Market Overview Analysis by Lance Roberts covering: US Dollar Index Futures, US Dollar Index. Read Lance Roberts's latest article on Investing.com
I recently debated with Michael Pento, who made an interesting statement that increases in the money supply, the deficit, and a return to quantitative easing will lead to 1970s-style. The recent experience of inflation in 2021 and 2022 would seem to justify such a view.
Most notably, from 2009 to 2019, the average inflation rate was below the long-term average despite increased money supply levels. In other words, the increased money supply did not lead to inflation.would lead to higher inflation and interest rates, there is a reason that hasn’t occurred outside of the Pandemic shutdown. The reason is that the government is notWhen the government needs to pay for obligations that exceed current revenues, the U.S. Treasury issues debt.
Basic economics states prices will be set at a level where the supply of goods or services meets consumer demand. Therefore, unless the Government passes a new infrastructure spending bill of massive proportions or sends another round of stimulus to households, no factor is available to restart the inflation process of increased demand.
The reality is that despite mainstream thinking that inflation will resurge due to rising debts, deficits, or Federal Reserve interventions, the historical evidence does not support such claims. The negative impact of debt on the economy is evident. Furthermore, the negative correlation between the size of the government and economic growth suggests the most likely outcome in the future is deflation.
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