Deflation, not inflation, remains the bigger threat to the economy in 2009


Is an increase in inflation in the cards for the United States? The inflation hawks certainly sense there's inflation up ahead given the roughly $10 trillion in stimulus the U.S. government and Federal Reserve have provided to the financial system to address both the financial crisis and the recession. They are always at the ready to recommend a tighter monetary policy and offer amendment after amendment on the U.S. Senate's floor to limit or reduce fiscal spending.

Further, China is so concerned about potentially higher U.S. inflation -- and the impact it would have on its dollar-based investments (mostly bonds) -- that it has recommended changing the international monetary system so that a global currency or a 'supercurrency' serves as the world's primary reserve currency, not the U.S. dollar.