How can inflation remain under control, with the 10 year Treasury stubbornly refusing to rise above 3%?
Inflation occurs when there is an oversupply of money. Too many dollars chasing too few goods. I believe it is the constant, uncounted creation of new wealth which has so expanded the amount of goods that printing money barely keeps up with. The internet is creating wealth out of thin air. Massive wealth.
Homeaway lists 2 million vacation rentals. It’s one company among many. The product it sells was a previously wasted asset. In providing a mechanism for owners of valuable vacant real estate to reach consumers, and facilitating the transaction, this industry has created enormous wealth. Is that wealth reflected in traditional economic statistics? I think not.
I just purchased a fairly obscure book published in 2002. It sold new for $22, and I paid $6.84 for a copy that is as good as new. I bought it from Goodwill Industries of Greater Cleveland and East Central Ohio. Someone donated it to them, they listed it for sale on Amazon, and I bought it. Amazon created wealth by facilitating this otherwise impossible transaction.
This is occurring at an ever increasing pace throughout the world economy. It’s not reflected in the old ways of measuring productivity. And increased productivity is what is stopping inflation.
This pleases me in particular because inflation would damage the portfolio of stocks whose dividends support me.
According to Will Durant, there have been ten “peaks” of human progress: speech, fire, the conquest of the animals, architecture, social organization, morality, tools, science, education, and writing and print. The great historian of civilization didn’t live to see the eleventh: the internet. It’s just as important as the other ten.