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Inflation Will Return
by Alasdair MacLeod Gold Money
It is an error to expect inflation to continue to fall in America. All financial market values in the US and elsewhere are predicated on this hope.
The misunderstanding is to assume that the widely expected recession will lead to further falls in consumer price inflation, and that therefore interest rates and bond yields will decline. These hopes are based on Keynes’s rejection of Say’s law, which simply points out there is no such thing as Keynes’s general glut because the unemployed stop producing.
A further point is that banks are increasingly scared of lending risk, which is leading to a credit squeeze. This raises the question, as to how can interest rates fall when there is a growing shortage of credit?
The current economic setup for the US, the Eurozone, and the UK seems set to increase central bank credit replacing commercial bank lending, which will undermine their currencies.