Everyone is talking about inflation nowadays. The most common question from my clients nowadays is “Will there be a recession?”.
Inflation is “too much money chasing too few goods” – in other words – demand is way greater than supply.
To combat inflation is to increase supply and/or reduce demand. The pandemic and Ukraine war has made it difficult for governments to increase supply. They do no want to stop the war, they continue with their trade protectionism, and they do not increase production of oil as they want oil prices to stay high. Instead, reducing demand is the easier and western governments’ preferred choice.
In today’s (22 June 2022) Straits Times, Linda Lim wrote a article “Inflation and recession: A reality check”. She wrote “For the US and other major developed economies, inflation is an enemy that can be readily defeated in the short run, if necessary by allowing or engineering a recession that need not be prolonged or severe.”
Well, its a matter of time.
Our PM has already warned us of a possible recession just last month (May Day message).
So lets be prepared, be defensive, keep cash, reduce loans, switch to those blue chip businesses that will continue to make money through a recession.
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