Inflation coming our way

 

Henry Thompson

 

Quantitative easing by the Fed increases the money supply.  Over the coming years, the result will be inflation.  The government prints money to cover its deficit.  Government debt already exceeds yearly national income and will grow with expanding public medical and social security spending.  Inflation eases the federal government debt crisis by effectively decreasing what the government has to pay back. 

 

After 20 years of 5% inflation, every dollar will be worth 38 cents.  Inflation may be much higher as during the oil price controls and debt crisis of the late 1970s and early 1980s.  Stock prices will have to rise to keep up with the coming inflation.  Starting at 12,000 in 2012 the Dow Jones stock average will have to reach 31,000 in 2032 to buy the same goods and services assuming only 5% inflation!  New “milestones” for the DJ will only keep up with inflation.

 

Inflation helps debtors including the US government, hurting creditors and those on fixed income.