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Aggressive Stimulus Needed? Inflation Is Dangerously Low

Inflation Low
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EDITOR NOTE: If you follow mainstream economic opinion, inflation at its current levels is dangerously low. We’re facing a deflationary threat. From an everyday, common-sense perspective, it’s hard to swallow this thesis when the cost of living has been rising steadily for as long as inflation has been hovering at these low levels. If you take a look at industrial metals, you’ll see how they’ve been rising significantly over the past year. What does this mean? If you think the cost of living is high now, wait until those industrial metals get priced into products. Industrial metals serve as one indicator for future prices. And it tells us that the coming wave of inflation is going to be much greater than any mainstream inflationary barometer or headline figure will tell you.

The conventional view of inflation is that it’s not only low, but dangerously low and in need of aggressive stimulus.

But that view is increasingly hard to defend, given all the things that are soaring in price. Consider:

Inflation Low

Inflation Low

The above charts are for industrial commodities that, while not something individual consumers tend to buy (and therefore not part of the official “cost of living”) do affect the price of consumer goods. When they go up, so eventually do the prices of cars, TVs and buildings.

Speaking of buildings, the next chart shows US home prices – which have been rising steadily since the bottom of the last recession – steepening this year. Note the upward inflection at the far-right. Home prices are now higher than they were during the previous decade’s housing bubble, and they’re accelerating.

And last but not least, the US dollar – whose rate of decline is the official definition of inflation – has begun to fall versus not just real things but even against the other crappy fiat currencies.

Inflation Low

Add it all up and today’s world has emphatically stopped looking deflationary or even disinflationary. Price increases are now wide-spread, and it’s just a matter of time before people start to notice and act accordingly.

Originally posted on Dollar Collapse

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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