gibberish he has learned from the managed
> sources of information he has chosen to limit himself to.
>
> On Nov 16 10:11 AM The Geoffster wrote:

Nov 16 04:00 PM

[PDT:]

I'm an admirer of both Mr. Buffett and Mr. Shilling, and I pay attention whenever I get a chance to hear them sharing some wisdom. But in my opinion, Shilling is going to be proven correct. The Fed keeps trying to cure a solvency problem by adding more liquidity. I wonder how many trillions it will take for them to figure out that their prescription isn't addressing the true illness, but rather masking some of the symptoms.

As for his timing, yes, Shilling was early. He has a history of being early. And sometimes being early feels a lot like being wrong. But he (like the rest of us) can't control how long it takes for the market to connect the dots. So, he looks at all the angles and supports his theses (in his Insight newsletter, not just this interview) with a mountain of factual data and sound logic. If you are a true contrarian, Shilling ought to be at or near the top of your reading list, IMO.

Nov 17 11:19 AM

[thiazole:]

Gary Shilling has a long history of predicting deflation - since the early 80s as I recall. At the very least, since the late 80s. He is a broken clock, and some day he might get it right. I certainly hope he doesn't get accolades when that happens. Predicting something that is preposterous for 30+ years before it finally happens is nothing to be proud of.

Nov 19 10:35 AM