FAST FIVE: How Asset Inflation Will End – This Time

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Moreover, the “core” US inflation rate (as measured by PCE) is still at virtually 2 per cent year-on-year.

Even had monetary conditions been easing rather than tightening, it is highly dubious whether this difference would have meant the powerful momentum behind the business cycle moving into its recession phase would have lessened substantially.

Fluctuations up and down in goods prices sometimes have nothing to do with monetary inflation.

Hence there has been a tendency for business owners to eschew long-gestation investments and focus on generating high returns via financial engineering instead (camouflaged leverage, momentum trading, carry trades).

Specifically, the star firm theorists tell us that there is something about present technological advance – most likely its high specificity of investment much of which is intangible to the given firm with little scope for selling in a secondary market – which retards the percolation of progress beyond.

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