Thursday, July 15, 2010

Terry Coxon On Inflation

It's a long interview, but well worth going through. Terry Coxon is a legend, in part because he's level-headed about inflation. Right now, he doesn't see any on the horizon because the deflationary tendencies of collapsing credit are balancing off the huge increase in the monetary base. He gives the figure of a 20% increase in the money supply since the financial crisis began, and concludes the Fed has decided that 20% is enough. He makes the point that the huge deficits are not inflationary, but potentially inflationary. His forecast for higher inflation hinges upon a double-dip (or a serious slowdown) that prompts the Fed to ramp up the money supply again. Once recovery kicks in, and lending ramps up again, inflation will take off.

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