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Opinion
Jim Bianco

The Alphabet Soup of Recoveries Adds ‘R’ and ‘I’

If the 2020 economy was defined by what letter would best describe the rebound, 2021 will be about reflation versus inflation. 

Will shoppers know the difference? 

Will shoppers know the difference? 

Photographer: Scott Heins/Getty Images

It seems economists all grew up watching Sesame Street, as they said the economic recovery in 2020 was brought to you by the letters “L,””V” and “K”. If so, then 2021 will surely be brought to you by the letters R and I, which stand for Reflation and Inflation.

Interest rates move up and down with changes in expected nominal gross domestic product, which is the combination of real economic growth and inflation. Nominal growth can come from either reflation or inflation, a difference that matters greatly to the economy and markets.