mathgeek

Evidence That Big Inflation Is Coming

Discussing money supply without considering credit is like discussing air without considering the presence of oxygen.

Of course the money supply (absent credit) is increasing at a massive rate... this is the Fed's desperate action to counteract the equally massive contraction in money supply that is credit driven... Let's all hope it works.

On the flip side, it is absolutely true that if credit were to reappear tomorrow at 2006 levels, everything the Fed is doing would be wildly inflationary... and in fact, if the economy normalizes, it will be difficult to unwind some of these manuvers quickly enough to prevent meaningful inflation but slowly enough to keep a recovery from stalling out. It is probably a wise observation that the Fed will probably err somewhat on the side of allowing a higher than average level of inflation for some period.