Japan and Europe are two massive economic areas that have been printing money for decades and have also tinkered with negative interest rates on a relatively massive scale.
The fact that inflation has not taken hold, to me, indicates that we could actually be in the midst of a deflationary spiral, with central banks trying to get ahead of this. Former Bank of Canada Governor Stephen Poloz has indicated this in previous comments, calling out deflation as a greater risk than inflation today.
I think we could be a few years away from seeing any sort of material inflation take hold, given the inflation ceiling I think the coronavirus has provided.
That said, I do think we’re just kicking the can down the road, and ultimately, we could end up with some serious inflation eight to 10 years from now when things settle down.
I think the long-term impacts of this pandemic are not properly being priced in currently, and therefore I remain highly skeptical of this stock market recovery. In the meantime, buying gold and other inflation hedges while it is cheap could be a great way to defend oneself from this future headwind.
Invest wisely, my friends.