Batten down the hatches. America is about to be overwhelmed by an inflationary wave that will threaten the value of the dollar and its ability to remain the world’s reserve currency. Or not.
Most of the news of late has been a lot cheerier than the reports that descended on us only a month ago. The interbank lending rate is below 1 percent, well down from the 6 percent peak it reached when banks were so unsure of the ability of their counterparties to survive that they refused to lend, even overnight. The housing market is showing signs of life, with inventories of unsold houses beginning to get sopped up in some of the hardest-hit cities. Commodity prices are on the upswing, suggesting greater demand for materials used by manufacturers. Consumers are striking a more durable balance between spending and saving after a period of keeping their purses tightly zipped. Inventories of goods have dropped to levels that will soon require shop keepers and others to re-stock their shelves. Consumer panic is giving way to a more confident outlook: retail sales in April recorded their largest gain since August of last year, with Wal-Mart leading the pack. China’s economy has responded to a stimulus package and is adding to worldwide demand for many products.
