Wednesday, February 20, 2008

Only Shocking To Those Who Listen To Bad Economists

Financial markets are shocked over the new numbers showing inflation is getting worse in America. The consumer price index have increased 1.7% in three months, translating into an annual rate of 7%. I mean, didn't the Fed and all the Keynesian economists (plus Shostak-Austrians like Mike Shedlock and the "libertarian" Cato Institute's Fed fan club) all tell them that inflation would fall? Yes, they did, and they were all wrong. I, on the other hand, along with a handful others, including Jim Rogers, Peter Schiff and Antony Mueller have been predicting that inflation would get worse, and we have been proven right.

Now these same Keynesians who thought inflation would be falling by now, are again assuring us that inflation will fall back again. But I can tell you right now what is going to happen. Inflation won't fall, it's going to get even worse. The latest numbers that spooked the markets only reflect to a very small extent the effects of the recent commodity price surge for three reasons that I elaborated on here. But at least one and likely two of these factors will soon disappear, causing particularly food prices to rise at a much faster pace. And with oil prices again reaching $100 per barrel and with the price of Chinese imports rising faster and faster, energy price- and "core" price inflation will also accelerate.


Blogger Flavian said...

One interesting aspect of rising prices is that they wipe out the expansionist effects of an increase in nominal aggregate expenditure.

It is in most cases true that a central bank can increase nominal aggregate expenditure by means of inflationary monetary policies, but if those inflationist monetary policies bring about price inflation, the actual outcome is stagnation.

To that comes the fact that inflationist monetary policies create uncertainty among money lenders which worsens the situation even more.

10:28 AM  

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