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Katwoman
18th August 2009, 11:46
Financial Trend Forecaster think "it takes about 2 years for monetary stimulus to result in inflation, so we could begin seeing massive inflation a year from now."

Current Inflation Forecast

Annual deflation has increased again this month reaching -2.10% very close to the bottom of -2.08% made in the last deflation in 1949-1950.

The MIP is projecting that the downward trend will end this month and turn upward next month as the negative numbers begin falling out of the annual calculations. But even if the rate turns upward it will take several months for the negative (deflationary) effects to work out of the system. But beginning around October we will see inflation beginning to rear its ugly head once again.

Interestingly just as we had deflationary months before we had deflation on an annual basis, we have now had inflation on a monthly basis for several months now (with the exception of July).

So for the moment prices are relatively stable. As consumers, we aren't spending $4 or $5 at the gas pump so as long as we have a job we aren't suffering too much. But unemployment rates are nearing 10% so it is getting serious. During the Great Depression unemployment rates reached 25%. Fortunately, this time around most families have two wage earners so even at 25% unemployment, most households will hopefully still have one wage earner.

But as inflation takes hold the suffering for consumers (especially those who lost their jobs) will increase. As I've said before, deflation is a good thing if you lose your job or your wages or hours are cut. I would much rather see deflation than prices going up along with the unemployment rate going up as well.

But once the effects of the "stimulus" package kick in we will probably see massive inflation. Generally, it takes about 2 years for monetary stimulus to result in inflation, so we could begin seeing massive inflation a year from now.

http://www.fintrend.com/ftf/MIP.asp