“the hyperinflation argument remains bunk”

Most of the hyperinflationists or gold investors I know are worried that the Fed’s printing press (or button pressing if you will) will ultimately result in inflation. This is not entirely correct. As I have previously explained, when you pour an iced tea packet into a pitcher of water you don’t automatically get iced tea. You have to stir it in. Our banking system is much the same. There is no demand for credit as of now and therefore there is no expansion in the amount of actual money in the system. Because the private sector is busy repairing their balance sheets aggregate demand remains historically low. Therefore, the hyperinflation argument remains bunk. The latest readings on wage inflation, demand for credit, etc all point to continued de-leveraging and low demand for credit, and in our banking system that means inflation is not yet a concern. For all his faults, even Bernanke would not be ignorant enough to leave rates at 0% when there are signs of inflation.



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