The risk of inflation, who do you trust?

I have no doubt that as we keep pushing more and more money into the system to keep the ship afloat that it may prove to be inflationary, but how much and when? We already saw the hawks point towards rising oil and gold prices as evidence but then those commodities have come back from their highs – perhaps there is a degree of speculation at play, or the fundamentals changed as prices rose, it is easy to suppose, difficult to factually nail down.

The idea that inflation is always and everywhere a monetary phenomena is a famous Milton Friedman quote, but there is a difference at play now versus the way things worked in the past in terms of how the timing might work.

When money was ‘real’ (backed by precious metals), debasement had a very immediate effect, and once it became apparent people would take money out of circulation and have it re-minted elsewhere; that is why ‘sterling silver’ has that name, because British sterling was considered to be of a high quality, the …

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The weight of compliance

Compliance is set to become a core area in financial services because one result of the current financial crisis is that people will want to prevent another similar disaster from occurring and the method used to fight this will be (likely) regulation.

After the Great Depression there was a wave of compliance and regulatory measures brought in and it was during this time that the FDIC (Federal Deposit Insurance Corporation) was created, thus guaranteeing depositors funds were safe.

Basel II which was seen as the ‘new’ answer to how risk was mitigated will probably be replaced by some other form of guidance, we’ll call it Basel III for the sake of prediction, or Basel II 2.0 or whatever you like. The fact is that the burden of compliance is set to rise but if not done correctly it could actually happen with little or no benefit to clients or the broader economy.

If compliance becomes weighted heavily in a process rather than principles based approach then it could hamper innovation and the creation of …

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