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I haven't written about inflation for 20 years like when I did quarterly letters I never featured inflation uh it I didn't think it was on the radar screen it is now on the radar screen once again it's not that inflation will go roaring back to 1972 or 1982. it's that it will always be part of the discussion from now on in my opinion instead of forgetting about it it will be spiking and irritating and falling back and then spiking again it will be part of the scenery in the way it used to be in the second half of the 20th century there's a lot about this economy I think that we'll be dragged back into the late 20th century we've had a very very abnormal honeymoon Goldilocks period for 20 years which I think is ending let me put it this way we're in the early stages of running out of raw materials of course we live on a finite Planet there's only a certain amount of cheap oil cheap nickel cheap copper and we're beginning to hit some of those boundaries and we're going to have bottlenecks Here There and Everywhere food price index of the UN is about as high as it gets a growing food is not getting easier climate change is coming with heavy floods serious droughts and higher temperatures none of these make farming easier so we're going to live in a world of bottlenecks and shortages and price spikes and we have to get used to it and learn to manage our way around it and it may well turn out that owning Commodities of our selected Commodities will be something of an escape valve Commodities have a long history of doing quite well when inflation picks up for obvious reasons and inflation is quite likely to pick up looking out into the future it is pretty clear that we are running out of Labor fertility rates have dropped like a stone China is reeling from the shock of finding that it has 10.8 million uh babies last year it's only the other the other year seven or eight years ago it had 20.
and this means absolute certainty that the cohorts of 20 year olds coming into the workforce will will be smaller going forward everywhere everywhere in the developed World we're below replacement infertility I think there's quite a few hedge funds that have a style of making a hundred small bats Trading gas prices against diesel prices and Brent oil against Texas oil they do a thousand Arcane little relationships they're all independent of the market if they do it well they'll make a few percent maybe even quite a few percent and there will be some enormous Dynamic moves in resources I think the FED absolutely does not get the pain that's involved with a bubble breaking you can see that in the history of the last 50 years Greenspan encouraged the tech bubble he bragged about the productivity gains from the internet that would last forever actually productivity has declined slowly but surely since then when it broke it caused a lot of pain Bernanke learned nothing he encouraged the housing bubble he denied its existence even though it was a three sigma one in a hundred year event that had never occurred in American history before and what have we learned we just went straight back into the game over stimulating pushing the raids down down and down they have gone for 50 years so they started at 16 on the long Bond and now the real return you would get is -2 no he hasn't expressed any reservations about Greenspan Bernanke Yellen Powell policy of pushing rates down they act as if a low rate is a Panacea and comes with no downside that is clearly nonsense it's created I think the biggest evil in in our society and that is inequality if you drive up the price of assets systematically and it's bound to happen if you drive the rates down to negative territory who do you make money for you make money for the people with assets who owns the assets the top one percent has 35 percent of all the assets the top 10 percent have practically all the assets what are the what's the asset ownership of the bottom half a rounding error a practically none so you mark out the assets and that that's your contribution contribution to society what you're doing is pushing down on labor pushing down on the bottom half with no offset from increasing their assets since they have not and you're making the top one percent inevitably rich and the data bears that out right down to the last two years when the top 0.1 percent has doubled its wealth during coded and the bottom 50 I can assure you has not doubled as well the dominance of a handful of firms has increased steadily in most subsets and so profit margins have gone up and the power of Corporations has gone up and they've been able to use more of their power in influencing government and they have there is a lot of regulatory capture where people from business tend to run the agencies that regulate the industries so it's been a wonderful time to make money at the corporate system and the share of GDP that goes to corporate profits has steadily risen and the share going to labor has steadily Fallen this makes a dreadful cousin with with the asset class inflation that we've had they both have two things in common they they make the rich better off and they make the working class worser and that that I think is the great poison at the moment in the American system if we do not address Rising inequality we will be in real trouble we are the least equal Society measurably in the developed world we have the least fluid economic Mobility For Heaven's Sake you know when I arrived in America in the 60s it was a joke how rigid the UK was the UK is now less rigid than the US the number of people moving from the bottom quarter to the top quarter in a lifetime is half of what it is say in the swedens of the world in the U.S we are the least mobile I mean this is so Un-American it is so far from what people believe to be the case but check it with the least mobile we're the least equal society and it it's a poisonous influence and we have facilitated it we have moved the taxes on capital capital gains tax dividend tax interest tax we've moved them down and by definition the amount that has to come from income has gone up I like to draw a very clear line between venture capital and everything else private Equity is just another form of money management you are shuffling the existing pieces of paper around if you make money someone else loses and and to do it well is exciting and and useful for your clients from a society's point of view you don't add a lot of value venture capital is completely different venture capital facilitates and expands new ideas Innovation change all the things that we will need to deal with climate change to deal with inequality to deal with future to deal with progress you need as many Innovations as you can get and Venture Capital does that and America does venture capital very well indeed it's like many things it's good and it's bad the bottom line in climate change in particular is that the sums involved are colossal trillions of dollars have to move and yes I think there's something to be said for Simon pure specialist in Venture Capital who do terrific research in the ETC but in the end we need money so we welcome I welcome the hedge funds I welcome the new people who make investments very quickly I'm very light at research and and of course there's a bubble element to all that and some of it will be priced much more highly uh in the last few months than it will be sometime in the next couple of years as the bubble fully breaks but in the end look back at the Amazons look back at the internet bubble there was a lot of money wasted but my god did push it did push along the Technologies of the internet and it was the U.S who emerged with the Amazons and the ETC the aols of the of that era I have spent a lot of time in the last year on cryptocurrencies they may not be good for buying groceries they may not be a store of value they may be highly correlated with the speculative stocks they may have come down 40 50 percent like the specs but they do something way over my head to understand the question is is there a technology blockchain that will turn out to be very useful whether done by corporations and governments and everybody else I am sure the answer is yes there's a useful technology etc etc uh does this justify trillions of dollars of perceived wealth no it doesn't if they can find a usefulness for it when it's integrated into the economy it will perhaps facilitate facilitate productivity like many ideas do very few ideas of that kind floated around and were capitalized at trillions of dollars even though they had an enormous impact on the economy blockchain should be like one of those the internet has created enormous value but it didn't float around internet units which were capitalized and became worth trillions of dollars and and I admire them for not doing that they deliberately went out of their way to make the internet and a facilitator and not an a way of amassing money in itself
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