We live in tumultuous times—memories of an extraordinary financial crisis are still with us while we experience a once-in-a-century pandemic.
Governments around the world are printing money at fabulous rates, including the United States.
These circumstances cause us to ask, what causes inflation?
In the simplest terms:
Inflation is caused when too few goods are being chased by too much money.
Understanding this, the chart below clearly shows why we are experiencing higher inflation than we have in decades, it depicts the Money Supply in the United States over the last 20 years.
Do you notice anything about the money supply recently?
We should be surprised if we didn't have inflation after seeing this chart and understanding what it means.
-Paul R. Rossi, CFA
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