CPI double digit inflation is likely within a year.

The U.S. population won't drive it and that is why it will be so hard to stop. The majority of the "printing" is going overseas. We saw in the AIG bailout how much money went overseas. we see the still problematic trade deficit with dollars going overseas. We have the problem with oil prices rising and dollars going overseas. We now have the overseas markets possibly attracting money again and we have the biggest problem.

The biggest problem is the trillions already created and overseas that don't want to be used for debt. We are seeing rising use of dollars for buying "stuff" for making things. They are buying commodities to build roads, bridges, power plants (China builds a new power plant a week and a new city the size of Philly, about every month) and car sales rising. They are even stockpiling some commodities to spend dollars.

Then you have the non-dollar deals going on all over the world so dollars don't have to be accumulated as much and can be spent to drop the number being held. We just had China make a non-dollar deal with Argentina so demand for dollars is reduced there. We have six other Asian deals like that which have been made. We have Brazil and Argentina ending the use of dollars in trade between them and 4 other nations reporting they will join in that move.

All that reduces the need for dollars and puts downward pressure on the dollar. We have the dollar now, that has been dropping and if that continues as some believe to 71-72 then oil will be over $100 a barrel again and that will be very inflationary as it would make the price of everything hauled buy trucks, planes and trains much more expensive. You have food that the raw materials of which are sold in dollars and the global population is rising and the middle class consumers rising in the emerging markets.

We only have 300 million consumers (population) and there are 6.7 billion out there spending dollars through their governments and companies buying food. We have about 2 billion middle class consumers now, in the world buying cars and fuel and more meals per day and more things made with raw materials sold in dollars.

We can be in a deep depression and have double digit inflation because of all the money being pumped out into the world and that was previously pumped out into the world. Because the dollar is the world's reserve currency it is the world that determines our CPI now, much more than we do.

This is also Bernanke's problem as what he does here, is affecting the world and when he gets ready to rein in the money supply it will be long too late. Since he won't rein it in while we are in a depression, that means it keeps going out to the rest of the world that wants to spend and get rid of them as fast as they can. It will be the global velocity of dollars that causes most of the rise in CPI here. Our meager 200 billion middle class are a drop in the bucket compared to the people spending dollars in the world.

That is why the world is looking to Asia for a global recovery, not the U.S. It is that huge consumer base that far outnumbers us that they are counting on. It is their positive account balances and consumer saving that gives them money to spend instead of paying interest on credit cards, and large home loans and big car loans, that they are counting on. They know the U.S. consumer will probably be dead for years. Thus, it is the world spending the dollars they have that is providing hope to many businesses, nations and investors.

The reason Fed is screwed is that they need to predict 18 months in advance depending on Velocity of Money. So far Velocity has been zero, but once the Velocity picks up, Bernanke has to day trade derivatives with perfect timing. He will either go down as either Greatest Trader of all time, or yet another Central Banker.

There is also the "money multiplier" which is when a bank has a deposit, it can lend out 10 times that amount.

But, if there is a lack of borrowing, they may only loan out 2 times or 5 times instead of 10 times the mount. As a result only two tenths or 1/2 of the money was put into circulation as could have been.

When the Fed tries to correct this, the money multiplier may still be high enough to thwart their attempts to lower the money multiplier by making loans to banks more expensive, for a long time. Too much money will already be going to work.

Hyper-inflation can double the price of things in days, once it starts any panic selling of the dollar. Look how fast the Zimbabwe dollar fell. Just while printing new currency to distribute, the currency would lose 50% and more.

http://investment-blog.net/cpi-double-digit-inflation-is-likely-within-a-year/

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