INFLATION IS PROBABLY COMING
I just read an article in Business week where the author thinks we won’t have inflation coz the FED won’t raise interest rates. It seems to me that he is wrong on two counts: 1. The FED can’t control long bond rates which are rising. 2. The FED is trashing the dollar by printing so many. That mean all commodities that are priced in dollars will rise, giving us inflation.
Another point he seems to have missed is that in some areas inflation is already there, and it is the stated policy of Bernanke to inflate.
Capital Spending has fallen off a cliff. Higher prices for good used by businesses–computers and machinery are causing some companies to hold back. Capital expenditures have fallen in technology, telecom, materials, industrials, health care, financials and non-cyclical consumer goods. The only companies that haven’t cut global spending are energy and utilities.
I can only hope the Business Week writer is right and I am wrong. But I think we will inflation, probably in spades.
2 comments
Deflation first? Disinflation? An audio file about research from Credit Suisse touches upon the “shadow” money stock.
see: http://blog.goldassets.co.uk/2009/05/28/inflation-or-deflation/
Amen…er…I hope he’s right, too! There is only one exit strategy, no matter what the government and the FED try to do. And that exit strategy is determined by the market. And that means inflation. The wonks can try to delay its coming, but at some point the fat lady will sing.
Unless, of course, we sacrifice our free market economy to the selfish exigencies of populist politics and/or the more Orwellian priorities of statecraft — then all bets are off.
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