We hear that there is little inflation and that deflation may be the real threat. We hear that prices aren’t going up. In certain assets, like stocks or real estate, that may be the case only because they were bubbles that are trying to deflate.

Unfortunately, inflation (whether monetary or price) is a real threat. Walking through the grocery store the other day, it was hard not to notice that some of the prices had gone up. The regular price for a 12-pack of coke was $4.99 up from $4.89. It may only be a dime, but it is over 2% of an increase. About 10 or 12 years ago, a nearby gas station sold two 12-packs of coke for $5. The grocery store might have a slightly higher price, but essentially the price has almost doubled.

If banks start lending more money, watch for prices to explode. We will be lucky if the next 10 years in the United States look like the last 10 years in Japan. Pray for a lack of inflation. We would rather get a depression now than experience massive inflation and then a depression.