The Drivers of Inflation: By Monty Guild
ME 3232: Engineering Economics and the Real Economy
July 4, 2008 (Modifications 11/5/08)
Introduction: Prof. Lyon
The following commentary provides an excellent discussion on the causes of inflation.
readily understood by anyone with an understanding and appreciation of the time value of
It is written by noted wealth management and hedge fund manager Monty Guild.
Guild is the CEO of Guild Investment Management, Inc.
The original commentary provided
here can be found, along with further related market and economic commentary, at
Follow-up 11/5/08: Prof. Lyon
Since the commentary by Mr. Guild was assembled to create this document, the markets have
gone through massive turmoil and there is wide speculation of a world-wide recession and many
countries are clearly showing signs of economic contraction.
In the midst of this, countries such
as China are seeing annual economic growth rates drop from 10-12%, to 7-9%.
This is still
good, but the drop reflects difficulties in their export markets.
As a result, some of the examples
given to illustrate the inflation drivers are a bit out of date.
However, the drivers are still quite
valid, and evidence of their effects are still apparent today, and some of the drivers will go into
overdrive in the near future given the international bailouts that are occurring.
inflation may seem to have subsided for now, but it will become quite apparent again during
As a result, it remains important for people that are looking to plan for their future, and
protect their investments, to understand these drivers and be aware of the potential detrimental
effects of inflation.
"INFLATION'S DRIVER" PART 1 OF THE SERIES
Posted On: Tuesday, June 17, 2008
Author: Monty Guild
INFLATION WILL COME MORE AND MORE INTO PUBLIC AWARENESS OVER
THE NEXT SEVERAL YEARS
There are many indicators of inflation in the world that we watch to forecast oncoming inflation.
Currently, the great majority of these tell us that the inflation we have seen so far…is just getting
In our newsletters at Guild Investment Management we have been talking about inflation and its
expected arrival for almost two years.
We have pointed out the reasons for inflation, and
discussed them in a general way.
I would like to go into each one individually in a short memo
that we will send to clients and to the CIGA’s [Comrades In Golden Arms – name carried by
readers of jsmineset.com] in the next few weeks.
The public media has picked up on the theme
of inflation in the last few months, and they have been haranguing the public about higher food
and energy prices.
As a result, many people believe that once the rate of the rise in food and
energy prices slows, the rate of increase in inflation will recede.