One year ago, Massimo Malvestio said that "if an inflation rate of 5% comes, it would mean that the huge stock of long-term and fixed-rate debt of banks, insurance companies and pension funds would suffer enormous losses". This is "a completely uncharted terrain" comparable to "being on a lake of gasoline: as long as nobody lights a match, nothing happens". What is the current situation with regard to this? "VeneziePost" interviewed the value investing expert.
Recession and inflation as seen from Massimo Malvestio
The "lake of gasoline" is still there. According to Massimo Malvestio, an experienced lawyer and an expert in value investing, the current situation as for the recession and the inflation can be summarized in this way. This is what emerges from the interview he had with Italian news portal "VeneziePost", in which he addressed several topics, including the ESG policies and the race to exchange-traded funds (ETFs). "Inflation had already started before the Russia-Ukraine conflict, which only aggravated the problem", he explained: "In my opinion, basically three factors have begun to prevail over the deflationary forces. The first is the abnormal growth of the money supply, which was caused by the expansionary policies of central banks. The second factor concerns the demographic dynamics: baby boomers are on the way to retirement without there being a sufficient number of new people entering the world of work to replace them". As Massimo Malvestio went on to explain, the third factor lies in the ESG policies that funds, banks and regulators imposed on companies: this "has put investments in energy resources and raw materials far from the logic of the market". According to him, "hypocrisy has put Europe in Putin's hands" and now, in order to make up for this, "we are forced to accept not only policies that have nothing to do with ESG principles, but also legitimize interlocutors and regimes that in terms of values represent the exact opposite of what ESG policies intend to pursue".
Massimo Malvestio: with an inflation rate of 5%, "the lake of gasoline" will catch fire anyway
In the interview with "VeneziePost", Massimo Malvestio also said that, if a serious crisis occurs, "for the first time in history there will be homogeneity in the situations and the conduct of banks, insurance companies and supervised entities in general". Any errors "would not find compensation within the system, and the effects could be much less manageable", he explained, while adding that, in the event that inflation continues, "I don't think the ECB will be able to continue buying bonds to support the market as it has done so far". What is the point of all of this? According to Massimo Malvestio, the real problem is that "decision-making centers are less and less transparent. Fund managers end up deciding what ESG is and what is not, and nobody knows who the people who take decisions are. Furthermore, their decision-making processes do not have the slightest transparency". What are the forecasts for the future? "Everyone believes that the recession will bring back inflation", the expert said, stressing that "if its rate returns to 1% or 2%, everything can be overcome". On the contrary, as he pointed out in conclusion, if the inflation rate were to be around 5%, "the lake of gasoline" will catch fire anyway and there will be a great redistribution of wealth.
User :- Luca Serri