Since a major effect of inflation is psychological, the fact that inflationary pressure has decisively moved back into the 1970s range is important.
At 5% per annum, inflation cannot be ignored. Investors cannot buy fixed-income securities without taking account of the fact that the principal of those securities will have devalued by more than half by the time they are repaid (if they are of 15 years or longer maturity.)
The combination of inflation and un-indexed income and capital gains taxes rapidly raises the tax rate on capital returns to an extremely high level, depressing still further the incentive to save.
For the layperson, this last seems the key to me - the disincentive to save. So in the light of this, what to make of Sackerson's post today, suggesting, via Mish:
The entire US banking system is insolvent.In Russia there is a long tradition of keeping the money in a shoebox in the top cupboard, keeping it in hard currency and never trusting anyone's exhortations to part with it.