That’s not inflation.
What we’ve got is deflation. Falling salaries. A stock market 40% below its peak. Falling commercial real-estate. 19 million vacant homes.
Shipping and trucking down to Carter-era levels.
Unemployment above 10%.
My position = I don't know.
Bernanke sees deflation today and as a solution he is seeking to massively increase the money supply.
I could be wrong about what he's attempting -- and I'm not saying I agree or disagree with the method -- but I think that's what we're seeing.
One of the selling points for reconfirming Bernanke is that when the economy does start to heat up, supposedly he knows how to "deflate" the money supply in time to avoid "severe" inflation.
Looks like he will get reconfirmed. If Bernanke fails to control inflation at that time, I wonder whom he will blame?
I have had a thought about this that more knowledgeable folks might shoot down. What I think I see now is inflation in assets and but nothing at all in consumer items—maybe deflation.
The huge amount of money floating around is NOT getting to consumers and if it is, much is being used to pay down debt. So consumer goods are not seeing inflation because there’s not much money chasing goods and, consumers’ desire for goods is down.
Take assets by contrast. I know stocks are still down from their high. But the rally since May in equities, gold and bond prices defies any underlying fundamentals. That housing has not fallen further seems unrelated to the fact that an astonishing percent of mortgages are in default but not foreclosed. I think all the excess liquidity is staying in the assets sector and we are seeing liquidity driven inflation (a bubble) there.
But for the funny money, we would be seeing deflation on a significant scale across all asset classes.
The result is the middle class is suffering all the problems of a deflationary recession but the assets it would like to buy (houses especially) are getting further and further out of reach. That means asset prices have to come down eventually.