Years ago, after the rapid rise in inflation and
interest rates put my development company out of business, I developed an
equation to forecast interest rates based on the rate of increase in money
supply and the rate of increase in GNP.
I will have to review the formula but I believe it
was
Inflation rate = Rate of money
supply growth - (rate of GNP growth + 3%). The effects of surplus money
supply are felt as price increases with a lag of about 6 months.
Today's conditions are somewhat different due to
the globalization of business and the rapid rise in productivity due to
technology and have resulted in a slowing of domestic inflation. Never the less,
I believe there will be a reckoning and a return to more sustainable conditions
but this time it will be world wide.