Money

Inflation Could Follow "Easy Money" Recovery

| by The Heartland Institute

Heartland policy advisor, John Skorburg, talks about the upcoming economic recovery in the United States.

According to several prominent economists, the economic recovery is right on the horizon. But what type of recovery will it be? Their guess: One fueled by easy money – followed by inflation!

“The signs of a V-Shaped economic recovery are all around, for anyone willing to see,” say Brian S. Wesbury and Robert Stein today on Forbes.com.

“New claims for unemployment insurance have been trending down, despite unprecedented layoffs in the auto sector. Home sales have started to climb from the lows set earlier this year. Consumer confidence has jumped faster than at any time in the past 30 years. In addition, the ISM Manufacturing index is now in a zone consistent with economic growth, and construction has increased two months in a row.”

Wesbury and Stein are positive, with a few caveats added from their previous writings:

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“The end of the recession does not mean we won’t lose more jobs; employment is always a lagging indicator. And there will be more defaults, foreclosures and financial market problems too. But none of these are leading indicators. In our view, there are no more [economic recovery] shoes to drop.”

“The end result is that the stock market and the economy are being lifted on a sea of liquidity, giving us a V-shaped recovery. Very soon, the recession will officially end. This is not a dead-cat bounce, and it’s not government spending. It’s easy money, plain and simple.”

Dr. John Rutledge agrees with Wesbury and Stein, on his blog. A money based recovery is coming, but with bumps and briuses longer term. (In short: Look out for inflation in 2011.)