Steve Green is worried about inflation:
If Congress doesn’t close the money floodgates, and in pretty short order, then we will begin to feel better soon. Because as I’ve explained before, the initial kick-in of an inflationary period feels pretty darn good.
But what happens when everybody figures out that the economy isn’t really growing, and that we’re just undergoing a major inflation? Why, Washington and its MSM lapdogs will claim we didn’t spend enough money, and free markets will take the blame once again.
I could be wrong. I hope I am. But if we keep spending on a trillion here, a trillion there basis, then this is exactly what will happen.
Steve may be right but I’m not sure he’s worried about the right thing. There are different ways of looking at the money supply usually called “components”. The first component is currency (M0), the green stuff you have in your wallet. The second is currency plus checking accounts (M1). The third is M1 plus most savings accounts, money market accounts, and certificates of deposit under $100,000 (M2). The last is M2 plus all other certificates of deposit. As you can see from the graph above although the stuff that Steve is worrying about has grown enormously over the years it constitutes a relatively small fraction of the total money supply.
I think that’s why some economists are worried about the possibility of deflation rather than inflation. That other stuff is shrinking fast.
