Dec 31, 2008 (LBO ) – Consumer price inflation in Sri Lanka’s capital Colombo fell to 14.4 percent in the 12-months to December from 16.3 percent in November, the government’s statistics office said. In the first half of 2008 inflation was high partly due to effects of loose policy in 2007 and also high inflation imported through a dollar peg, after the US Federal Reserves cut rates, sending commodity prices soaring.
But the bubble collapsed partway through the year. The Federal Reserve is now printing money to re-flate the economy and halt the slide in asset prices to prevent deflation.
“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost,” Fed chairman Ben Bernanke said in a speech in 2002, outlining possible strategies if US moved into a deflationary collapse.
“By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is