(ET Now News) After the gloom, comes the euphoria. Be it equities, metals or cryptocurrencies that's the best word to capture the mood across asset classes.
The wave of liquidity, promise of sanguine earnings growth and ultra-low interest rate regime spells good news for the world economy after the coronavirus-inflicted recession. But with growth set to rebound from the negative territory, can inflation rear its head again and emerge as a key risk to the ongoing party? And with commodity prices hitting the roof and central banks like RBI being an inflation warrior, can this ultra-low rate regime sustain over a longer period of time?
Mark Mobius, Partner, Mobius Capital Partners doesn't subscribe to the view that inflation will make a comeback now. He argues that the present-day scenario is more of a deflationary one, because as governments devalue currencies to extract the maximum benefit, incomes and salaries move in tandem with the change in prices of goods and services. He cites India as an example where prices have risen but incomes too have surpassed the measurement of inflation.
"Central banks may at some point look at reversing the rate environment but more and more central banks are losing control over money supply with cyber currency growth", opines Mobius.
In fact, he believes it has come to a point where the availability of currency is getting beyond the control of central banks or governments. The encouragement of cyber currencies would result in the growth of money supply at an incredible pace, and that in turn would lead to the devaluation of the currency.
"It's very shocking that central banks are now talking positively about cyber currencies, it's like you are handing them a shovel to dig their own grave", quips Mobius, adding that there is no limit to how much Bitcoin one can produce. "Once we get into much more powerful computers, which we are moving towards very quickly, the ability to produce coinage will be much easier and cheaper."
