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Biden's trillion-dollar spending may restore inflation missing since '08 crisis
Inflation will become a problem by the end of 2021: AlphaOne Capital’s Dan Niles
Dan Niles, AlphaOne Capital Partners founding partner, argues that when economies fully reopen, inflation will become a ‘big problem, which will ‘force the Fed to taper a lot sooner than people are expecting.’
President-elect Joe Biden’s promise to spend trillions could bring back a healthy level of inflation that has been lacking since the 2008 financial crisis and put an end to the nearly 40-year bull market in bonds.
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Biden unveiled the details Thursday of a $1.9 trillion COVID-19 relief package, the opening gambit in a two-year stretch in which Democrats are likely to have few restraints on their spendingc priorities, with the party controlling both the House and the Senate along with the presidency.
“I think the [inflation] tide is about to turn and the higher inflation provides a basis for the 10-year yield rising" for U.S. Treasurys, said Sri Kumar, president of the Santa Monica, California-based Sri Kumar Global Strategies, pointing to the Biden administration’s plans to spend money to help support lower-income groups.
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Kumar has for the past decade maintained that inflation wouldn't head higher because the Fed’s expansion of its balance sheet through investments in the bond market boosted stocks and housing prices without doing much for wages and consumption.
U.S. consumer prices rose 1.4% year-over-year in November, according to the personal consumption expenditures price index, when excluding food and energy.