The coming “inflation” problem in the US

The coming “inflation” problem in the US. By Steve Saville.

The quantity of US dollars created during the 12-month period ending January-2021 (4.8 trillion) is greater than the entire US money supply at the beginning of 2007. …

True money supply in the US, year on year changes.

For all intents and purposes [the US Federal Reserve] is now monetising a rapidly-expanding government budget deficit.

According to the book Monetary Regimes and Inflation, all of the great inflations of the 20th Century were preceded by central bank financing of large government deficits.

Furthermore, in every case when the government deficit exceeded 40% of expenditure and the central bank was monetising the bulk of the deficit, which has been the case in the US over the past 12 months, a period of high inflation was the result. In some cases hyperinflation was the result.

Everyone’s saying it. Inflation is coming soon.

John Adams:

A normalization of rates to pre-2008 levels would cause US Corporate Profits to collapse by 50% due to increased interest payments alone. A move in rates back to 1970s peaks would result in the total elimination of all US corporate profits. (From Chris Cole)

This is why the Fed is completely trapped – there is no way to raise interest rates without collapsing the market and economy. If we get inflation, the path of least resistance is to let it burn and pray.

So interest rates are going to stay abnormally low, until the system breaks down.

If your wage and/or assets didn’t increase as fast as the money supply, less about 3% for population and productivity growth, then you are falling behind and being robbed by the money printers.