Thought of the Week- Inflation

The German inflation of the early 1920's and the extreme difficulty of closing the inflationary Pandora's Box, once the money supply has been allowed to ride out of control and when velocity of circulation accelerates.

This week's chart shows the extraordinary expansion of the
US monetary base during the financial crisis/recession.
Note that both the Fed. and the Bank of England now appeared
to be more concerned about a double dip than inflation.
If the concerns are justified, expect another dose of
monetary laxity. It is as though our Faustian central
bankers have signed a cunning pact with inflation permanently
to ward off a stagnant economy, which may well be the price
that should be paid for previous debt- fuelled excesses.





Chirag Shah
Director, Kassius Ltd