During this time, growth and inflation are the only feasible ways for the debt to be eroded in real terms. It is difficult to see where growth is going to come from as we know central banks have reached the limit of what they can do to stimulate growth and, with major governments running large budget deficits, there is little scope for a significant fiscal response. Even if the private sector comes to the party, economic growth rates are likely to remain muted, leaving inflation as the most likely solution. It is certainly preferable to Republican presidential candidate Donald Trump giving treasuries a haircut.
Ultimately, it is in the interest of the global economy for inflation to exceed expectations for a prolonged period of time.
Matthew Brittain is investment analyst at Sanlam Private Wealth
