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Economics 101: Inflation is caused by too many dollars chasing too few goods.
Its an easy concept to visualize, when you push many dollars into an economy prices rise, but in our present predicament its hard to see it in action. With billions and billions of dollars being pumped into the economy there should be rising prices across the board, but they don't exist. Why is that?
It is dawning on me that I'm only looking at one side of the equation, the 'too many dollars' side. In fact the answer may lie on the other side. Maybe prices aren't rising because there is no lack of goods. Maybe, and this is just a wild maybe, maybe we have managed to mask inflation in the most bizarre way - maybe we have managed to export it.
For just a moment forget about our economic activity other than that we spend huge amounts of money on goods from China. What does that do to China? It deprives them, by way of export, of the goods they produce and at the same time greatly increases the number of dollars in their country - many dollars chasing few goods.
Have we managed to transfer inflation that rightly belongs between our shores to our asian rival? Is every item we import and every dollar we export a hedge against domestic inflation?
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