Wednesday, June 11, 2008

Deflation: Making Sure "It" Doesn't Happen Here













One of the biggest reasons for high commodity prices has been monetary inflation in the recent years. All central banks for the past 5-7 years have increased their economies' money supply substantially.

Ben Bernanke was claiming that we were in a deflationary environment back in 2002 (even though money supply was still increasing)

Here's a quote from Mr. Bernanke:
"...Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services..."

Then people complain about high gas prices.

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