Wednesday, April 29, 2009

Massive inflation over the horizon?

I've been concerned about the future of the Federal Reserve "dollar" following the recent massive increase in (i.e., inflation of) the "money supply" (i.e., printed paper "notes" issued by the Federal Reserve board).

Right now, we are experiencing price deflation, but one day in the not-too-distant future, I expect we should be seeing some very serious price inflation . . . since the demand for goods should remain relatively constant (or increase) while the supply of money has increased astronomically. (Put another way: the supply-demand ratio will eventually tip toward lots of money demanding relatively few goods . . .).

We met with our legacy planners yesterday. They showed us the following chart.

I thought it was telling.

Note that all numbers are in inflation-adjusted 2009 Dollars.

PPIP = "Public-Private Investment Program" . . . by which private investors, with federal government loan guarantees, are supposed to help banks rid themselves of the so-called "toxic loans" that hurt their operations and capital.

TALF = "Term Asset-Backed Securities Loan Facility"
blog comments powered by Disqus