One popular definition of inflation is, “Too much money chasing too few goods.” At the consumer (CPI) and producer (PPI) levels, inflation is tame, in the vicinity of 2%. American big businesses are sitting on trillions of capital. Demand does not justify further investment in manufacturing, currently are running at 77% of capacity. The historical average is 84%. Plus it’s so much easier to invest in financial instruments, e.g. stocks, bonds, and more exotic fare. The US stock markets are on a relentless upward climb. Bonds are being issued and bought in record numbers (see Opinion: There’s overwhelming evidence that the U.S. stock market is heading for disaster). Too much capital is chasing too few financial instruments, i.e. classic inflation.
The solution? Perhaps Now is the time for investors to loiter around the lifeboats. Or at least locate the lifeboats and paths to them.