Jun 26 2006
Inflation? Follow the Money (Supply)
We’ve long been arguing the Austrian School of Economics perspective about inflation being tied to money supply, a sentiment echoed by Milton Friedman and the monetarist school. Unfortunately, through the Greenspan years, because the vast increases of money aggregates vented into financial assets instead of consumer prices, analysts and common investor alike have come to believe that inflation was conquered, and that their wise central bankers could, in fact, enable us all to have our cake and eat it too. That is, of course, because the definition of inflation — if one bothers to look back through history — is simply the increasing of the money supply, vs. the current common understanding, where “inflation” is used to describe thy consequent symptoms of such actions: rising prices. Moreover, with official stats like CPI rigged to understate the actual rate at which prices rise, a complacent professional class out to build-up Wall Street is more than happy to always be as bullish as legally possible.
Whatever the case, in the face of rising price tension, especially in energy prices, the debate and discussion is beginning to relook at the inflation debate from decades ago.
We encourage readers to give a look to the Christian Science Monitor, for example, where they give the inflation tip: watch money supply. As the world catches on, there could be large shifts in investor attitudes, and vigilant investors will be poised to benefit.
