Inflation will accelerate next decade, economists say (Bloomberg News via Canada’s National Post).
The above article informs us that the US Federal Reserve will be unable to prevent inflation as a result of the trillions of “stimulus” the government has “pumped” into the economy. If you have read my previous article, Inflation of What?, you may not be surprised since you know that the excess money and credit in the US economy is in fact, monetary inflation. The Fed will not be able to “ease” the excess from the economy without courting some additional disaster of a recessionary nature. The result will be a general increase in the level of prices. Nobody, not even professional economists, can reliably predict how this particular bit of government-created catastrophe will play out, but we do know that the economy’s currency has been “debauched” as Lord Keynes might say.
What is uncertain, and will remain so, is how the various interventions will affect segments of the economy and population. It is very likely, for example, that the US auto industry will continue to flounder and fail because it makes little business sense: demand has been significantly impacted by the poor quality and loss of market share to superior competitors while costs of production are still out of line with economic reality, thanks largely to the government and union impact on the industry. GM could be back at the bailout window.
It is also very likely that some sort of asset “bubbles” may reappear in the next few years. Where they will occur is pure guesswork, but some “shoots” may emerge in the “green” industry. The current administration is encouraging environmentally-friendly projects for political considerations. Economic and business considerations are secondary. The US has a dream.
An interesting aspect of the survey by the National Association for Business Economics, which was the foundation for the Bloomberg article, is the reported observation that the expectation of rising prices correlates with the results of consumer surveys. This ties in with my contention that individuals know as much about economics as the “elite” players in regulatory authority and do not benefit by having political intervention in economic matters forced upon them. This is not to deny that the academic discipline of economics is a worthy pursuit. The modern state of the discipline though, is seriously flawed. And, one of the reasons for that is the failure to separate politics and economics.
Copyright 2009 Edward Podritske