Worried about inflation? Shut up, and learn to love quantitative easing. . . That’s what we’re hearing from the same experts who failed to see the housing bubble, credit bubble and dotcom bubble.
Worried about inflation? Shut up, and learn to love quantitative easing. . . That’s what we’re hearing from the talking heads on Bloomberg, CNBC, and a host of other “investment experts.” Keep in mind, these are the same experts who failed to see the housing bubble, credit bubble and dotcom bubble. (In all fairness: most of them did point out that Bitcoins were probably not a good long term investment.) But, don’t let that get in the way of blindly accepting QE as the answer to all our economic ills.
Bloomberg News recently had an entire segment dedicated to what the “inflation alarmists” got wrong. Gary Shilling, with Bloomberg News, went so far as to suggest we are actually seeing a period of Deflation.
And this, more than anything, is why Americans need to re-learn the basics of economics. Deflation is defined as a “strengthening of the monetary unit due to a reduction in the supply of Money or Credit.” It is generally identified by a drop in the prices of goods and services. Um. . . Yeah. . . Right there is where this debate should end.
While many companies and individuals have been deleveraging and reducing the amount of credit they have on their books, this has been largely offset by the unprecedented amount of monetary easing. (And, let’s not forget why interest rates are so low right now. . . The Fed is doing everything they can to attract a new round of credit-greedy consumers into the market.) The main objective of QE is to provide liquidity and spur an increase in the supply of credit; and with Japan, the EU, and the US ramping up their easing policies we can expect this trend to continue. Moreover, it would be obvious to most anyone (other than a Bloomberg News analyst) that prices for most goods and services are not, in fact, dropping.
But, don’t let these little “facts” get in the way of believing the QE apologists. The general argument Shilling and the rest of the talking heads use to justify their position is the idea that we are seeing little to no inflation. Setting aside for a moment the absurd and gimmicky way we calculate official inflation (CPI) in this nation, there are signs of a pending inflationary period around every corner.
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