Wednesday, September 16, 2009


So dumb carpenter boy here is in a state of complete confusion. The latest reports show that the Producer Price Index is up 1.7% and retail sales were up 2.7%, the largest increase in three years. How can this be? Unemployment is 16%+, credit is unavailable and people have watched their assets disappear. Why would we see inflation rear it's head. I know that the money is being printed like crazy but still, if no one is buying why would prices go up? Could it be that the appearance of looming inflation may be seen as an advantage to the government? If people think prices are going to rise would they push forward demand to buy at a cheaper price? If we had money, maybe. I don't think it's going to work this time. I believe we are entering a deflationary period because everyone is financially exhausted or just too leery of the future to spend any money at all. No demand equals lower prices, regardless of everything else. And if I remember right, this action, when tried in the 30's, just created a bubble that popped, plunging the country deeper into depression. It took a World War to start to get us out.

Anyway, this video may help to show why it might be in the interest of the financial sector to overstate inflationary pressure. Besides, Pete Smith Specialties are great to watch.

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1 comment:

  1. Only Pete Smith could make this subject enjoyable . . ."Oh No Look Out For That Ladder"