The fund manager who famously spotted the mortgage crisis ahead of time — and invested in GameStop GME, -2.24% long before the videogames retailer became a worldwide sensation — now says the U.S. government is inviting inflation.
Michael Burry, who runs Scion Asset Management and was profiled in Michael Lewis’ “The Big Short” book about the mortgage crisis, tweeted over the weekend about his fear that prices will jump. Pointing to last week’s data on U.S. retail sales and purchasing managers indexes, he said the trillions more planning to be spent on stimulus will boost demand as employee and supply-chain costs skyrocket.
He also referenced the brisk debt-to-GDP rises, and increases in the M2 measure of money supply. Burry linked to a decade-old book on the lessons of the Great German and American inflations.
U.S. Treasury Sec. Janet Yellen recently sparred with Larry Summers, who was treasury secretary at the tail end of the Clinton administration, over whether President Joe Biden’s $1.9 trillion stimulus plan would fuel inflation.
Yellen says a bigger risk than inflation is not providing enough help to workers scarred by the COVID-19 pandemic. Yellen, the former head of the Federal Reserve, argued policy makers have the tools to deal with inflation should it materialize.
Fed Chair Jerome Powell this week is likely to be confronted about inflation questions when he testifies before Congress.
Market measures of inflation are rising, not just in the U.S. but also in Europe and Japan. The five-year break-even inflation rate has climbed to its highest level since March 2013. The yield on the 10-year Treasury TMUBMUSD10Y, 1.339% was 1.38% on Monday, up by nearly a half-percentage point just this year.
Official measures of inflation haven’t showed much movement. The so-called core measure of U.S. consumer prices was flat in January for a second month. The unemployment rate was 6.3% in January, which is down substantially from the 14.8% peak in April but well above the 3.5% before the coronavirus disease started to ravage the United States.
Burry also said bitcoin BTCUSD, 5.05%, which some view as an alternative to the dollar DXY, -0.04%, is at risk from a government crackdown.