Tuesday, December 15, 2009

Inflation Estimate Off By Over Factor of Two

Wall St falls on inflation fears. Here's the key quote:


The Labor Department said the producer price index rose 1.8 percent in November, much more than the forecast for an 0.8 percent rise.

Whoops.

Bernanke and other economists in his camp believe inflation is not possible due to current utilization rates and unemployment. In their mind until factories are humming like mad and companies are fighting for workers inflation is "not possible". This theory ignores places like Zimbabwe, Weimar Germany, South America a few decades ago, and scores of other places where inflation took place despite the lack of production and massive unemployment. It was a simple debasement of the currency.

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