Why stagflation is coming (too much money and too much federal spending makes it inevitable)

Washington Times ^ | 6/29/2009 | David R. Burton and Cesar Conda

[SeekAndFind]

Both the money supply and federal spending have increased at breathtaking rates over the past year, unprecedented in peacetime. The policy decisions made by the Federal Reserve Board and Congress virtually assure we will enter a period of 1970s-like stagflation.

The recovery, when it comes, will combine slow economic growth, unusually long un- and underemployment, stagnating real incomes, rising interest rates and inflation. There is little that policymakers, having made colossal mistakes, can do to prevent such an outcome. However, there are steps that can be taken to shorten the period of stagflation and return to an era of robust economic growth, good jobs and stable asset and consumer prices.

The money supply is measured several different ways. They all show alarming increases. The monetary base (coins, currency and bank reserves) has doubled over the past year. It is increasing at a rate 12 times the average since 1981. M1 (the monetary base plus checking deposits) increased last year by roughly 16 percent, a near record and three times faster than average since 1981. M2 (M1 plus most savings deposits and money market funds) increased 9 percent in the past 12 months (a rate more than 50 percent higher than the average since 1981).

The demand for money is relatively stable and generally increases in proportion with economic activity (although precautionary motives play a role). Given the huge increases in the money supply and credit, future inflation is virtually ensured. Money supply will outstrip money demand, and the excess money will cause prices to be bid up.

The prices of gold and other commodities provide real-time indicators of future inflation. They have been rising substantially for the past three to six months, depending on the commodity.

[lakertaker]

The stagflation of the 1970’s was the worst in my lifetime. The gas lines were not too bad here in N. Minn. but I remember going through Madison, Wi. and seeing them.

Carter is back. No doubt about it.

[Don Corleone]

However, there are steps that can be taken to shorten the period of stagflation and return to an era of robust economic growth, good jobs and stable asset and consumer prices.

Step 1. Release the Birth Certificate!!!

[ClearCase_guy]

there are steps that can be taken to shorten the period of stagflation and return to an era of robust economic growth, good jobs and stable asset and consumer prices.

And we won't be taking any of those steps until at least 2013.

[SeekAndFind]

And we won't be taking any of those steps until at least 2013.

What makes you so sure there won't be a second term ?

[JPJones]

Both the money supply and federal spending have increased at breathtaking rates over the past year, unprecedented in peacetime.

Has the money supply increased? Sure they're printing up dollars but trillions in credit have been removed.

[TSgt]

What are the business opportunities in a Stagflation environment?

[Obadiah]

[thirst4truth]

Instead, the Obama administration seems bent on doubling down and making a bad situation even worse with massive increases in business and individual taxes, nationalizing or taking control of major industries (including automakers, banks, insurance and health care), hidden but huge energy-cost increases in pursuit of the chimera of global warming and ever greater entitlement spending.

On purpose, the Cloward/Piven strategy to overwhelm government services and bring it down and change it to complete socialism. That's how they bankrupted NY in the Sixties.

[KC_Conspirator]

Ah yes, Obama is now giving us Jimmy Carter again. Right about now is when people will start missing Bush.

[MaggieCarta]

Drat. I have no time for a parody...

Welcome back,
Your dreams were your ticket out.

Welcome back,
To that same old place that you laughed about.

Well the names have all changed since you hung around,
But those dreams have remained and they're turned around.

Who'd have thought they'd lead ya (Who'd have thought they'd lead ya)
Here where we need ya (Here where we need ya)

Yeah we tease him a lot cause we've got him on the spot, welcome back,
Welcome back, welcome back, welcome back.

[MattinNJ]

2013. Acorn is getting billions to make sure that doesn't happen. I am an optimist/realist. However, the GOP doomed the Republic by not ramming home strict voter ID laws for and Federal office while they controlled the White House and Congress. ACORN will control the redistricting in 2010 to make sure the House has a permanent majority. Additionally, voter fraud-normally 2-3%-will now be 5-6%. We simply do not have the numbers.

The questions are how violent the inevitable secession will be and when. (I would also add a third question-what will safe havens like Texas do with conservative yankees like me-but I digress).

[Mamzelle]

I pray it’s no worse than the seventies. Carter didn’t print monopoly money by the truckload.

[OB1kNOb]

I’m thinking this time it may be worse. More like hyper-stagflation resulting from a bondmarket and connected currency crash.

[cherry]

I was in HS and nursing school during those days, then freshly married...my husband was in the service....the only thing I remember was grousing about the long gas lines and the cost....I think it was up to $.36/gal then...and thinking that it figured that just when I was able to get my license and buy a car, the price of gasoline would skyrocket........LOL....

before Reagan, when Carter was in all of his glory, I remember interest rates about 20%.....

remember too that good tv's like Quasar would run $400 for a 19" and calculators were comparatively huge and and expensive.....times have changed, and actually some things have gotten better because of capitalism....

[cherry]

what a pessimist.....better run to a better country now....of course, there are no better countries....

things on the national scale look bleak..but govt starts locally...

mayorships...county boards...state legislators, governorships....and congressional districts....these are all attainable...

the bama coronation was a freak occurance....normally conservative people voted for him, and normally sensible people voted for him...

he got a lot of the white vote...the WHITE vote got him into office....a lot of them young college aged people....

they won't make the same mistake twice...

voter fraud?...yes....but throw that in along with the total SRM touting bama, and bama's illegal money, and its a wonder he didn't get 70% of the vote...

I personally am working on rubbing the noses of people that voted for bama in his stink...

[Toddsterpatriot]

The demand for money is relatively stable

LOL!

[Lazamataz]

With ACORN and widespread fraud, there will be no more elections.

Obama is here to stay, cherry.

[hinckley buzzard]

I’m thinking this time it may be worse.

You are right. Carter bungled the economy through sheer incompetence and Lilliputian thinking. Obama is malignant and deliberately seeks to cripple the nation. There may be an art to managing an economy successfully but there is a whole history available on how to wreck it.

[OB1kNOb]

Obama is malignant and deliberately seeks to cripple the nation. - Bears repeating. BTTT.