Inflation Held in Check by Fear
http://www.europac.net
Posted on Tuesday, February 21, 2012
History has shown us time and again that out of control money supply expansion creates inflation. In light of the trillions of synthetic dollars that have been injected into the economy by the Federal Reserve over the past five years, most observers (this one included) had expected prices to spiral upward. But in making these determinations, many of us forgot to factor in the supply side of the supply/demand equation. Inflation remains low now because of game changing events that have reduced the demand for money.
As far as the Federal Reserve and the President's Council of Economic Advisors are concerned, inflation is currently holding at around 1.4 percent. However, these authorities choose to focus only on the most generous measurement tools, like the core PCE index. Other common indices, such as the CPI burn much hotter. Current CPI is at 2.9 percent, the highest year-over-year increase since 2008 and more than twice the rate of the core PCE. However, it is widely recognized that even these figures have been manipulated downwards to benefit the Government.
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