Is inflation inevitable in the U.S.?
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Before long, gas prices will go rise, I don't for see any economic rebound that isn't accompanied by a rise in oil prices. However, to cope with those oil prices, the Federal Reserve will have to increase the money supply otherwise the financial strain on this country will continue. Personally, I believe the root of the current economic downturn is caused by natural inflationary forces created by oil prices, over-consumption and our reliance on China. In addition, it is practically impossible for us to lower the current account deficit while maintaining a strong dollar at the same time. Something has to give, and with other countries (particularly China, and India) going through phases of major growth we are realizing the bargaining power of the U.S. to diminish in the global market. Honestly, the U.S. hasn't experienced significant inflation in about 20 years and now that the economic climate is much worse than it was before. Inflation to some extent can be helpful in maintaining economic stability. Think about it: oil prices are practically out of our command as India and China increased the demand for oil thus we have to spend more to obtain the essential resource. Also home prices were rising (due to globalization) yet most people salaries did not increase in the same regard. Lastly the current account deficit demands that the dollar weaken. Sure there is a negative stigma associated with inflation, however I just don't see it being possible that our economy recovers without ANY inflation. Our policymakers, and even the Feds are too dedicated to keeping a strong dollar, however aside from all the stimulus crap, a weakened dollar shall be and will be the ultimate price for this economic upheval.
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Answer:
Inflation happens if and only if the supply of money grows faster than the underlying economy. Saying that oil prices cause inflation is like saying it is getting warmer out because the thermometer is rising.
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Other answers
Past November the dollar index will fall then rise suddenly before credit and debt is wiped out and new bartering systems wil emerge for survival purposes by June 2010 this next year.
Oil prices rise because inflation is occurring. Oil prices do not cause inflation. Inflation is only caused by expanding the money supply. Also, home prices rising had nothing to do with globalization. Inflation is inevitable because the government is spending more money than it gets through taxes, not because of oil prices.
Agustin
actually, oil prices dipped below 70$ and yes, considering bernanke printed an additional 1 trillion dollars, its going to leak out eventually. Only thing is, its not in the consumer market, its shuffled between the fed and banks to keep interest rates at absolute zero and there is a SHORT RUN tradeoff between inflation and unemployment, but it never lasts
Jay G
inflation is certainly to happen in any economy because the central bank uses expansionary monetary policy; however, how much it will rise? it depends how agressive policymakers are; the objective to combat high unemployment in recession is expansionary both fiscal and monetary policies to spur economic growth and reducing unemployment; however, the pace of recovery depends on spenders, which interferes with the policies; sometimes it's not govt. to be blame although they r part of it; i hope that big emerging economies (china, india, brazil, russia, indonesia, etc) could share US burden; every country has part to play
vijay
I think it is inevitable to have inflation in the US. As the current US Monetary Policy is inappropriate to reform the meltdown US economy. According to Milton Friedman, the inflation is the monetary phenomena. Since Uncle Sam has printed about 80 trillions US totally to sustain the wars, it is doubtful if US treasury can afford the cost of 10 billion US per day for the Iraq war. What's more? America and Hong Kong is currently experiencing the twin evil of stagflation, higher unemployment and inflation. The speculation of oil prices to meet the greed of the Wall St. financial personnel and the oil mega investor (Dick Cheney and his wife). What other root cause of the continous inflation in US, particularly in Hong Kong and a few African countries? The real estae transaction. It was televised in the 60 minutes recently mentioing about the more economic harm than the sub prime loan crisis in the future will be the Option Arms and Alta A. http://www.oswego.edu/~edunne/340chapter26.html http://www.informationclearinghouse.info/ http://search.yahoo.com/search?p=How%20oil%20prices%20are%20controlled%20by%20speculation? http://search.yahoo.com/search?p=The%20Option%20Arms%20and%20Alt%20A%20will%20be%20followed%20the%20sub%20prime%20loan%20crisis%20as%20televised%20in%20the%2060%20Minutes I think if the US and the G20 want the world citizens to share the world wealth more evenly with more secure and comfort life and America Dream for the Main St. peoples, Barack Obama and Bernake must put some efforts and thoughts in the followings. 1) Stop all those financial bail outs and stimulus. Try to collect back those printed US dollars bit by bit. 2) Destroy the global stock markets directly and indirectly, but wisely. Simply speaking, if Dow Jones Index will decline to below 4,000 points and the Hong Kong Heng Seng Index will be declined to below 8,000, it is likely to ease the inflation in the US and in HK. 3) Hong Kong real estate tycoons want to make the already overepriced properties 5 to ten times as it really worth to a higher price bracket. Hong Kong government is the behind curtain supporter to sustain the highest paid officials and civil servants in this world. Obama should learn how to control the real estate prices to become reasonable and affordable to all Anericans. 4) It is better to send more US troops back home than keep on battling in the war zone. It is a review on the implementing and failing US Monetary Policy http://www.federalreserve.gov/generalinfo/faq/faqmpo.htm
Guo Lo C
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