Inflation

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

Ernest Hemingway, The Next War

Economically most nations have been lucky. Yes, as Jeremiah Wright once said, the chickens are coming home to roost. Unemployment in Greece and Spain are in the 20% range. As this figure involves government statistics, no one knows for sure. India's currency is tanking. So is Brazil's. Brazil's case is ironic, as the president complained last year that the Real, the Brazilian currency, was too high. Be careful what you wish for. 

We have a lot of inflation right now, inflation defined as an increase in the money supply. While the monetary inflation rate is quite higher than the CPI government figures, even that rate is not as high as one would expect looking at actual prices. The beef bacon I buy just went up 20% since the last time I bought it. I see lots of examples. I am sure you do too. 

But what the US is doing is exporting inflation to other countries. Well, I suppose US citizens should be grateful that the US can export something. Other nations have no choice but to also inflate their currencies to match the US Fed. 

All is well, until it isn't. Eventually all these dollars overseas may come home. The US debt owned by China and Japan is on the decline. While both China and Japan understand that they cannot sell these bonds all at once, they will be sold. Especially in the case of Japan. 

The chickens will come home to roost as the US dollars return to their place of origin, like homing chickens. 

While I am not expecting hyperinflation, modest inflation in the 10% range seems almost inevitable. (Yes, I see 10% as modest.)

Get ready.