Is severe inflation ahead?

Farm and Ranch February 2, 2010 Large federal spending deficits and the Fed’s increases in the money supply; that could be a recipe for severe inflation in the U.S. economy down the road. But a former White House economic advisor who spoke at last week’s Washington Oregon Potato Conference, Todd Buchholtz, isn’t that worried. He explained why during an interview.

Buchholtz: “I don’t think inflation is “baked in cake“ as some economists think. It is true that Bernake has had the printing press going overtime starting about November of 2008. But two points; first of all he has actually pulled back the reins on money supply growth. That printing press has actually slowed down in the last few months. But secondly, when he was printing so much money the private sector was burning money. They were destroying credit, calling in loans, deleveraging. So those sort of inflationary forces that Bernake might have been firing up is really just offsetting the destruction of capital, the destruction of money, that was taking place in the banking community. So overall I think that in terms of inflation it was more of a wash than something that would lead to the hyperinflation some people are worried about.”

Buchholtz believes this is the first world recession in which the U.S. is the not the locomotive that is bringing recovery to the world economy. He says China and India have done more to lift the world economy than the U.S. has.

I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on the Northwest Ag Information Network.

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