Money supply explosion will lead to accelerating inflation

The dotted line is the exponential growth trend, in other words the maximum rate of growth that can continue for ever. This trend was valid until mid-2002, since when TMS has accelerated at a faster rate, telling us that TMS growth entered a hyperbolic phase when the Fed eased rates in the wake of the dot-com collapse. Put another way TMS is already hyperinflationary.

Bear in mind that economists are now telling central banks to accelerate monetary growth even faster to offset the tendency for bank credit to contract. They see no other way to avoid a bank balance sheet implosion with all the deflationary consequences that implies. So the prospects for 2012 and thereafter are for TMS to continue its hyperbolic trend, and incidentally supply funds for a government deficit completely out of control. Also bear in mind that when such a trend becomes established it becomes almost impossible to stop, since the whole debt-based economy and the banking system would collapse....more