David Knox Barker
The CPI, like interest rates, is following its natural long wave trend. It is on schedule to reverse higher in a new long wave spring in 2013 and beyond. Unfortunately and ironically, the Fed's attempt to produce inflation could prolong the deflation by socializing bad debts and weighing down the U.S. and global economy. The CPI annual rate of change below demonstrates the long wave forces at work.
The natural global long wave disinflation and deflation is in the process of clearing non-viable bad ideas out of the global economy with what Schumpeter called creative destruction. QE wants to keep those bad ideas in business, taking profit and reward away from the more prudent and better ideas in the market. The problem is that central banks are pouring trillions of additional debt into the economy when a long wave spring is right around the corner. This creates a real risk of hyperinflation once the long wave winter season is over and a new long wave spring gets underway, a real life bonfire of the vanities.
The CPI, like interest rates, is following its natural long wave trend. It is on schedule to reverse higher in a new long wave spring in 2013 and beyond. Unfortunately and ironically, the Fed's attempt to produce inflation could prolong the deflation by socializing bad debts and weighing down the U.S. and global economy. The CPI annual rate of change below demonstrates the long wave forces at work.
The natural global long wave disinflation and deflation is in the process of clearing non-viable bad ideas out of the global economy with what Schumpeter called creative destruction. QE wants to keep those bad ideas in business, taking profit and reward away from the more prudent and better ideas in the market. The problem is that central banks are pouring trillions of additional debt into the economy when a long wave spring is right around the corner. This creates a real risk of hyperinflation once the long wave winter season is over and a new long wave spring gets underway, a real life bonfire of the vanities.
No comments:
Post a Comment