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The Inflation Beat
Q & A
Inflation Forecasting Methodologies
Percent Growth Estimate Of Aggregate Credit
The American economy runs on debt growth.  I believe that the entire purpose of the Federal Reserve bank in setting interest rates is to steer the supply of debt growth with lower rates being used to incite more borrowing and higher rates to curtail borrowing.

Here again is a chart of the aggregate debt in the US:  
The rates at which the debt grows depends on a lot of factors.  Confidence is a big reason for there to be demand for borrowing money.   

What I want to focus on is the typical rates of growth in debt and its relation to the rate of inflation.
The above chart is a clean chart that just shows the rate of aggregate credit growth per capita (blue line) and the rate of inflation (red line).

Deflationary forces will allow for higher rates of credit growth to be gotten away with while inflation can remain low as what has occurred from 1980 up until today I would argue.  

We're running out of deflationary forces, so credit growth is pretty low.
The rate of aggregate credit growth per capita is the baseline for what the inflation rate is going to be.  There are inflationary forces and deflationary forces that will go against it.  Normally, the forces are deflationary as progress in the economy normally leads to increases in productivity, but not all the time.

Now here is a chart showing the increase in aggregate debt growth as a percent of our Gross Domestic Product:
This chart gives justice to the extent of debt growth per year in the US economy.  In 2018, about 15% of our GDP was from new debt issuance. 

Another perspective is to see the total debt to GDP ratio.  As you'll see, since the 2nd quarter of 2009, the US economy has been deleveraging this ratio.

For inflation forecasting, we want to be concerned with the rate of aggregate credit growth per capita.  This information comes out quarterly and the main source is the Federal Flow Of Funds Report .

From this rate, we can then apply the degrees of the inflationary forces Vs. the deflationay forces and surmise a fair estimate of the final rate of inflation. 
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