If the feds keep printing dollars to prevent banks from going insolvent due and plans to borrow at 1 trillion dollar defecits, our currency will devalue and the world will drop it as a reserve currency. Devaluation means all our imports (oil, raw materials, food, etc) will inflate. Weak dollar played a role in increasing our oil price during the last energy crisis. The residential mortgage crisis is not the last threat to our banks, we have a commercial real estate mortgage crisis and credit card default crisis looming as retail sales dropped, and more people become unemployed. Peter Schiff is not crazy.
I agree with Denninger on this and would add that the collapse in mortgage securitizations and the bursting of the credit bubble, tightening of lending standards, etc is highly deflationary. Bernanke will try his quantitative easing/money printing to fight deflation, but Japan tried that starting in 2001 and the money just piled up in the reserve accounts of banks.
I don’t expect severe deflation, but the prevailing economic winds are clearly deflationary. All you need to do is look at the yields on long bonds and see that the bond market is not expecting inflation in the foreseeable future.
I don’t agree because this can happen. Obama has already mentioned wanting the minimum wage to rise to $10 an hour so if infct the dems decide to do this then this will happen ala Jimmy Carter when he rasied the minimum wage 3 times in two years between 1977-1979.
Au contraire, M. Denninger.
This is nonsense. There are other ways to trigger inflation other than labor cost. For example, printing TONS of money reduces the value of each dollar therefore requiring more dollars per item.
This is not going to happen for some very good reasons.
The first is that the typical American is not going to revolt as long as he has a roof over his head, and food in his belly. This was the single reason that “Ol’ Frank” Roosevelt succeeded where Herbert Hoover failed.
But importantly, this doesn’t mean that if Obama provides these things, he gets to do anything else he wants to. Far from it. In fact, even though it is the exact opposite of what he wants to do, he will probably have no choice but to dismantle the socialism we already have.
The odds are that after just a few years, he will be helpless, hopeless, and prematurely aged by things beyond his power to control.
His internationalism is dead already, all international trade but oil and food drying up. The credit crunch still has some painful collapses to endure, such as the Alt-A and ARM mortgage collapses, 1.5 times larger than the subprime collapse. And the collapse of the US Treasury bill market is going to be awesome, and remembered in history books for hundreds of years.
In short, there is little the federal government can do other than house and feed homeless and hungry Americans, possible renounce its national debt, eliminate Social Security, Medicare and Medicaid; and finally to not tax those trying to rebuild all the industry we outsourced in the past 40 years.
Employee free choice act forced unionization to demand protection from trade. Here in union Maryland food prices are going up, not down. That is also protectionism. Government intervention keeps natural gas prices high, used instead of cheap heating oil.
Schiff’s theory is that prices can go up independent of US demand , once the world economy figures out that can proceed without giving stuff to the USA, based on devaluation of the dollar. But I get your point SChiff did NOT predict the current (partial) deflation with crash and this is the question of the day.
Liberal Cramer on CNBC says Obama needs to create inflation to start another boom.
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RE “This is where the Peter Schiffs and McHughs are wrong in their hyperinflation thesis and their “defensive” measures to try to do something about it “
Schiff calls for personal savings, capital investment and creating an private industry that can compete, not a bunch of government employee consumers. He is not completely conservative(as recently defined), and has some ideas that conservatives don’t like.
But this did happen in the 1930s, and it led to the rise of the unions in the first place.
A repeat would most likely represent a revival of unions.
Nobody --that would be horrible!!!!!!
--assuming of course that during four years of 10% inflation, incomes stay exactly as they are today.
Right.
How do wages in Zimbabwe compare with the inflation rate?
Who is this clown? Is this jist some dufus making a opersonal rant?
Inflation is not caused by a “spiral.” That metaphor was always just a dodge, so the government could blame others for inflation. I remember magazine ads in the mid-70s (under Ford) showing a worker, a housewife, and a storekeeper as PIGS, with copy saying, “We all need to be a little less piggy.”
bfl.
Take a sip of brandy before this one ..............
I dunno, I see this all as being a GOOD thing. This is how we get our country back...
I dunno, I see this all as being a GOOD thing. This is how we get our country back...
So far I see deflation happening.
My children’s private school did not raise tuition for the first time in all 8 years by kids have been attending there. They usually raise it by 5-6%.
They are losing families due to rising unemployment/layoffs and therefore are trying to stem the bleeding.