Thanks for the detailed post. While inflation may very well skyrocket when the banks stop hoarding all the money, until they do many businesses are completely frozen. Not quite as bad as 2008 when banks wouldn’t even loan to one another but close. I think the banks are choking Obama off for all the new regulations he wants, icluding Obamacare. His new FHA loan reprieve for the unemployed is him attempting to fire back. It’s going to be class warfare to the extreme for the next year and a half and unfortunately most of us are caught in the middle.
>>until they do many businesses are completely frozen...<
I doubt this is the case. If a business is “frozen” out of the current credit markets it’s more likely because the current economic environment is so unfavorable to a lot of small businesses that they can’t get a bank officer to sign off on a loan. Just because a business needs money doesn’t mean it makes sense for a bank to lend it.
In fact, a lot of businesses are sitting on piles of cash. They just don’t want to invest in ventures that will run afoul of Obama and the Green Machine of regulation that he’s installed in DC since he took office.
One of the bigger problems a Republican President is going to face in 2012 is how to unwind everything the Fed has done to bank reserves at the same time the economy is starting to fly due to a reversal of most of Obama’s economic policies. We could see a monster inflation rate if it’s not handled properly.
It’s important to understand that with current money growth we should be experience significant economic growth, on the scale of 6-8% per year by now, especially coming out of a recession. The money is there. What’s missing is the will to expand among business owners large and small.
The stagnation is due to policies Obama has put in place, or threatens to put in place (EPA CO2 regs, ObamaCare, etc.) and not Fed policy. Fed policy has been extremely expansive, as indicated by the strong stock and bond markets, excessively low interest rates and surging commodity prices. None of that happens when the Fed is tight with money. Quite the opposite in fact.