February 29, 2012

Supply, Demand And Inflation

I have long argued that neither recession nor high unemployment would protect us from inflation. If demand falls, but supply falls faster, prices will rise. That is exactly what is happening with gas. The same dynamic is already evident in the airline industry. Fewer people are flying, but prices keep rising because airlines have responded to declining demand by reducing capacity. Since seats are disappearing faster than passengers, airlines can raise prices. At some point Americans will be complaining about soaring food prices as much more of what American farmers produce ends up on Chinese dinner tables.

Because the Fed is likely to continue monetizing huge budget deficits, Americans are going to be consuming a lot less of everything, and paying a lot more for those few things they can still afford. - in Europac

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.