[RoninLB]

inflation can be difficult to pin while it's in the early stages of motion. The easiest way is to watch the money supply. ie: to many dollars chasing few goods. Gold prices have been an historical leading indicator measure. High gold prices = inflation.

The trade deficit is an example of our $ chasing goods worldwide. If we didn't have the trade/current acc't deficit another country would have to take over our deficit or mfg decrease production. Decreasing production decreases jobs. Decreasing jobs in countries like China, India, etc creates instability. That's one of the reasons that China buys our bonds. They'll stroke the screamers with US bond bs to pacify them.

There should be a balance between savings and investment to curtail inflation. All the post "bubble" excess $ is searching for investment and the only thing available is bonds. The bond demand keeps the spread of interest rates above mkt perceived inflation very low. How long will this global imbalance last? Nobody knows. The US has the role of giving the world something to believe in due to our success in monetary policy which produces low and stable inflation. Mkt's take years to adjust. What's going on now is a worldwide adjustment to the late 90's "bubble" excess volume of $.

The world currency mkt's are another story.