Only one way to go here.  Inflation is going to explode to the upside by the end of the year I think.  We are already seeing energy prices creep back up.  I think the stock market smells all the money looking for a place to go.  Assett prices will be bid up even if the actual value falls in real terrms.

I think inflation is going to be a very big problem towards the end of the year and into 2010.  There is just no way the FED is going to be able to turn the faucet of money off without blowing out whatever recovery may be taking hold.  The problem is going to be who is going to finance us at that point?  Looks like the FED will continue to be the buy of last resort.

I read a very thought provoking piece on inflation by Eric Janszen over at ITulip.  You can click here to read it.  I have been a big fan of Eric for years now as he always seems to be slightly ahead of the pack.  Anyway, he seems to think we have made the turn from deflation to inflation. 

You wonder if it is time to panic when someone in the fed actually admits they are worried about inflation.  Plosser says in this article that the fed is worried about inflation of 2.5% in 2011.  Of course that figure is an absolute joke.  If they are copping to 2.5% you can bank on the fact that is will be at least double that figure and probably more.

With the bond marketrolling over and gold up to $975 it looks like deflation is rolling into inflation much earlier than the "pundits" thought.

The bigger joke is the FED "leaking" a story on a rise in interest rates later this summer.  I almost fell out of my chair on reading that.  Anyone want to bet that doesn't happen?