Guest Post: Welcome To The Era of ‘Ugly’ Inflation

Friday, September 28, 2012
By Paul Martin

by Charles Hugh-Smith
ZeroHedge.com
09/28/2012

Ray Dalio recently described the characteristics of a “beautiful deleveraging” in which equal doses of austerity, write-downs, and inflation gradually lighten the load of impaired debt. wo things can turn beautiful inflation into ugly inflation: Wages don’t inflate along with prices and the currency depreciates as money is printed excessively. This might not matter for a nation that is a net exporter of goods and services. But for nations that import essentials such as oil and grain, this is a catastrophe, as wages are flat while the cost of imported energy and food skyrocket. Households have less money to spend, and servicing debt becomes increasingly burdensome. Welcome to the United States of Ugly Inflation. Real household income (i.e., adjusted for official inflation) has declined 8% since 2007; the cost of oil, medical care and higher education has climbed; and government revenues have stagnated even as demand for government services has increased. As a result, the entire beautiful deleveraging

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