Posted on 08/28/2010 4:52:55 AM PDT by GonzoII
Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.
To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears. But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending. For its part, the Federal Reserve has been busy propping up all assets—including Treasuries—by way of “quantitative easing”. The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze—and will continue to do so. After all, when your only tool is a hammer, every problem looks like a nail.
But this Fed policy—call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization”—has been overwhelmed by the credit contraction. Just as the Federal government has been unable to fill in the fall in aggregate demand by way of stimulus, the Fed has expanded its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today—but that additional $1.4 trillion has been no match for the loss of credit. At best, the Fed has been able to alleviate the worst effects
(Excerpt) Read more at seekingalpha.com ...
Easy.
[Read my tagline...]
A good read! This could have been avoided if the stimulus had actually been given to the taxpayer and a spending or debt reduction recovery had happened rather than the Pork Stimulus which never really does the job of creating wealth and jobs.
Mel
Glad my federal pension has a COLA index feature!
Good god that article was depressing
It is actually better than that.
When there is no increase in the cost of living, they give away $250 to make up for the COLA you didn’t get.
I wish I still had the piece posted here on freepers (I think it originally was posted over at the Daily Beast) that explained how the stimulus was put together. No wonder it didn’t work.
I regret I didn’t save it.
IIRC, basically Pelosi and David Obey told their members to pull out every half baked “wish list” project in their desk drawers (that wouldn’t survive the light of day when GWB was in office) and hand them over. This was going to be their chance to get these loser projects funded. Indeed, these were projects that the governors of their own states had refused to fund out of their budget!
I wish I still had that article. Knew right then and there this would be a disaster.
meh
That's what Americans need to be educated about before they go into the voting booth next time around.
So we just need to watch for a commodity spike and then you’ll know. You can beat everyone to the store and stock up.
When we start walking around with wheel barrels full of money, I’m going to pay off my mortgage!
Sarcasm?
You think that all those non federal workers who'll lose EVERYTHING to hyperinflation, will be able or willing to fund you're continued lifestyle, since it was indexed to inflation?
Pet projects to buy votes or to get someone’s name on an edifice very rarely produce any wealth or long term employment whereas public sentiment built upon an expanding workforce and money in the pocket always produces a healthy vibrant economy, more tax income which in turn, if managed right, produces a reducing deficit!
If the stimulus had been put in the hands of the people you would already be seeing a some financial return to the government in increased tax revenue from more people being in work and from increased company returns.
Mel
Leftist governments love hyper inflation because:
- it reduces the value of savings to essentially zero, thus making all poor and dependent on the government.
This amounts to a confiscation of accumulated wealth.
- it doesn’t bother the liberal elite (Nomenklatura) because their benefits are adjusted for inflation
- it allows them to take more and more of earnings because “higher” earnings fall into a higher tax “bracket”
- it allows them to give us more worthless paper dollars while saying “look, I’m giving you more money!”
- it destablizes civil society, possibly leading the way to the upheaval of the civil order and the stealth installation of a communist paradise
- for a while, it allows them to say “look, prosperity is increasing, look at those numbers going up every day”
Hey, I used to use that tagline!
Maybe you should be glad that you have a COLA feature in your federal pension. But I suggest you look back to the Carter years when we were suffering from high inflation rates. People with COLAs in their pensions lost ground to inflation.
Since you are retired from federal service, you probably remember working during those years of two pay raises each year and still losing ground to inflation.
If you really want to get frightened, read some of the history of the Weimar Republic and the inflation in Germany following World War I.
“By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. But it will not be because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead)—it will happen because once Treasuries are not the sure store of value, where are all those money managers supposed to stick all these dollars? In a big old vault? Under the mattress? In euros?”
Why not the stock market? Stocks have real value.
That explains it. I found it just lying around on the floor. It still looked ok, so I decided to try it for awhile...
{chuckle}. Well, let me know if you tire of it... I might reuse it later.
As mentioned in the article, at the height of a hyper inflation, assets are increasingly worthless. If you are able to wait it out, though, you might end up sitting pretty.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.