As readers may know, I’ve been tracking the likelyhood of inflation on this site, and in today’s WSJ Arthur Laffer lays out the case for why we’re at risk of inflation, and predicts it’s going to get pretty bad:
It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn’t a pretty picture.
He also provides this illustration of the stunning increase in the money supply, “the largest increase in the past 50 years by a factor of 10.”
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