Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

Exactly When Will Inflation Begin?

It’s hard to predict exactly when any given event will occur. As with the housing bubble, the onset of inflation depends a lot on changing psychology. For housing prices, it was faith that housing prices could never fall too significantly that kept us going for so long, until that faith finally died. For inflation, it will be faith that massive increases in the money supply never cause significant inflation or that it can be easily controlled before inflation gets too high. Once that faith dissolves, the domino fall of our remaining bubbles (described in more detail in the next chapter) will begin.

Of course, the same people who are now saying that increases in the money supply will not cause inflation or will cause only mild inflation that can be easily be controlled, are the very same people who said housing prices could not fall significantly enough to cause major financial problems for the United States and the world. You wonder how these people maintain such high credibility on such important economic issues even after being horribly wrong on such other incredibly important economic issues, like the fall of the real estate bubble or the stock market crash of 2008. Of course, we know why they maintain such high credibility. They say what the cheerleaders want to hear.

So what is our best guess about when inflation will start? Due to the “lag factors” we described earlier, it typically takes about 2 years from the time the money supply is increased ...