Posted on 03/04/2009 1:25:30 PM PST by 2ndDivisionVet
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.
Proof that his spending will have little impact on the depression is the vast increase in money supply with no commensurate improvement in the economy. Providing money, via spending hikes or tax cuts, does not guarantee that the money will be spent. Tax cuts can be saved and spending increases, while surely spent once (on the initial project), can rapidly lose their multiplier effect as wage-earners on the government payroll bank their money just like those who get tax cuts will do. Getting out of this economic mess depends on consumer and business confidence, a faith that Obama is eroding with his looming tax increases as rapidly as he tries to kindle it with his excessive spending.
None of this should come as any news to Obama. He likely knows all this. But he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession. He puts ideology first and the economy a distant second.
The stock market has figured out his priorities and is responding accordingly. One can only hope that voters also eventually realize what is going on.
This one scares me more than any of the other big problems caused by “hope and change”
Predicting hyperinflation — That’s not too hard ... The money supply has been pumped up by near 80%.
We have been without significant inflation for so long, people don’t know any better. It will be a rude awakening.
Me too. Morris has been speaking on this for a while. $1.9 trillion deficit in 2009. We can’t get away with that I’m afraid.
People under 40 don't, older ones do or should.
Yeah, the broken clock routine. He is long overdue for one correct prediction and I think this is it.
“We have been without significant inflation for so long, people don’t know any better. It will be a rude awakening.”
I was too young to funny understand what was happening in the late 70’s to early 80’s, but I remember the layoffs, gas lines, and uncertainty of that time. I also remember when Reagon came along and helped bring back confidence and pride as a nation...we need another Reagon, not Carter II.
Morris has no idea how much the money supply has expanded or contracted in the U.S. over the last five months. Very few people do.
The problem is that the Federal Reserve stopped providing a full accounting of our nation's money supply a few years ago (I believe it was 2005 or 2006) when it stopped reporting the M3 figure. It was no coincidence that the period of time since then has seen plenty of inflationary evidence in places where one would expect to find it at its root -- mainly in commodity prices (remember $145+ oil in the summer of 2008?).
I suspect that much of the alleged increase in our money supply over the last five months is really just a matter of the U.S. government "legitimizing" prior (hidden) inflation by adding money to the M1 and M2 figures that would have been included in the M3 figure previously. This is why long-term U.S. Treasury rates were at or near historic LOWS even as many economists were echoing Morris' predictions about rampant inflation.
Invest in “post America” currency-
ammo.
Time to buy stock in wheel barrel manufacturers.
“...The point of this gloom and doom is that all this pain is entirely preventable...”
And this is the thing the average idiot has NO CLUE about!!!
HE IS DOING THIS ON PURPOSE...IT’S HIS AGENDA!
This sentence presupposes that 0bama gives a shit.
He puts ideology first and the economy a distant second.
Then Morris presents this tidbit that proves he knows that 0bama gives less than a shit. 0bama and his minions need to be stopped, somehow, before they ruin this country.
Buy Silver, it’s the only commodity on the market that is still cheap enough to actually make some money. Gold is way too high and your margins to small.
Meltzer has said the coming inflation will make the late 70’s early 80’s look like a picnic. Thanks R’s and D’s.
>> This one scares me more than any of the other big problems caused by “hope and change”
It sure keeps me awake nights.
Cash is a doomed investment. That much is easy enough to understand.
but...
What to do with it?
When?
Will the onset of inflation be sudden, or will there be a ramp?
Will there be a separate, delayed bottom in other asset classes, like real estate?
Will the signs be clear? Will I miss them?
Will I jump prematurely at a *false* sign?
&etc
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