Bridgewater warns Fed will struggle to fix inflation

Financial Times/Kate Duguid and Tommy Stubbington

Repost from 10-12-2021

graphic representation of a bulletin board note reminder that the 1970s equal the 2020s

“A top investor at the world’s biggest hedge fund has warned that high inflation is here to stay and central banks may be powerless to fight it without derailing the economic recovery, following a week in which soaring energy prices rocked markets around the world.”

USAGOLD note: Bridgewater Associates co-chief investment officer, Bob Prince, explains that the “Fed is in a box” when it comes to inflation. Tightening won’t work, he says, because the price increases are supply-driven and because it would drive financial markets down – something the Fed does not want to do. Allowing inflation to run, Prince reasons, is the lesser of two evils and the path the Fed is most likely to take adding “you can’t do much about it anyway.” Things, he concludes, are beginning “to look a bit like the ’70s and the oil shocks.”  This time around, we will add, it isn’t just oil we need to be concerned about. There is a long list of items in short supply produced in countries experiencing inflation problems of their own.

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