Jim Bianco – We Will Face “Non-Transitory” Inflation

This article is based on a presentation from John Mauldin’s 2021 Virtual Strategic Investment Conference, which is being held from May 5 to 18. To register for this conference, click here. The Strategic Investment Conference was just approved by CIMA and CFP for 19 hours of continuing education credits.

We are about to see “non-transitory inflation,” according to Bianco. His words were chosen carefully to oppose Fed Chair Jay Powell’s statement on April 28 that the U.S. would face only “transitory” inflation.

Bianco is president and macro strategist at his own firm, Bianco Research, L.L.C., which is based in Chicago. He spoke on a panel with Lacy Hunt on May 7 at this year’s Strategic Investment Conference, hosted by John Mauldin.

Hunt is an economist and executive vice president of Hoisington Investment Management Company. Hunt supported Powell’s prediction for temporary inflation, using many of the same arguments that David Rosenberg offered at the same conference two days earlier.

I’ll review Bianco’s comments first, and then Hunt’s.

“We are going to see inflation,” Bianco said.

Inflation will bring higher interest rates. Bianco said he was a bond bull for a long time, but that changed on March 9 of last year, when the yield on the 10-year Treasury bond bottomed at 32 basis points.

The biggest driver of inflation is the $4 trillion deficit, which Bianco said does not include the spending bills that were just passed or infrastructure bills that are pending. That is 19% of GDP, a level that was surpassed only in 1943-1945, when it was 20%, only to fall to 7% in 1946 in the aftermath of World War II.