RBS Tells Clients To Prepare For "Monster" Money Printing By The Federal Reserve

The Telegraph (UK) ^ | 6-27-2010<b> | Ambrose Evans-Pritchard

[Richard Kimball]

When backed into a corner, politicians will do anything to delay the end game. Obama has made it worse, but I believe we went past the point of no return with the bail out when Bush was President.
That bailout was trying to pump money into a hot air balloon that had a rip all the way down one side. We are continuing to do this. At some point it will be impossible to borrow any more money, and the Fed will shift the printing into high gear. This will continue as long as they can get away with it.
When a government is faced with a debt it cannot pay, it has four choices: borrow, steal, print or default. Our government has been doing the first two for years, and is easing into the third. They will not default, even if we end up with inflation like Germany had before WWII.

[IncPen]

Wonder if it will be inflation or deflation?

Both.

Deflation crashes it, inflation refloats the boat.

They hope.

[blam]

Economic Outlook: Worsening Picture In The US

[dr_who]

why not both?

[Vince Ferrer]

Wonder if it will be inflation or deflation?

My vote is not hyperinflation, but a generation of high inflation. We still have deflation caused by debt default which is ongoing, but the percentage of federal government which is entitlements like social security, medicare, Obamacare, will gradually win out. Entitlement spending dwarfs all discretionary spending. The military is the only big thing that is not an entitlement, but cutting it to zero won't save us, and will send millions out of work as well. Obama will raise taxes, at least he will not renew the Bush tax cuts, but for the rest he has chosen to print and spend the entitlement money.

[Mr Ramsbotham]

The real policy problem for a central bank is to keep increasing the money supply enough to avoid deflation in a economic slow down, but to taper off quickly enough so as to not start an inflation as the economy bounces back.

That's called "doing it until you need glasses." I prefer tax and regulation cuts myself, but no one seems up for that at this particular time.

[Sun]

Re: inflation/deflation, thanks for your thoughts.

Wish we knew which it will be, so we know how to prepare.

[Lurker]

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abondonment of further credit expansion, or later as a final total catastrophe of the currency involved. Ludwig Von Mises

L

[Kozak]

I get the feeling we are one “Black Swan “ be it war, natural disaster, etc, away from total catastrophe....

[Kozak]

The only way he can halve the deficits is to deeply cut the military - he’s certainly not going to cut health care.

He said "cut the deficit". He didn't say "cut spending". Knowing the a@@hats in charge that means huge tax increases and a few cosmetic spending cuts, like military spending. The Bread and Circuses for the Obama Masses will continue.

[JLS]

Tax and regulation cuts would take some of the weight off monetary policy, but alas this Congress nor this president will go for either and in fact want more regulation and higher taxes.

[freekitty]

Does anyone have anything good to print?

[rawhide]

How does someone protect the value of their 401K if the Feds start printing money like crazy?

[blam]

"Does anyone have anything good to print?"

You're free to post/print whatever you desire.

[redgolum]

For inflation, you need that money to hit the streets. In other words, you need salaries to rise without a rise in goods.

So far, that isn’t happening.

[Myrddin]

at least he will not renew the Bush tax cuts

You say that as if it is a good thing. The Bush tax cuts were cuts for everyone. Their expiration means tax hikes for EVERYONE. The money the government steals via taxes is less disposable income in the economy. More job losses. Money that gets poured down the rat hole of socialist spending. Tax increases are a disincentive to work and hire. It's the looming tax increases that have employers holding off hiring.

[demsux]

IMO, it will be inflation...it will allow the politicos to pay off the rediculous debt with worthless dollars.

[RC one]

I think inflation and deflation can, do, and will continue to exist simultaneously. The deflation is entrenched in the “main street” economy and is observable in the market place. The inflation exists within the “wall street” economy; that meaning: the fiscal policy, the fractional reserve banking system, the fiat currency itself, and the political processes underneath it all, the political processes which require vast quantities of capital to grease the wheels of democracy, nonexistent quantities of capital that have to be created or borrowed to keep those wheels greased and turning.

[RC one]

I think they intended to “give” the banks the money so they could lend it to the people. That's what was supposed to happen. Seems like nobody really wants to start a small business during the Obama presidency though and most every other American is already eyeball deep in debt so they aren't going to borrow anything. Everyone else is already subprime or worse from the collapse so they probably aren't too keen on borrowing money. I had written my congressman a letter back when this all started and recommended using the money as a tax credit for Americans who pay off/down debt. He never even replied to me. Instead, they all saw fit to throw a bunch of cinder blocks to drowning Americans.

[montanajoe]

I think that both probably do exist today and for the past few years simultaneously as you say. However I think deflation is inching its way into what you refer to as “wall street.” The examples of the current price of oil and long term interest rates convince me of that. Although the price of gold is at or near all time highs I think it's really due to a speculative bubble fueled by “wall street.”
I can see gold crashing to $400 in the not to distant future..caused I suspect by a large hedge fund going belly up.