There's a debate we've been having around the water cooler (or really, the coffee maker) here at Zecco and I wanted to open it up to the community and get your take.
Our QA Manager, Marc Arnold, thinks we're heading for an inflationary period. He argues that the Fed has pumped so much money into the economy that there will be too many dollars chasing too few goods. He told me, "The crux of the inflation worry is that Fed money is chasing growth that may be very hard to get – and may flood the U.S. in more money than necessary. Maybe this does not result in inflation, but rather a further devaluation of the currency."
Our CMO, Gabriel Dalporto, corroborates the inflation concern, but primarily because he thinks the long and sustained trade imbalance is putting a lot of pressure on the dollar, which will make all those imported goods more expensive. Here's his two cents, "You can't take in more than you give back forever. Eventually the Chinese are going to want something in exchange for all of those cheap computers and VCRs we've been borrowing."
Personally, I'm less worried about inflation unless oil prices skyrocket again in which case I could see the possibility of some double-digit inflation. I don't, however, think we'll face hyper-inflation. That would require a serious collapse of the economy that we're nowhere near in my opinion.
On the other side of the cooler is COO Allard Luchsinger. He believes that all the fiscal and monetary stimuli won't be enough to re-invigorate the economy, and as a result people will hold off on purchases. "Think about it, that house you've been eyeing is 20% cheaper than a year ago. But you think it will go down more, so you're not buying. That lack of demand will put further pressure on prices and they will fall further."
All good points, no?
So now I turn it over to you. Are you concerned about inflation? Do you think deflation is inevitable? Do you think this is just fodder for alarmists, or is there a real concern here? Give me your thoughts in the comments below!