“The Dam Has Burst”: Why David Einhorn Thinks The Coronavirus Shock Will Lead To Soaring Inflation
One of the bizarre aspects of the global depression resulting from the coordinated shutdown of most world economies due to the coronavius pandemic, is that we have experience a collapse in both aggregate supply and demand which, almost absurdly, has kept equilibrium prices relatively unchanged (except in the infamous case of oil where due to storage space limitations, the prompt WTI contract traded as far negative as -$40 on April 20. As a result, the biggest challenge facing economists is deciding if what comes next after the coronavirus pandemic is conquered, is inflation – as trillions in central bank and government stimulus lead to a far faster rebound in demand, or if the early surge in supply overwhelms demand and leads to a deflationary crash similar to what was seen in oil.
While the majority of economists and strategists, even contrarian types, are confident what comes next is even more deflation – and why not according to 10Y breakevens there will barely be any inflation for the next decade…
… one financial luminary who disagrees is David Einhorn who, when not feuding with Elon Musk on an almost daily basis now, believes that the economic shock from the coronavirus will turn out to be inflationary as he explains in his latest letter to investors.
But before we get into the gist of it, first we lay out his take on where we are now, and how we got here, namely the events leading to the global corona crisis, and the official response:
…click on the above link to read the rest of the article…
