posted on Feb, 19 2009 @ 02:07 PM
Supply and demand
Originally posted by redhatty
Most of the increase is from a supply and demand issue, not an "inflation" issue. Our currency (USD) is strong right now, getting even stronger
is an essential component of the 'inflation' dynamic.
Currency 'strength' is relative. The US dollar is only 'strong' in it's relationship to a basket of other rapidly weakening currencies.
The last time we experienced double digit inflation was during the 1974/75 recession - cpi peaked around 14% - the dollar @ 109+...much 'stronger'
than today's 87+.
IOW, US dollar performance relative to other major currencies should not be considered a metric for gauging inflation.
*DTWEXM is equivalent to the NYBOT USDX
When you don't have the supplies, but you have the demand, the price rises.
Exactly...it's called price inflation
. With declining profits, limited access to new credit, and the inability to roll-over existing
loans...supply destruction is the inevitable result of producer cut-backs...suppliers going out of business. Those that believe an inflation scenario
is the ultimate end game, will point out that cutbacks in base metals & energy production, are soon to be joined by serious shortages from the drought
stricken wheat producing nations.
Edit add: Protectionist measures to curb exports in order to satisfy domestic demand, will only fuel the fire of global shortages.
[edit on 19-2-2009 by OBE1]