I honestly believe we are headed toward hyperinflation. On Friday the Federal Reserve announced that it would purchase $1,15 trillion in treasury securities. That is, over one trillion dollars will be created out of thin air. We are monetizing the debt. This is what we euphemistically refer to that as “printing money.” I fear we are facing an economic crisis like we have never experienced. This is the start of the process of devaluing the currency. The only way hyperinflation can be avoided is if the stimulus works beyond our most optimistic projections and we have miraculous economic growth.
I hope I am wrong. I hope the stimulus works, but I do not see how it is possible to have sufficient economic growth to absorb all the money being created. It is a big gamble. We are rolling the dice hoping it will work. This 9-minute clip from Glen Beck does a good job of explaining the enormity of the problem we face.
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Completely agree with you regarding the dire possibility of inflation. The banks are sitting on more than enough capital reserves (more than is required by the federal reserve) while the personal savings rate has increased also--this means that there is a lot of money out there BEFORE the fed starts printing money. As confidence comes back, all this money will start turning over in the economy and inflation will hit like a brick. (See Milton Friedman's Quantity Theory of Money.) The current stock market rally is a "suckers rally" that will end when inflation strikes. My guess is that all the Keynesian's in Obama regime are going to attempt the impossible and try to hit the brakes on the money supply before inflation gets too severe--very risky and difficult.
ReplyDeleteRod
ReplyDeleteis this guy running Entrecard ?
He must be.