As the dollar depreciation, will we get inflation? Depreciation is a loss in the value of the currency. Inflation is a loss in the value of the currency.
I would argue we already have been experiencing inflation faster than the official figures since 2001… the costs of things I buy – housing, transportation, food, and health insurance being the big ones, have all been going up faster than the numbers the BLS puts out. Sure, electronic goods and some high end military equipment has seen price drops in that time, and presumably many Americans are now substituting away from steak toward ramen, and away from travel toward cable tv, and away from health insurance toward sickness…
But as the dollar loses value, will the electronic goods stop dropping in price (in dollars)? Why should the price of something made in China drop in price measured in dollars if the Chinese currency begins to appreciate relative to the dollar? And will the other costs continue to rise? Providing health services means using a lot of equipment, some of which comes from abroad.
So at what point does any of this get reflected in the inflation figures? Or does it? And at what point does currency devaluation become a real problem? Or does it?