Those investors concerned that the Fed's expansion of its quantitative easing policy may lead to giddy U.S. growth and rampaging inflation may want to recalibrate the economic model they're using.

The global recession has destroyed more than $50 trillion in global wealth, with $17-25 trillion of that asset destruction occurring in the United States, depend on the methodology used, the U.S. is on a pace to lose a staggering six million jobs this year, and there are ominous signs that demand is decreasing in nearly every sector of the economy.

One stat indicative of the latter: apartment sales in the financial capital of the world, New York City. Manhattan apartment sales plunged 23 percent in 2008, Bloomberg News reported Thursday. In addition, co-op and condominium prices -- the Manhattan equivalent of starter and intermediate-stage homes in the United States -- are dropping as well, as Wall Street sheds thousands or workers and firms cut bonuses.

Comment: Why are the Manhattan real estate sales and price declines relevant for investors? It's the last vestige of the housing bubble, which has now thoroughly burst. Moreover, the bursting of that bubble, combined with the stock market's roughly 7,000-point swoon, has removed an enormous amount of wealth -- formerly accessible cash -- from the financial system.

Net result: Don't expect inflation to trend higher any time soon. You'll hear inflation hawks criticize the Fed's actions as 'setting the stage for runaway inflation by flooding the system with dollars.' Sorry, it doesn't work that way: that's only half the ledger. The other half involves asset destruction, low median incomes, lack of wage growth, a substantially smaller workforce (due to a high unemployment rate), and radically changed consumption habits -- all of which indicates the economy is still net-short accessible capital than it was in December 2007, when the U.S. recession started. And that means inflation is not likely to rear its ugly head anytime soon.

Economic Analysis: On balance, even with the Fed's expanded quantitative easing, the greater threat to the U.S. economy remains deflation, not inflation, for at least the next 12 months, and most likely for a considerably longer period. The Fed said as much, in its most recent FOMC statement.

One way you can evaluate price conditions and get a 'rough estimate' of inflation? Think of all the goods, both consumer and business-to-business, piling up on shelves and in warehouses, because there are not nearly enough buyers to purchase them. It will take many quarters to work-off this excess inventory, and price cuts will be a part of that process -- another factor that will help keep a lid on prices, and by extension, on inflation, as the nation battles its way back from this pronounced recession.

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