I am surprised that people seem surprised about the recent inflationary spiral in the United States. It is the result of a simple formula and should have been predictable. If you outsource production to China and then buy the goods produced in China at such a rate as to run up a huge deficit, the value of the dollar will decline. This will, in turn, result in higher prices for goods produced outside the county – in China, for example.
But the situation will not last. Demand will slacken. American consumers laid off because of outsourcing will not be able to afford to purchase as much as they used to. Production will begin to exceed demand. And prices will fall.
Then, as a man named Adam Smith noted many years ago, producers will cut back and the supply of goods will shrink. Demand will begin to exceed supply. Prices will rise again.
It’s called the free market and it makes a few people who understand it very wealthy while the rest of us stumble blindly along, paying through the nose or going without the necessities of life.