I have the view that for there to be inflation then there needs to be an increase of money circulating through the economy but if we look at the velocity of money being at an all time low and ponder that deficit spending has stopped we can begin to realise that less money is circulating. But deficit spending should have jump started the economy allowing fresh money to circulate, however a pivotal variable prevented this. The balance of trade deficit means that more money leaves America and that China has more US dollars than America. I deduce that Americans are powerless to create meaningful inflation, as opposed to the distorted core inflation that has continuously found new ways to adjust the figures to take into account new challenges facing the economy.
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