Fox Business News recently spoke with former Fed Chairman Alan Greenspan on the subject on inflation expectations.
A lack of inflation has been designated by many economists and central banks as a key culprit for the persistent slow global growth that the US, Europe, and Japan have experienced post the 2009 recession. In a statement that at first sounds optimistic, Dr. Greenspan expressed that he is just now seeing the early signs of inflation. “The only thing that ultimately determines the general prices level is the money supply. That’s what the data shows going back 100 years. The issue now is we haven’t quite clearly got a breakthrough, but the last five to six to eight weeks of money supply growth are very clearly faster by perhaps two percentage points in annual rate than they have been” remarked Dr. Greenspan.
While that seems like a positive forecast, according to Dr. Greenspan the positive sentiment will be fleeting. Dr. Greenspan notes “The presumption that the inflation pressures are going to remove the deflationary pressure is good, that will last for about three weeks maybe four.” After that, concerns will build about inflation getting out of hand.
Watch the interview below for more.