ObamInflation: Coming Next Year
By Dick Morris
FrontPageMagazine.com | Thursday, March 05, 2009
In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled.
Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-82, and perhaps since the Great Depression.
So where is the money? If it isn't being spent, where is it?
It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway -- not the one in the dealer's lot. Businesspeople are buying T-bills, investing the money and saving it. They aren't spending, either.
But one day this recession -- despite Obama's best efforts -- will end and things will begin to look up again. Then we can expect all of this money to come out of its parking space and get back on the highway of commerce. All at once. The inevitable result will be double-digit hyperinflation.
Since the spending and borrowing splurge is not confined to Washington, but is being mimicked all over the world, the inflation will not strike just one country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II), it will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics texts. There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.
The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obama's excessive spending and trillion-dollar-plus deficits. This spending, of questionable utility in overcoming the current recession/depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.
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Dick Morris is a former adviser to President Clinton.
Hyperinflation explained (short article):
HERE
extra extra Buy silver and gold- buy silver and gold
ReplyDeleteHere's a question. Inflation will only result from the banks going from hoarding the credit they are receiving to lending it out to government, corporations and people. I see the govermnent spending. But what catalyst will there be for conumers to extend their debt obligation when they are trying to pay down debt, save and are fearful of taking on more debt as unemployment goes through the roof. And of course corporations will see that and continue deleveraging themselves and not take on more credit because earnings won't warrant it.
ReplyDeleteSo I ask again. How are all these trillion dollars going to magically find there way into the economy in a year. That would assume there is going to be a recovery in 12 months. No way that will happen for several years to be honest.
Dick Morris is correctly named "DICK". He is a digruntled cross dresser. Where was he when Bush was spending $9 TRILLION on this mess last year? Run back to FAUX News and tell them you stuck to Obama.
ReplyDeleteFirst, it appears that at least a few banks will be nationalized or taken over. Further, accepting the federal aid money will also bring with it many obligations to the government, and from what I understand, giving up some perhaps control over the bank.
ReplyDeleteNext, if the printing presses are printing freely enough, the circulation will eventually make its way into the population's hands and then out from under the mattresses (the more it is being printed I speculate).
Also, what happens when the dollar gets dumped, if that is the case. Will it not further devalue the dollar? And all the debt the goverment owes and the negative balance sheets that are starting to be revealed. Won't hyper-inflation be the only answer to their woes, even though it will prove dismantling to the economy, which either was is screwed?
*either way
ReplyDeleteThe printing of money does not imply inflation. If I print 10,000 in my garage, and never spend it, is it inflationary? Inflation comes from the demand side which is dead. Our credit expansion was inflationary over the last 10 years of borrowing as everything went up in price. The money being created now will not inflate because the debt is eating it faster.
ReplyDeleteYou imply that all money will just 'sit in the garage' if printed like wild. I don't know about you, but I would rather be using it to spend on things like food, water, and energy. And when the value starts falling out from under it, garage-fulls of money are only good for one thing: heat.
ReplyDeleteOf course, nothing is written in stone and it remains to be seen how exactly the chips will fall for the long term. But there have actually been more cases of inflation than deflation in history with the collapse of societies.
Don't mistake deleveraging for deflation.
ReplyDeleteRegarding my garage comment. Let me clarify. I am saying the money being printed is not leaving the garage i.e. banks, AIG entities we know nothing about, et al. In order for the money to become inflationary it would have to leave the garage and be spent. Do you see any TARP, or TALP, or bailout money being spent?
ReplyDeleteAs for deleveraging, that is by definition deflation.
Deflation defined: a reduction in the general level of prices as a result of a severe decline in economic activity
ReplyDeleteDeleveraging is the unwinding of debt. Companies use leveraging (i.e. borrowing) to accelerate their growth or return, however, but when a company is concerned about defaulting on its obligations or concerned about rampant losses, it can use deleveraging to lower its risk of default and mitigate its losses. By deleveraging its balance sheet, a company sells off debt to lower its overall risk profile. Deleveraging can have serious financial consequences when a company tries to unwind assets that are illiquid. In this case, deleveraging may mean selling assets at relatively steep discounts. As a result, deleveraging may lead to downward pressure on security and asset prices as more and more companies and/or individuals unwind their positions during the deleveraging process.
So......assets, stocks, goods, and commodity prices have come down as a result of deleveraging and at the same time has spured deflation. The demand side is dead. All this is a result of many years of credit expansion. Who will get credit now to ramp demand? Unless the dollar gets sold off, we will not get inflation. The debt to money supply is 36-1.
Yes, we will probably have a shorter term credit deflation, but the money will continue to get pumped like heroin into a dead carcass. Meanwhile, commodities like energy,food, and other goods will likely rise, particularly since oil is an ever-dwindling resource. The printing will continue, confidence will fall, while the dollar will likely become a worthless piece of paper at some point. Thats my guess.
ReplyDeleteRemember that they have promised to do everything possible to keep pumping in liquidity.
Have a look at this page:
http://www.kwaves.com/deflation_inflation.htm