Should we worry about inflation?

Economist David Rosenberg thinks so. The latest Bloomberg Businessweek devotes an article to Rosemberg’s projections, with the subheadline “A contrarian thinks stimulus will push prices higher.”

[W]hen Rosenberg, chief economist and strategist for Gluskin Sheff & Associates in Toronto and former chief economist for North America at Merrill Lynch (BAC), declares inflation is returning, peers take note. They may not follow, but they listen to a man who’s proven to be a shrewd prognosticator for the past decade. Rosenberg’s focus on inflation since last year marks a 180-degree turn for him—his earlier call on the threat of disinflation represents the view now prevalent among economists. “This deflation, disinflation, benign inflation story which seems to be everybody’s mindset is really yesterday’s story,” Rosenberg says. The Federal Reserve “is carrying out the mother of all reflationary policies. My bet is that eventually the Fed will get what it wants, and then some.”

Janet Yellen, the new Fed chairman, has said inflation is running below policymakers’ 2 percent target and is unlikely to flare up soon. Yet Rosenberg predicts wages and rents in the U.S. will head higher as the job and housing markets rebound and record stimulus by the Fed stokes prices. He says bonds are no longer safe with inflation on its way.

Regular readers in this forum are not unfamiliar with the prospect of dangerous inflation.

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