“In response to a question posed at a forum by The International Economy magazine in its Spring 2015 issue: Will America Soon Have an Inflation Problem?
“Not a chance. Fed policy since 2008 has been to tilt against powerful deflationary forces that have yet to abate. How powerful are those forces? Consider this: from September 2008 to date, the monetary base has increased by 336%, from $0.94 trillion to $4.1 trillion, yet the annual CPI growth declined from 5% in September 2008 to a negative -0.1% in February 2015. So, we are talking about quite powerful underlying deflationary forces that will not go away.
Commentary & Analysis
Thinking Swissie! By far the most overvalued currency on a cycle low to high scale
Swiss Bank Chairman Thomas Jordan said today the Swiss franc is “considerably overvalued” and was concerned there may be a rush of funds into the franc if Greece were to leave the single currency regime. I believe Mr. Jordan is correct on both counts. If you measure relative Swiss valuation to the other major pairs in terms of what I define as cycle low to high, you get a better sense of the love investors have had for Swissie during the last dollar bear market cycle.
First the definition of cycle low to high: It is that period measure from early 2000 to early 2008 which represented the eight year dollar bear market (which was a roughly eight year bull market in the Swiss franc and other major pairs).
I have summarized the major pairs’ cycle low-high prices and dates in the table below. Prices are in dollar terms for consistency...