Monday, December 01, 2014

Whatever Happened to Inflation?

Whatever Happened to Inflation? - Reason.com
In recent years, U.S. federal deficits have declined from more than $1.2 trillion to less than $600 billion. 
This is not because the government has made hard choices to raise revenue or cut spending but because rising asset prices have resulted in greater tax receipts from the wealthy. 
Yet this windfall can only last until the next meaningful correction in asset prices. 
If tax revenues fall, growing federal deficits would compel the Fed to print the difference. 
In that case, foreign banks would need to buy even more dollars to maintain their currency valuations. 
If they lose the will to keep pace, the dollar would lose relative value. 
A weaker dollar could be the spark that finally ignites significant CPI inflation in the United States.

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