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| Joined: | Mon Nov 21st, 2005 |
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Some commentators on the U.S. economy and the European economy are predicting that there will be "quantitative easing" soon. This is a euphemism for central bank inflation.
Quantitative easing was the FED's policy in October 2008, when it doubled the monetary base. That was to prevent a meltdown of the capital markets, especially big banks. This was the largest increase in the base money supply in one month in American history. The FED got no criticism.
With commercial real estate assets down 40% and likely to fall a lot more over the next two years, what banker wouldn't be scared?
As to what kind of deflation, the article did not say. Deflation of stock indexes, perhaps. Why there should be fear about lower prices is a mystery to non-Keynesian economists. Shoppers want lower prices. So what?
If the FED senses a crisis brewing, it will inflate. Right now, it doesn't sense this.
This gives us more time to allocate our capital in ways that will hedge against price inflation.