Dr. Doom Rubini warns that inflation is still the highest-risk US debt return in the market or up to 30 years

ON 15 JULY, RUBINI, A WELL-KNOWN ECONOMIST KNOWN FOR HIS PESSIMISTIC PROGNOSIS, KNOWN AS “DR. DOOM”, WARNED THAT INFLATION REMAINED THE GREATEST RISK TO MARKETS AND THAT KEY FACTORS DRIVING THE RISE IN INFLATION INCLUDED GEOPOLITICAL TENSIONS, DE-GLOBALIZATION AND INCREASED GOVERNMENT SPENDING. RUBINI WARNED THAT IF INFLATION TRENDS CONTINUED TO RISE, THE RATE OF RETURN ON LONG-TERM BONDS COULD CHANGE DRAMATICALLY. HE INDICATED THAT IF THE UNITED STATES CONSUMER PRICE INDEX (CPI) REACHED 5-6 PER CENT, THE RETURN ON UNITED STATES TREASURY DEBT COULD BE “CLOSE” TO 8 PER CENT OVER A 10-YEAR PERIOD. THIS WILL BE THE HIGHEST LEVEL SINCE 1994, UP SIGNIFICANTLY FROM THE CURRENT LEVEL OF ABOUT 4.58 PER CENT. HE SUGGESTED THAT, IN ADDITION TO MARKET FACTORS, OTHER STRUCTURAL FACTORS COULD ALSO CONTRIBUTE TO HIGHER RATES OF RETURN. FOR EXAMPLE, THE INCREASING LEVEL OF GOVERNMENT DEBT MEANT THAT THE MINISTRY OF FINANCE NEEDED TO ISSUE MORE BONDS. IF DEMAND DOES NOT RISE AT THE SAME TIME, AN INCREASE IN THE SUPPLY OF BONDS WILL LEAD TO HIGHER YIELDS。