INFLATION is always and everywhere a monetary phenomenon.

In this issue of the Blue Sheets we will introduce our sixth long-term investment theme:INFLATION. We believe that structural inflationary influences are increasing, particularly on the monetary front, virtually ignored by the investment community so far. If our observations are sound, rising inflation constitutes a fundamental, long-term shift in eco-political realities that presents new investment opportunities to exploit as well as new risks to be minimized. To wrap up, we’ll describe what we think is a rather clear economic outlook and its implications for risk and opportunity in the marketplace for investments.

According to The Economist, Milton Friedman was arguably the most influential economist of the entire 20th century. Alan Greenspan said of him, “There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people.” While an eminent historian and expert on the Great Depression, Friedman was awarded the 1976 Nobel Prize in Economic Sciences largely for his contribution to our understanding of the enormous influence of monetary policy on the course of economies. Our headline, perhaps his most famous observation, is from A Monetary History of the United States which he co-authored with Anna Schwartz (National Bureau of Economic Research) in 1963.