http://dailycaller.com/2011/10/27/data-suggests-inflation-on-the-way/
The good news is that the economy grew at a modest 2.5 percent in the last quarter. The bad news is that rapid economic growth in 2012 or 2013 could also prompt bank executives to inadvertently jump-start inflation.
The executives are holding back roughly $1 trillion in funds provided in 2009 by government officials to buy over-valued mortgages from banks and Wall Street firms.
The bank executives are now holding that cash because they were traumatized by the near-meltdown of the banking system in 2008.
But if their confidence grows, they could loan out hundreds of billions of dollars and spur inflation, says Steve Horwitz, an economist at George Mason University’s Mercatus Center.
There’s some evidence that inflation is already underway, he said.
New data shows a sharp jump in prices at the base of the economy, he said. For example, consumer prices rose 3.9 percent over the last year, but the price of “crude goods” grew 21 percent.
Crude goods are the raw materials of production, and their increased prices may gradually pass through factories, distribution centers and shops until they bump up consumer prices in future months. The 21 percent growth is perhaps being caused by companies’ use of banks’ plentiful funds to bid up prices, he said.
The good news is that the economy grew at a modest 2.5 percent in the last quarter. The bad news is that rapid economic growth in 2012 or 2013 could also prompt bank executives to inadvertently jump-start inflation.
The executives are holding back roughly $1 trillion in funds provided in 2009 by government officials to buy over-valued mortgages from banks and Wall Street firms.
The bank executives are now holding that cash because they were traumatized by the near-meltdown of the banking system in 2008.
But if their confidence grows, they could loan out hundreds of billions of dollars and spur inflation, says Steve Horwitz, an economist at George Mason University’s Mercatus Center.
There’s some evidence that inflation is already underway, he said.
New data shows a sharp jump in prices at the base of the economy, he said. For example, consumer prices rose 3.9 percent over the last year, but the price of “crude goods” grew 21 percent.
Crude goods are the raw materials of production, and their increased prices may gradually pass through factories, distribution centers and shops until they bump up consumer prices in future months. The 21 percent growth is perhaps being caused by companies’ use of banks’ plentiful funds to bid up prices, he said.
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