Wednesday, September 3, 2008

Looking Ahead to Deflation

In today's Best of the Net post, I recommended three articles that address a similar issue, but in different ways. The issue is of expansion/contraction in the supply of money and credit, aka. inflation.

To summarize the themes of the three articles, I have put together a graph that explains things in fewer words. Click on the graph for a sharper image.

This is a process that has been going on for some time now, but as mentioned by Shedlock, inflation numbers are currently overstated and are on their way down. The Federal Reserve, by looking at a flawed method of calculating and defining inflation, is wrong in their recent hinting of higher rates to come. As this deflationary process continues to feed on itself, the next move in rates will be lower - not higher.

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