Well, PoP, there's inflation and then there's
INFLATION. This goes back to my point about wages lagging inflation. We have seen a massive growth in debt (particularly as tied to housing), and it's been a substitute for income growth. Corporate earnings as a percentage of GDP are high, while employee compensation, as a percentage of GDP has fallen. It would almost seem the middle class is getting the squeeze, but it's a quiet progression (ala boiling the frog). "Hey, we won't give you a pay raise, but you don't need it, buddy. Your house has gone up in value 78% over the last 4 years. Let me let you talk to my banker. He can get you a HELOC, and you can get that new bass boat you've been talking about." In this case, the bank is happy. The boat company is happy. The boss is happy. The employee is happy as long as he can pile up more debt. It's win-win for everyone, I think.
Thing is, I don't want to be a part of the squeeze, and in doing so, I must consider all possibilities. If inflation cannot be constrained, due to worldwide demand, how does one protect himself? Will Bernanke say "All ahead flank, basis points be damned," or will he say."How soon can you load my Chinook with sacks of cash?" Preparing for situation A is a lot different than situation B.