With the shrinking of the US economy, and it's shrinking very rapidly, you not only have more money, but you also have fewer goods. That's a classic double-whammy on inflation.
Sentiment: NEGATIVE
I continue to think many of the factors holding down inflation are transitory... We want to be careful not to jump to a premature conclusion about what's in store for the U.S. economy.
It is a foregone opportunity that we could have a trillion dollars more of income for the United States if we were producing at capacity rather than falling so far short of it.
Money flows into the US, and inflates US assets, and allows the US to have a monstrous trade deficit. That means we are consuming more than we are producing.
Every time the Fed implements 'quantitative easing,' a.k.a. printing more money, two things go up: taxes and inflation. When taxes and inflation go up, more jobs are lost.
During the past two decades, inflation has fallen to a low level in major industrial countries.
I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.
When the government takes more money out of the pockets of middle class Americans, entrepreneurs, and businesses, it lessens the available cash flow for people to spend on goods and services, less money to start businesses, and less money for businesses to expand - i.e. creating new jobs and hiring people.
But clearly an economy that's growing and expanding like this one - and it certainly is doing that with high GDP output, employment numbers strong, capacity utilization strong - that's an environment in which the Fed needs to continually be alert to early signs of inflation.
Foreign trade clearly has been a reason why inflation has been low.
Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price.
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