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You’ve heard the call for several years:
“INFLATION IS COMING! INFLATION IS COMING!”
The more extreme predictions out there were calling for hyperinflation as far back as 2008 and 2009. Here we are, three years later, and inflation is still very subdued. All the talk about money-printing at the Fed and the most we could squeeze out was your run of the mill 2% inflation.
It’s not that the “inflationistas”, as we’ll call them, were wrong about everything. They merely failed to take into account how extreme the contraction had been and how difficult it would be to counteract the massive deflationary tug of the market. The Federal Reserve, try as it may, simply does not have much power to create “inflation” in a massive balance sheet recession, once it’s already resorted to a zero interest rate policy. Yet, just because the inflationistas were wrong in 2009, doesn’t mean that we shouldn’t be worried about inflation in 2013. From the data I’m seeing, the risks for inflation are starting to rise significantly.