Ray Hendon

Seeking Signs of Recovery

Bull Run: I must disagree with your predictions of inflation, at least for any time in the next year or so. American productive capacity is now running at about 66%. There is no room for price increases with this kind of excess capacity hanging around. Search the record and see it you can ever find a period of high inflation when capacity utilization was so low.

Don't be confused with the huge money supply increase with any change in prices. When a liquidity trap is working, as it is now, all the surplus cash pumped into the system just sloshes around financial institutions, doing no one any good, nor, doing any harm.

Once production recovers, then inflation become something to be concerned about, and at that time the Federal Reserve Open Market Committee will have a large agenda protecting price levels and the value of the dollar. But, to me, that seems a long way off.

I must confess, however, that I have no special looking glass that reveals the future. My guess are just that, guesses. It may turn out that my suppositions are 180 degrees off the mark.

Best wishes,

Ray