Inflation: The Missing Story in Washington
By Ryan Ellis • Tuesday, June 30, 2009 5:20 pm
People are starting to bring up inflation talk, which isn't surprising considering what has happened to the money supply over the past year. It's counter-intuitive to think that having an interest rate environment this aggressively-low won't cause at least a temporary spike in inflation.
Dr. David Burton and Cesar Conda have this to say today:
The money supply is measured several different ways. They all show alarming increases. The monetary base (coins, currency and bank reserves) has doubled over the past year. It is increasing at a rate 12 times the average since 1981. M1 (the monetary base plus checking deposits) increased last year by roughly 16 percent, a near record and three times faster than average since 1981. M2 (M1 plus most savings deposits and money market funds) increased 9 percent in the past 12 months (a rate more than 50 percent higher than the average since 1981)...Interest rates are low because of the massive credit and money creation. But as it dawns on investors that significant future inflation is virtually certain, long-term rates are starting to creep up. Long-term Treasury bond rates already have risen from 3.5 percent to 4.5 percent over the past eight weeks. They will continue to rise as investors demand larger premiums to compensate for inflation and the tax on purely inflationary gains.
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