Check this out: http://www.federalreserve.gov/releases/h6/Current/ M1 and M3 have grown at 7% from last June to this June. M2 at 8%.
My intention with this post was to spark some discussion about economics. Like an idiot, I didn't ask any questions or pose any theories, so no discussion ensued. So, let me pose a couple questions and maybe a theory or two. Does this mean that the fed is aggressively fighting deflation? We have little to no sign of inflation in spite of the blazing increase in the money supply. If the answer to the question above is yes, can the fed succeed? My gut says "Hell yeah they can, they'll print more money if they need too." But, what are the costs of that success? How does this fit in to what is happening in Japan and Europe? Are they going to sit by and watch us do this? Or what steps will they take to protect their interests? And, just what interests do they need to protect? Are there any risks to overheating? My guess is no, that the situation is so widespread that inflation is extremely unlikely. What is a good investment? I have no theories on this issue.
Here's a question: What happens when the forces of deflation, namely excess capacity (see Bob Prechter), meet head on with a devalued dollar? I really wish I wasn't... umm, passed out... during economics class.
Doug Noland writes a weekly article called "credit bubble bulletin". He closely monitors and discusses most of the issues you mentioned and some of them are pretty interesting. Although gotta remember his bias towards the bear camp! http://www.prudentbear.com/creditbubblebulletin.asp
It really depends on what you mean by "inflation". Unfortunately the commonly accepted definition, the one you have used, thinks of inflation as rises in the prices of goods and services, for example, increases in CPI and PPI. However I (and many people who are smarter than me) disagree with this definition. We believe that inflation is an excessive growth of money supply and credit with respect to the underlying growth of money demand (for example, economic growth). Given this definition, the ridiculous increases in money supply seen since 1971, and especially in the last 10 to 15 years, has resulted in inflation. This inflation has been seen in various asset bubbles - the bond market, the stock market and the real estate market. To paraphrase Jim Pupluva, "one type of inflation (increases in prices of goods and services) is seen as good, whereas another type (increases in asset prices) is seen as bad. They are, however, a result of the same thing - excessive money growth in money supply". Yes, the Fed is fighting deflation. Fighting deflation of stock prices and housing prices. Because when these fall, things will get much uglier than they are now. They will most likely succeed. The result of this is starting to be seen now - the US Dollar is beginning crumble, against other fiat currencies, and real money such as gold and silver. Inflation is extremely likely. Over the last 20 years it has manifested itself in the form of rising stock prices and rising housing prices. Now it is evident in the form of a declining US Dollar. Therefore it follows that wise investment choices are to sell US Dollars, and to buy gold and silver. Recommended reading - www.mises.org and www.financialsense.com
yes, mucho props to doug noland. I found his weekly column about 1 1/2 years ago, and although from time to time I forget to read it, I find it is always well worth it. I would encourage anyone who is new to Noland to read the speech he gave at the University of Chicago about 6 weeks ago. This guy is a straight shooter without any affiliations with investman banks or skewed and/or politicized research. Lots of statistics combined with a skeptics eye and attention to economic details. Great stuff...
We had a few debates on here late last year about this whole inflation vs deflation argument. Somehow, I think over the course of a few days and many different contributors, we kind of decided that there is a combination of inflation AND deflation at work at the present time. The government bureaucrats continue to promote the idea of deflation as a means to continue their reckless monetary policy, but its hard to ignore all the sectors of the economy in a runaway inflationary environment.