Poll analysis:

02/22/2013

On 10 September 2008, the U.S. monetary base stood at $875.7 billion. In contrast, on 6 February 2013, it stood at $2.8201 trillion, a full 222% increase in just four and a half years. Of course, this increase has not manifested itself broadly in product prices. One of the great myths of finance is that monetary expansion affects all goods, services and assets equally. Commodities and many financial assets are up strongly, while many consumer products and house prices are down sharply. Moreover, constraints on lending and the financial incentives of low interest rates have thus far kept the money supply in check. For example, M2 is up only 34% since 2008. This sharp difference between the growth in the monetary base and M2 is at least partially explained by a sharp decline in the velocity of money, meaning that economic activity has slowed sharply and has -- thus far -- been offset in part by the Fed's aggressive monetary actions. But the poll results clearly reveal that investment professionals are apprehensive about how much longer this situation can continue. Only 14% of 1,270 respondents seem unconcerned about significant inflation. The other 86% are concerned, and for good reason. -- Ron Rimkus, Content Director, CFA Institute

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