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Anyone in business needs to have at least an ear to the ground on the economic scene – not just what it is now but expectations for the future. That requires some basic economic literacy.
Inflation is the result of more money chasing too few goods and services. Recently, the productivity of the US economy has been pretty flat. So any increase in money supply is going to result in an increase in prices.
Here’s a chart of the increase in the US money supply over the last few years (Courtesy of
Money Supply Jan 2009.jpg
The recent huge spike in the gray line shows the Federal Reserve pumping cash into the economy. The soaring M3 from 2006 until early last year shows the craze in credit being extended on poor-bet loans. The crash in M3 since shows the “credit crunch”. M2 is the net result and the best indicator of future inflation. You can see it soaring through 10% now.
Plan accordingly.

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