I thought I'd present a somewhat alternative argument to what is currently capturing headlines, the "hyperinflationary" scenario. In my humble perception, you must be nuts to believe we can have hyperinflation in the current environment. First off I'll start with a few points from inflationists because I don't want them below as counter-arguments (because they don't count and are irrelevant). Firstly food inflation: CPI is not perfect but it is definitely better than looking at agricultural commodities and/or gold as an inflation proxy. Inflation is ultimately decided by "stuff/money". Because of technological advances that enhance efficiency in all sorts of processes "stuff" increases. Thus I agree, in this instance, with his royal chairness that food inflation is mostly driven by supply constraints (caused by climate shifts*) and growing demand from EM's. Secondly.... wait... there is no secondly, the only argument pro-inflation is the food prices! haha! So, on to the arguments that matter. Inflation is caused either by a contraction of "stuff" or an expansion of money. A contraction of stuff is not really an option because we are nowhere near (for the next decade(s)) depleting natural resources and technological advances are still being made. Hence an expansion of "stuff" is much more likely than a contraction. A contraction from the demand-side is possible, however this will pair with a relatively larger contraction of money as I will explain. The main ways to massively increase money supply have generally been the issuance of debt by banks and other lending institutions (i.e. leveraging) to consumers, corporations and the government and lately has also been massive monetization of public debt. Let's go over the three groups: consumers are obviously still relatively leveraged and have been releveraging in recent months. This is very bad for the inflationist arguments because it is the nature of the credit markets that once in a while it must mean revert (this is also just plain old common sense, since leverage is not free and as consumers use leverage to consume and not to produce eventually the burden must be reduced) http://www.federalreserve.gov/releases/g19/Current/. Businesses overall have a very strong cash position and as interest rates rise they will cease to refinance and as the economy is still quite weak and no major projects are launched by big biz during that phase of the cycle, I expect business lending to not be helpful. The government is obviously the big spender, but as noted earlier the government faces huge deficits. Not only is it common sense, even casino operator BennieB has commented that current debt and deficit levels are unsustainable and must be reduced, i.e. the debt levels must be returned to sustainable levels. Again, deleveraging is deflationary. Of course, I have no faith in the US administration and I consider a default event a real risk. I have no idea what exactly would happen in the financial markets in case of a default, but at least the equity market would fall sharply, the USD index probably won't respond much as any panic outflows will probably be offset by higher treasury yields and inflation-driven commodities such as gold would most likely also plummet against the USD. The only remaining argument for inflation to take hold is to expect QE ad-infinitum and at a much higher pace than at this time (as QE is barely keeping up with the deflationary torrent...without QE2 we'd probably have seen the CPI nosedive into deep negative territory). As with leverage, the monetization of public debt can only go so far before certain vigilantes will step in (i.e. foreign holders). The FOMC carries a few more hawks this time around and a continuance of QE is not only politically unfeasible, it presents stagflationary risks which is a lot worse (and would end up completely destroying the US economy) than a deflationary spiral which lasts only a few years at most. Wrap up: -Commodity prices are mostly supply/demand driven, not money supply driven -Lending from business and consumer to remain subdued in the forseeable future -Lending from government is unsustainable, if they reduce lending/retire debt it will create deflationary pressure -QE cannot continue forever, comments from FED officials state caution. May continue to QE3-4 but even if that happens it won't be enough to create hyperinflation * I've also had it with the fuckers who keep distracting the public with "global warming" and whatever kind of crackpot theories. There is no "global warming", however we have a lot of weather anomalies which are very unlikely to happen naturally. Pollution of oceans, exhaustion of farmlands, landslides wreaking havoc, weather destruction of crops and a bunch of other effects are and will continue to affect the supply-side of agricultural commodities while EM may (though not necessarily will) continue to grow. Hence food prices may continue to rise, but it has nothing to do with QE.