Deflation or Inflation?

Admittedly this is anecdotal. But also significant. It looks like auto prices are set to…drop. That’s right, the price of new cars- even new and improved models- is set to fall. Seems odd in the face of reasonably strong commodity prices doesn’t it? Sales numbers have been decent and global capacity was cut right after the crisis three years ago. The Yen is strong, the Euro is holding in there despite being a disaster, so it’s not like the dollar has suddendly greatly appreciated to lower import prices. All of this means that auto prices should be up modestly, not down. (click graphic below for article). Hmmmm….

Still Worried About All Those Reserves?

Many commentators still seem to be screaming that hyper-inflation is around the corner. The crux of their argument is that the Fed has pumped hundreds of billions into bank reserves. There is a chart circulating, which you may have seen, illustrating this explosion of credit. After all, reserves normally translate directly into fresh lending. I have reproduced the chart for you here:

Deflation, Not Inflation, Is Your Worst Enemy

Some of the most common questions and comments we get concern inflation and the money supply. Many feel that a fixed or tightly controlled supply of money would prevent inflation. One email predicted chaos due to rampant “double digit” inflation “sure” to come next year because of the Fed and Treasury’s recent actions. There is a hidden danger to a lack of inflation that is not readily apparent.