Alan Greenspan, former Fed Reserve Chairman, was asked to assess what the price of gold would be a year from now. He said that he couldn't tell in a year, but could five years from now say that it would be higher. When asked about interest rates, he claims that he knows it will be considerably higher, and believes that inflation is only going to increase more and more. Low inflation and high interest rates are not ideal. Inflation is caused by a large growth in money supply and lower interest rates are supposed to compliment this, which would give people an incentive to spend. But if he views that in the future interest rates will be high, and inflation is currently low, than people have no reason to spend because there isn't enough growth in the MS. At the end of the article, he says that though the interest rates have been kept pretty low, they will indeed rise, and once they do, inflation will also.
http://www.wnd.com/2014/11/greenspan-inflation-interest-rates-gold-all-heading-up/
If he predicts that interest rates will rise and inflation will also rise than this is fine. If interest rates are going to rise in the future and he claims that inflation rates will also rise then inflation wont just randomly increase, it will be gradual as well. Also, it's interesting that he is concerned with the price of gold. Is this just because that is what he uses an one of many benchmarks for the economy? Also, I wonder why inflation will increase so much. Right now it's very low and I don't see any reason as to why the Fed would be printing money when the economy is finally recovering.
ReplyDelete