This is the way the last five paragraphs should have appeared. The agoracom editor italicized all of them. I would not want attribute to Hamilton my poor thoughts. Only the italicized paragraph is from Hamilton.

P.

I would add yet another set of complexities in today's prices. There is market intervention by governments with political agendas and additionally huge price swings caused by hedge funds with too much money so that prices do not reflect the fundamentals in the shorter term.

Since separating out price effects is virtually impossible, it makes far more sense to look at the cause of inflation. That is money supplies increasing at faster rates than the underlying economy. If you think of price inflation as smoke, an effect, then why not look for the fire that creates it, the cause? This fire is excessive monetary expansion. When a fire initially flares brightly, there might not be smoke right away. But there sure will be if it keeps burning!

Indeed if one follows his logic then this statement though odd can be true. We can be and are suffering what can be considered as "deflationary effects" in the midst of an inflation. It is true that credit is collapsing and loans are hard to come by. It is true that prices are down for many retail goods as retailers cut prices to compete to sell things.

When the created money, still being held by banks, starts coming into the economy, when the dollar's role as the world's reserve currency tumbles, when the U.S Bond market breaks down, then the blazing fire that is the current monetary creation will begin to produce the smoke of rising prices. And I am terrified of how high they will go even for our simplest necessities.

I did not respond to some of your questions e.g. "Where is your line in the sand" because I have no other view. To me, even though I could be wrong - wouldn't be the first time, the concept is as basic as 2 + 2. There is to me only one answer. The housing collapse is not yet complete - many more resets are coming - so there may be more deflationary symptoms on the road to inflation...but inflation is coming. The monetary base has been increased substantially...by definition there can only be one outcome.