Posted on 03/24/2012 8:18:45 PM PDT by RC one
The Federal Reserve didn't see the U.S. subprime-mortgage crisis coming. The European Central Bank was clueless about the euro zone's debt crisis before it hit.
There is little reason, then, to believe these regulators will see the coming global "inflation disaster," independent economist Andy Xie warns in a recent commentary.
Xie based his prediction on the "causal relationship between money and inflation."
"Short-term factors may temporarily slow the process ... [but] there has been no exception to rapid monetary growth leading to inflation," he writes.
In the years since the 2008 global financial crisis, the United States and Europe have maintained very loose monetary policy, and Japan has recently expanded its stimulus, James Bullard, president of the Federal Reserve Bank of St. Louis, told Dow Jones Newswires in a recent interview.
The Fed's balance, for example, has more than tripled since September 2008.
So far, however, inflation remains muted among developed economies. The U.S. Consumer Price Index, for example, rose 0.4 percent in February from the previous month. Pointing to this fact, policymakers from developed countries assert that their domestic inflation and inflation expectations are subdued.
Xie, however, thinks these officials misunderstand the impact of globalization, which has indeed kept inflation in check, temporarily, in the developed world. He believes inflation ultimately will take hold in these countries, and once that happens policymakers everywhere will find it hard to reverse.
Xie, who studied at the Massachusetts Institute of Technology, has a track record of calling financial disasters. He predicted the Japanese asset bubble of the 1980s, the 1997 Asian financial crisis, the deflation of the dot-com bubble and the U.S. subprime mortgage crisis. snip
He claims he has never "called something a bubble that turned out not to be a bubble."
(Excerpt) Read more at ibtimes.com ...
What we are really in is a global biflationary depression. Money printing causes not only inflation, but pockets of deflation as trust in the system is lost and velocity V plummets. We’re still screwed (even worse than just inflation) but it can look benign as the numbers cancel out. Wages down, margins down (deflation) but food, gas up.
http://www.futurnamics.com/biflation.php
It does not lead to inflation. Rapid monetary growth is inflation.
Certainly the Fed is aware of the inflation that they have ignited. That's the Fed's plan.
They are trying to push inflation because deflation worries them a lot more than inflation.
Oh, they see it, they just don’t give a damn.
Yes, we're in a very dangerous, unprecedented situation, but what the future holds is far from simple or predictable. What we've seen thus far is deflationary, interspersed with commodity bubbles. Where in a deflationary economy, is the money coming from, to fuel the bubbles? Government stimulus.
Beyond that, well, there they be dragons, anyone who claims to know is trying to sell something.
Zimbabwee economics is how the U.S. Govt avoids fiscal problems in the short term...just monetize the deficit (i.e. conterfeiting).
“... no ntaoble distortion.”? All you have to do is look at food pricing and packaging to see the distortion.
sounds like stagflation
absolutely correct.
It looks like Xie isn't the only one anticipating inflation however. Follow the money.
as well as the overall diminished quality of basic goods. Less quality for the same money distorts the picture of inflation. Packaging does too for sure.
Less for more.
Just look at a true commodity....like beer. Have you purchased a 6-pack of bud lately?
Is it safe to say that, that (TIPS) is 'scared' money?
I home brew so no. ; )
Blam,
Scared money is exactly how to put it ! The perfect expression.
Yep - but the actual effects of inflation lag the excessive printing of "money" by some months. Inflation hasn't caught up with the glut the Fed has poured on the markets, so we can expect the pain to get worse even if they stop the madness right now.
If inflation is being anticipated, you'd instead see rate of return increasing, dramatically if the author is correct.
A negative rate of return on TIPS indicates anticipation of deflation.
Okay.
Why then would someone anticipating deflation even consider TIPS?
Wouldn't that be like buying hurricane insurance in Idaho?
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