- We will have deflation... in some areas. But we are also going to suffer a concurrent bout of inflation too, producing a paradox that many have difficulty reconciling.
The vicious cycle created by the Federal Reserve’s Quantitative Easing [Note: we now call it QE 1] monetary policy is kicking in. We are seeing a huge influx of speculative money flows into the commodity sector pushing up food prices across the board. At some point, sooner rather than later, the rising cost at the wholesale level as indicated by the CCI and the futures boards will translate into higher retail prices for consumers, who are already being pinched by stagnant wages and falling net worth.
The result – consumers are forced to retreat on spending with the next result – a slowing economy – with the next result – more Quantitative Easing – with the next result – more rising prices as currency induced inflation in essentials rises further will compound the problem exponentially as the cycle repeats itself.
- "It means the consumer is on the verge of watching his disposal income be decimated by high food prices... the only saving grace is that energy prices have not YET begun moving up alongside the rest of the commodity complex. But it's only a matter of time. When the crude complex gets involved you will see home heating bills, home cooling bills, industrial energy costs and gasoline prices join the list of soaring costs nationwide. But don't worry. None of this counts towards the Consumer Price Index anymore. Thus... there is no inflation."
Watch what happens next. All you are going to hear about from officials is the threat of deflation. Deflation and a collapsing stock market will set the stage for QE 3.
Get ready... it's coming.
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