Thursday, February 14, 2013
Founded on the Fed’s QE-based currency printing programs and now by private bank currency creation too, US money supply is booming. Calculated in Austrian terms, 2012 was another year of double-digit year-over-year increases. This indicates that a big economic bust is on the cards. The last time there was anything approaching a 49-month double-digit rate string was the 36-month string that ended in the US housing boom-turned-bust.
Now in its 53rd month, US monetary inflation is 500 basis points greater than the cumulative increase seen in the 53rd month of the housing boom-bust, and it’s picking up steam. The Bernanke-led monetary inflation is, in dollar terms, not only 1.7 times larger than the monetary surge that resulted in the housing bust, but it’s a surge that is currently running at 2.1 times the rate seen at that time. And to top it all off, that rate differential seems to be blowing out.
What about a precipitous fall in the rate of monetary inflation negating this thesis? Possible, but not probable. Even if private banks cease their currency printing, there is still a swath of inflation to come because the Fed’s latest QE program is adding $85 billion a month to the money supply until it deems the economy healthy enough to survive without it. That means an annual rate of monetary inflation of roughly 10% until further notice. And if private banks continue their currency printing, instead of a precipitous fall in the rate of monetary inflation we could be looking at a precipitous rise.
A great(er) recession in the offing? Yes, says Pollaro; it’s rapidly being baked in the cake.
Posted by Unknown at 3:32 AM