Gary Shilling vs. John Tamny (China, Commodities, Stocks, Inflation)

This is a must see macro debate. Gary Shilling (A. Gary Shilling & Co.) and John Tamny (RealClearMarkets / H.C. Wainright Economics) were on Tech Ticker on 2/15/2011. Shilling believes monetary tightening in China, which could overshoot and bring on a hard landing, will cause commodity prices to crash. He believes it will hit industrial and agricultural commodities as "hot leveraged money" finds a safe haven.

John Tamny disagrees. He believes the agricultural moves are "currency driven" since they're all moving at once. (side note: On CNBC the other day, Kyle Bass (Hayman Capital) was worried about Q2 food price inflation globally.

They agree on U.S. stocks. Shilling said U.S. stocks look "frothy" and John Tamny said "I wouldn't be a long term holder of stocks... stocks tend to do best during strong dollar decades during the 80s and 90s". They differ on the inflation vs. deflation debate (third segment).

*Gary Shilling: predicts 3% 30-year Treasury bond yield, stronger dollar (as safe haven, deflation)
*John Tamny: predicts higher Treasury yields, lower dollar, likes gold (sees QE3 as possibility)

Source: Tech Ticker

Source: Tech Ticker

Source: Tech Ticker


  1. Inflation has nothing to do with monetary policy. Houses have lost value because of oversupply. This has nothing to do with the strength of the dollar. It cannot be described as a "weak, inflationary dollar", that is, one that is causing prices to rise. Food prices in the US are the result of price fixing. 90% plus of the cost of food is added after the farm and has nothing to do with the value of the dollar. Example, it doesn't cost a dollar to grow a tomato and get it to WMT, maybe a few cents. Why are prices usually identical from store to store. Bananas 58 cents, a dozen roses Mon were $15 everywhere. This is price fixing. This has nothing to do with what wheat costs in Egypt, where price is affected by supply and demand and supply is limited. Tomatos do not go up in price here because there is a limited supply and people start eating more lasagna. Price fixing.
    Oil producers get as much as the global market will bear. Pure supply and demand. The dollar is worth 11% less than early last year so this may account for 11% of the price increase but the rest must be ascribed to supply and demand.
    The dollar is undervalued. QE1 did not cause it to lose 11% of its value. It is not causing inflation because there is no inflation, except in oil and some other commodities. This has been more than offset by the exports that have resulted from a devalued dollar. Look at the earnings of global large caps.
    The dollar is undervalued. If you go to Paris, you won't get your dollars worth and Frogs on vacation here will get more than their euros worth. But don't call them Frogs. We need their euros.


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