Posted on 06/23/2011 5:11:51 AM PDT by 2ndDivisionVet
On June 15, the Bureau of Labor Statistics released the inflation data for May. If you didn't hear about the new data, you are not alone -- the mainstream media buried the story. Why? Inflation hit 3.6% in May, even though gasoline prices actually fell that month. Inflation has been rising since November, as shown in the graph below:
(CHART AT LINK)
These rising prices were largely caused by Federal Reserve Chairman Ben Bernanke's rapid expansion of the U.S. money supply, known as QE2 (Quantitative Easing 2). But inflation wasn't supposed to get this high. Back in November, Bernanke told his fellow central bankers that the Federal Reserve's Open Market Committee (FOMC) was aiming for an inflation rate no higher than 2%. Specifically, he said:
This policy tool will be used in a manner that is measured and responsive to economic conditions. In particular, the Committee stated that it would review its asset-purchase program regularly in light of incoming information and would adjust the program as needed to meet its objectives. Importantly, the Committee remains unwaveringly committed to price stability and does not seek inflation above the level of 2 percent or a bit less that most FOMC participants see as consistent with the Federal Reserve's mandate.
Bernanke is like a driver who steps on the brakes, then floors the gas pedal, then steps on the brakes again, then floors the gas pedal again. His tenure at the Federal Reserve has been marked by the erratic swings in the U.S. money supply, shown in the graph below:
(GRAPH AT LINK)
From May 2010 to May 2011, Bernanke had his pedal to the metal. He grew M1 (the amount of money in cash and in checking accounts) at a 13.4% rate. Due to lag time, this didn't get inflation climbing rapidly until February. Now that inflation has gotten started, it may be hard to stop because it can get a momentum of its own.
Back in November, Governor Palin took on QE2 and President Obama's defense of it. Her predictions have turned out to be correct. When making her case against QE2, she argued that it could cause inflation, but would not much help U.S. net exports and business investment, the two factors needed to grow the U.S. economy.
Indeed, worsening net exports (exports minus imports) have been keeping the United States stuck in its current economic stagnation. When imports go up relative to exports, Americans get more debt and lose jobs, whereas when exports go up, relative to imports, Americans get more income and gain jobs. The decline in net exports may be slowing or preventing the U.S. economic recovery.
Bernanke hoped that QE2 would weaken the dollar which would turn U.S. net exports around. But Palin predicted that any positive effects would be temporary. In November she wrote:
Will driving the dollar down in this way do anything to boost U.S. exports? The short answer is not really. A weaker dollar will temporarily boost exports by making our goods cheaper to sell; but inevitably other countries will respond in kind, triggering the kind of currency wars economists are warning us about.
Indeed, so far Palin has been correct. QE2's effect upon net exports appears to have been temporary. Although U.S. net exports worsened more slowly in November and December, they resumed their economy-sapping slide in February, as shown in the graph below.
(GRAPH AT LINK)
Business investment is another key to economic growth, it combines the money spent by businesses on new tools and structures, such as when businesses develop new energy resources or build new factories. When businesses spend money on tools and structures, they put Americans to work making the tools and building the structures. Later, the improved tools and structures give American workers more productive work, resulting in higher wages. Bernanke had hoped that QE2 would stimulate business investment. But, in November, Palin predicted that QE2 would have little effect upon business investment. She wrote:
Will QE2 then at least boost domestic investment? No, again. As I explained in my speech in Phoenix, the reason banks aren't lending and businesses aren't investing isn't because of insufficient access to credit. There's plenty of money around, it's just that no one's willing to spend it. Big businesses especially have been hoarding cash. They're not expanding or adding to their workforce because there's just too much uncertainty created by a lot of big government experiments that aren't working. It's the President's own policies that are creating this uncertainty.
Indeed, as the graph below shows, the rate of growth in real fixed investment slowed in the fourth quarter of 2010 and the first quarter of 2011, despite QE2:
(GRAPH AT LINK)
Palin argued that QE2 was a dangerous experiment that risked inflation. She urged Obama to instead balance budgets, cut taxes and reduce burdensome business regulation. In November, she concluded:
If the President was serious about getting the economy moving again, he'd stop supporting the Fed's dangerous experiments with our currency and focus instead on what actually works: reducing government spending and boosting business investment through good old fashioned supply side reforms (cutting taxes and reducing overly burdensome regulations). Simply running the printing presses in order to avoid paying off your debts is no way for a great nation to behave.
In May, she added balanced trade to her recipe for economic recovery. After meeting with Donald Trump, she said:
"What do we have in common? Our love for this country, a desire to see our economy put back on the right track," Palin told reporters. "To have a balanced trade arrangement with other countries across this world so Americans can have our jobs, our industries, our manufacturing again. And exploiting responsibly our natural resources. We can do that again if we make good decisions."
The bulk of the U.S. trade deficit (i.e., of our negative net exports) is with China. When Trump was testing the waters for a possible presidential run, he made President Obama's incompetent negotiations with China a cornerstone of his campaign. With Chinese aggregate demand growing rapidly and U.S. aggregate demand stagnant, economists would normally expect the Chinese trade surplus with the United States to be shrinking. But President Obama has let the Chinese government reduce U.S. net exports to China month after month, as shown by the new 12-month lows reached in recent months in the graph below:
(GRAPH AT LINK)
Obama negotiates with China from a position of weakness. He goes into each meeting ruling out the possibility of the U.S. putting tariffs upon Chinese products, even though the Chinese government has already placed high tariff and other barriers upon U.S. products. The U.S. need not negotiate from a position of weakness. Under world trade rules, it is entitled to impose trade balancing tariffs whenever it is running chronic trade deficits. Our proposal for scaled tariffs would let the United States (and any other country harmed by large chronic trade deficits) achieve higher net exports with or without the cooperation of its trading partners.
The mainstream media pretend that Palin is stupid. But she is actually blessed with a very rare commodity these days - economic common sense. She is the only potential presidential candidate currently advocating the three basic principles that would restore economic stability and long-term growth to the American economy: (1) balanced monetary growth, (2) balanced budgets, and (3) balanced trade.
Read my post #28 again, you responded to that and in that I specifically pointed out that of all of the potential candidates, she was the only one taking the lead on this issue, we got threads from last year asking where are the leaders talking about this? Analyst yes were but most the potentials no, Palin was well ahead of it
Gee really?
Do you actually think that the author of the article was implying that Palin was the first person in the world to warn that QE2 would cause inflation to rise sharply?
LOL.
the point is that potential candidate Palin understanding and warning about inflation and QE2 back in the fall was a GOOD thing.
Bingo!
Yeah, not like hundreds of others haven’t been warning against QE 2 as well. Of course it’s all about Palin!
Ugh!
Excellent. Feel free to tell psycho.
(sorry Mr. Robinson)
I agree. I didn’t mean to leave out the unemployed. We that are still employed have no idea when the guillotine is coming down on our jobs. If something isn’t done soon many more will be unemployed.
I believe we are currently beyond a recession and actually in depression. Headed straight for a deep depression followed by a hard tyranny if something isn’t done soon.
Amazing how the ignorant force history to repeat itself but those that do are supposed to be the enlightened. unbelievable.
Of the potential candidates who are much smarter than Palin including Cain, what did they say about this last year? If they did then I stand corrected, can you provide a link?
Yep, I am skeptical too. Thanks.
For someone so widely regarded as an idiot the lady sure seems to be right about an awful lot.
OOOPPPS, sensitive nerve subject alert. So I take it you havent joined the draft Rick Perry club??
“Shadow Government Stats, which calculates the CPI the way it was calculated by the government in 1990, has annualized CPI at 11.2% versus the current BLS number of 3.6%.”
http://www.economicpolicyjournal.com/2011/06/shadow-stats-price-inflation-at-112.html
///
wow!!!
Obama makes Carter look great...
You're right - but Palin and Ben Bernanke both knew what Schiff, Rogers and Faber were saying - but only one was wise enough to understand... and that 'one' was Sarah Palin.
Attempting to prop Palin up in this way is laughable and it will backfire on her in a big way. It's just another exxageration of who she is and what she has accomplished from her blind following.
Name another politician who made this public call in advance, besides the marginalized Ron Paul who the media ignore. I dare you to dig up another nation-wide politician who had the guts to come out against QE2 and state that it would not work and would cause inflation. You can't, can you? That is why the article singles out Palin. Because she was the only major nation-wide politician who said don't do it and gave a sound reason not to do it.
Bingo! Post of the day!!!!!
Thank you very much for showing his bias and showing his complete lack of objectivity and credibility regarding Palin. You saved me a lot of trouble. Thanks immensely. I appreciate it.
And a big Virginia bump, which is where I want to retire.
I certainly agree that she warned about it a while back when those in DC were not sensing the importance of this, and maybe still dont. Or they just are scared to talk about it.
The problem is that those with presidential ambitions tend be thinking about how they may someday want monetary stimulation to make things look better when they are held responsible by the voters for the economy, but not be blamed for the later inflation. You ever see a president in office complain about interest rates being too low?
There are good reasons why Bachmann doesn’t have anywhere near the kind of support Palin has. Bachmann has a record of making strong statements that make her sound conservative, but she has no record of walking the walk while in an executive position.
Palin says something and then she does it. She did more as Governor than most governors even think about. (If you don’t want to learn more about this or to understand that the real Palin is very different from the Palin you think you know, then do not watch The Undefeated.)
This is the reason the Marxists—the principle enemies of the United States—are so afraid of Palin. It also provides an explanation for why there has been the appearance of a Bachmann push in the leftist run media.
Just a caution to well-meaning conservatives: don’t play into the hands of the Marxists and give your support to a candidate they’ve chosen for you.
There is no "draft Rick Perry" club among FR's Palin supporter ranks. The people pushing him around here are either Texans or GOP "Anybody but Palin" hacks.
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