[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:
1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]
Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.
If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.
[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]
Geee…. doesn’t sound familiar at all.
If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.
The system is really, really stacked against the responsible people right now.
