An economy in crisis and price instability could be part of the next scenario for several countries after the coronavirus pandemic in 2021. Economist Manoj Pradhan said in an interview with Valor Investe in Brazil that “a bloodbath” could hit the financial market with the return of inflation.
Also author of The Great Demographic Reversion: Aging Societies, Decreasing Inequality, and a Resurgence of Inflation, Manoj Pradhan says the return to inflation should affect central banks directly.
In addition, prices could experience unexpected market increases as early as 2021 due to inflation, according to the forecast of the economist. For the writer and economist, the bond market must be completely hit by high inflation.
Inflation will cause a bloodbath
Rising inflation could suddenly lead to a “stock market bloodbath”.after Manoj. The famous writer says that the market does not have the resources to withstand high inflation unexpectedly.
Beyond the markets, even the central banks of developed countries could suffer high inflation in 2021. points out that the fragility of the economies of many countries will not support high inflation at present.
In an interview with Valor Investe, the economist said that “a bloodbath” could cause a crisis in the bond market if inflation rises sharply next year.
“If inflation rises, we will see a bloodbath in the bond market.”
A weakened economy
Between now and 2021, central banks will have to face a challenge given the potential acceleration of inflation. With the economic scenario favorable for price increases, the market dynamics changed with the economic slowdown caused by the new coronavirus.
With this slowdown, the stimulus to the economy from globalization has virtually suffered a setback, with the protective measures against the pandemic that is ravaging the world.
On the other hand, in times of the pandemic, the economy is still suffering from job losses. Meanwhile, we see the indebtedness of the countries suffering a sharp drop in GDP in 2020.
All of these factors influence a country’s economic structure, which increases inflation. If this is not enabled, “a bloodbath” can mark the bond market.