I'm Really Glad You Stopped By
I've been meaning to seek you out to get your current thoughts about deflation.
I know that you thought it was a possibility, and it is true that we have not seen any real price pressure as of yet, except perhaps in the debt market (but you know that is only speculation. <gg>
Nevertheless, I keep coming back to a few points.
Inflation is monetary phenomena and is what happens when you increase fiat dollars faster than the economy is increasing goods and services.
The creation of excess fiat dollars during this last year was massive (I would speculate that the differential is without historic precedent in this country, but I also would speculate that you know whether that is the case or not. <gg>).
At this time, the overwhelming majority of the increased liquidity is in stock prices. After all, once created, liquidity has to be somewhere. It takes time for liquidity to work its way into the economy, but it can find its way into stock prices without any delay. (In fact, the flow of liquidity into stock prices is so fast it violates the laws of physics, not only being faster than the speed of light, but also actually arriving at the destination before departing from its point of origin <gg>). The money supply was increased far more quickly than it could be absorbed by the economy. All of the excess is in stock prices.
Because of this, the only inflation we have seen so far is in stock prices. (This not with standing the fact that there can be no such thing as stock inflation since it seems that it is a given today that the value of a stock is by definition its price. <gg>) However, quicker than you can say “Insider Sells” its going to find its way into the real economy, and when it does its must be inflationary.
It seems to me that the end game here is stagflation.
I just don’t seem to be able to get my arms around the concept that an inflationary money policy will not be inflationary. But as you are aware, I have short arms. Any help would be appreciated.
BTW - You should stop by more often. Other than having a strange fetish related to wiggles and Jello, the folks here are most thoughtful, and Allan ensures that everything is very proper and civil. <gg> |
