Author: Lyn Alden

The Risk of Inflation

Several prominent investors have been voicing concerns lately over the potential for return of consumer price inflation sometime over the next several years, with the latest commentator being Michael Burry of The Big Short fame. While inflation is by no means assured this decade, the risk factors for it are rising. It’s worth being aware of the history of inflation in the United States and what may cause it in the years ahead. Consumer price inflation is a broad rise in prices of everyday goods, and is often driven by a notable increase in the broad money supply combined with limitations in key supply chains and scarcity of essential commodities. *   *   * For this article, it helps to define two types of money. The first type is the broad money supply, which refers to the national sum of physical currency in circulation, checking accounts, savings accounts, certificates of deposit, and similar cash-equivalents. For the United States, this figure is approximately $19.5 trillion. The second type of money is the monetary base, or base money, …