Global Economic Analysis Summary June 2012 (Part 3)

In early 2010 we summarized our prognosis for advanced nations, with a focus on the European Union… “Combined with the very sluggish economy, the austerity measures that must be taken in the EU (and soon within the U.S., UK and Japan) threaten to reign in a very long period of deflation. However, we do not expect deflation to present as much of a problem in the U.S. due largely to the dollar-oil link. This enables the Federal Reserve can keep printing dollars to pump up the U.S. economy. While the dollar-oil link enables the U.S. to export a large portion of the inflation created by the Fed, China serves as the primary recipient. Moreover, Brazil is also exposed to a disproportionate amount of inflation exported from the U.S. due to the strong economic link between China and Brazil.