There's been a lot of talk about inflation on this thread. I have a question for those with more knowledge of economics than I. I understand that the amount of money circulating in the U.S. is somewhere in the vicinity of $400-500 million (maybe a little more - I think my information is old). I also understand that our annual trade deficit is... somewhere in the vicinity of $400-500 million. This would mean that every year the value of our dollar should be cut roughly in half. But that doesn't seem to be happening. Does anyone know how these numbers add up?
If you change millions to billions, you numbers are
very roughly accurate if you define your two numbers as currency in circulation and trade deficit. However, let me see if I can shed some light by taking a different approach.
Whenever the money supply grows relative to goods available prices will go up. Part of the reason you don’t see much cpi inflation is that we have (until relatively recently) experienced asset inflation instead (stocks, real estate, etc.). Secondly, our large trade deficit actually exports our inflation by simultaneously increasing the amount of goods and reducing the amount of dollars, domestically. What you are probably concerned about are all those dollars being exported. If and when they come home to roost the scenario you fear will come to pass and we will all have to run for cover.