Economic Outlook and the Dollar

David Malpass, Encima Global

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  • Real GDP: slower growth from a lower base 
    • The expansion is starting from a deeper recession than the previous three (1980, 1990, 2000) and, under current Washington policies, is likely to be weaker in terms of annual growth.
    • Slower growth from a lower base means painfully high unemployment and a series of rolling debt crises.


  • Deflation Fear: 10 Year Treasury Yield Low
    • With monetary policy unstable, markets are applying a 'barbell trade' - gold to protect from inflation; bonds to protect from deflation.

Price and Markets

  • Inflation Fear: Gold Prices Hitting New Highs
    • Gold and bonds are rising on the risk that central banks will continue alternating between deflationary and inflationary blunders. We're critical of the instability in the dollar's value and the monetary policy behind it. 


  • US Federal Government Debt 
    • Marketable U.S. federal debt (debt held by public, not trust funds) will hit $20 trillion even under the relatively rosy CBO outlook.