The Federal government has basically printed trillions of “stimulus dollars” in the past 12 months, dramatically increasing the money supply.
In the past, printing money leads to devaluation of the dollar, which means that real assets – measured in terms of dollars – will cost more in the future (when measured in terms of dollars, each of which is worth less).
Real things, including commodities, go up in price. At some point, this impacts producers. Simultaneously, those stimulus dollars lead to increased demand, enabling producers to raise prices. At that point, inflation becomes obvious to consumers.
Procter & Gamble will hike prices on baby care, feminine care and adult incontinence products in September to respond to higher commodity costs.
Some say “but its different this time” and this will not lead to high inflation. Yet every country that has chosen this approach in the past – Venezuela, Zimbabwe, Germany in the 1920s and many more – this has led eventually to hyper inflation. But hey, “its different this time…”
What to do? The traditional response is to own real assets and take on debt that will be paid off in future, deflated dollars.