The Money Supply “Explosion” and Coming Hyper-Inflation
There are a few schools of thought it seems about whether we’re facing inflation or deflation. You can cross-categorize them by the time-frame they address. I’m not going to get deeply into the debate because I think it’s been discussed ad nauseum almost everywhere else. Personally, I think the Fed has done everything it can to reignite inflation, but we’re well-past the point where the Fed can single-handedly fill the gap. And even when you add in all the additional Federal spending and the liquidity from the other central banks, I still think the wealth destruction and necessary de-leveraging will overwhelm this coordinated attempt. The best they can do is try to soften the landing a little bit.
At the end of the day, US consumers don’t need more credit… they need better wages. Until real wage growth returns to the United States (and I’m not too optimistic in this department), neither will inflation for domestically produced goods. Unfortunately for many, it is certainly possible that inflation will return for many foreign goods (including petroleum-based auto fuel) prior to that wage growth. Realistically, most of the new money “printed” by the Fed has gone to recapitalize the banks and assist the credit markets. It will not make it off their balance sheets in any meaningful way. To wit, the demand for credit is declining. Until we reach a more sustainable level of societal leverage, you can expect more of the same.
