Jimmy says that we will not prosper much in real terms but we will prosper in comparison to our economically negligent neighbour because inflation will negate much of our gains and leave the neighbour destitute.

No Practical Means Of Draining Quantitative Easing Mon, 6/22/09

Dear Comrades In Golden Arms,
Those that discount inflation, as many are doing today, because of the unlikely nature of demand pull caused inflation are economic ignoramuses.

I agree there will be little if any meaningful demand pull caused inflation.

Inflation this time is totally tied to the US dollar and when it surfaces will be COST PUSH CAUSED INFLATION as dollar weakness is translated into the cost of raw materials and food, even with same or moderating demand.

In all experiences of major QE lasting more than one year, the outcome has always been currency motivated cost push inflation in terms of the currency in question.

Since there is no practical means of draining the quantitative easing as it is an international occurrence across many forms of debt, there is no practical means of avoiding currency related cost push inflation. Any other opinion is dead wrong and speaks to the lack of economic training and experience of the speaker/writer.

Basis for Complacency

The unprecedented amount of monetary creation is being entertained because financial leaders see demand push inflation as highly improbable.

There is no quick fix to this business contraction because the cause is yet to be focused on: the enormous amount of OTC derivative instruments that cannot be dealt with in any practical manner. They are contracts for special performance that lack standards that prevent listing or clearing and are unfunded.

The West is in for a long period of slow business activity.

What is not being considered is the future of Western economies and that the dollar is based on confidence, a very subjective and fickle element to depend on.

The problem faced then is a cost-push inflation that has nothing whatsoever to do with the level of business activity.

This cost-push inflation is a currency related phenomena, which historically occurs as a result of QE when confidence in the currency of the practitioner nation begins to lose value at an accelerating rate. The result has always been a currency driven hyperinflation that takes birth in the worst of business condition.

"The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services."