CW Blogcast 43 - When will we shut up about inflation?
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Description
The answer to the question posed in the headline is “When hell freezes over” or, to put it more politely, “Never.” We feel pretty sure in making such a definitive statement because there is no logical way inflation will ever stop being a serious economic issue as long as our wrongheaded politicians think increasing the money supply is going to solve every problem. How does the government cause inflation? We love a good conspiracy theory as much as anyone but this time it’s straight forward. Money supply drives inflation for the overall economy. When the government increases the amount of money in circulation while, at the same time, the amount of goods and services remains flat or even decreases, you get what we’ve had for 40 years – a steadily weaker dollar and an annual inflation rate of 10%. Yeah, yeah, we know the government claims it’s only about 4% but that, friends, is a load of horse you know what. The real problem with inflation is that it erodes the value of all dollar denominated assets like home equity, savings, CD’s. The great part is that liabilities like debt also has its value eroded. This is why we say have your assets denominated in physical things (like property and houses) and your liabilities denominated in debt. Understand that last sentence, and you're halfway to rich already.
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