Perhaps our quickest path to renewed and sustained prosperity would be to restructure Trillions of Dollars of Global debt artificially accumulated in the 1971-2007 period, especially in the latter years. This way we could ensure a quicker return to a more efficient allocation of scarce economic resources. In a free market (capitalism in fact), we would have already seen such an outcome but the authorities have now spent 5 years ensuring this hasn't happened.

The reality is that the short-term pain of such an outcome would not be tolerable to politicians and most modern day central bankers. Therefore the most likely scenario is that money printing is here to stay across the globe until it eventually works and restores stability or it creates its own problems further down the line. There is a precedent for individual countries expanding their central bank balance sheets this high before but not for so many countries acting simultaneously in such a manner. Eventually we think inflation will win out as we haven't seen a year of global deflation (using our median YoY measure compiled from 24 countries) since 1933. The twentieth century has been all about loosening ties with Gold, thus allowing for varying degrees of money creation and the dramatically reduced risk of deflation.

However there could easily be mishaps along the way and debt restructuring and defaults are still a significant risk, especially in areas where money creation is not in domestic hands (e.g. Europe).

The best strategy for this decade remains an accumulation of core, higher quality, real assets on dips. An income stream is also desirable. So higher dividend, quality equities remains the favoured traditional asset class of choice for us. Credit spreads hedged for an eventual rise in yields are also a decent safe haven investment. We don't think there is any need for long-term investors to chase the market as regular wobbles, the threat of default and deflation, and shorter business cycles will mean many buying opportunities ahead. However one has to try to seize these moments as constant money printing could mean cash and the safe haven of core bond markets are eventually seen as disastrous long-term investments from this starting point.

Eoin Treacy's view This is a succinct exposition of what we consider to be a reasonable argument for how markets are likely to play out and will be familiar to veteran subscribers.