Posted on 02/25/2015 10:26:02 AM PST by ChildOfThe60s
How are the United States' historic budget deficits, money-printing and depressed economy any different from the country's that have experienced hyper-inflation? The three-part answer is:
(1) we don't have any problems selling our debt
(2) we aren't actually printing money; and
(3) the United States is a highly productive economy that is nothing like bombed-out Budapest.
(Excerpt) Read more at theatlantic.com ...
they make the recession or depression last much longer than if they did nothing
Agreed.
But again, if you were in charge of the FED and ALL indications are that the country is heading into a deep depression, would you, without hindsight, try to STOP the depression or just let it play out?
You would try to stop it.
Do you think if the FED did nothing back in 09, this deflationary cycle would have been over by now?
Except that the oil producing states could change this on a whim. The dollar isn't "backed" by oil, rather, the major oil producing states just choose to accept dollars for oil and they could stop this any time. Russia and Iran have tried at various times to get the other oil producing states (ie. Saudia Arabia) to do just this.
Well it used to be so. But the problem now is a vary large part of our economy is in the financial sector and alot of the stuff they are creating and trading is based on nothing but Unicorn Farts and Fairy Dust. Then they leverage that stuff and invest in even more UFFD. That is why LTCM, Lehman Brothers and Bears Sterns are nothing but dust now. They leveraged their UFFD to buy even more UFFD and suddenly everyone realized UFFD wasn't really worth as much as everyone said it was.
The big reason the dominoes hadn't started falling is because of the Bretton Woods Agreement. If the dollar wasn't the reserve currency of the world well Greece would seem like financial wizards by comparison to the USA.
The reason we don’t see hyperinflation is because of the incredible efficiency of modern companies and their model of cutting costs all along the supply chain. It creates a deflationary environment because they lose market share if they raise prices. And all that money printing created massive inflation...in stocks and bonds. Banks aren’t lending it out, they make more money pouring it into the markets.
Technically you are correct that the US Dollar isn’t backed by Oil.
But, for all intents and purposes, the World Currency markets trade as if it is.
Because, it is the only reliable measure of a country’s economies strength or weakness. If there were a BTU index than that would be the measure.
“(1) we don’t have any problems selling our debt
(2) we aren’t actually printing money”
Au contraire, our “money” IS debt. “Electronic currency” is a series of IOUs, tracking who owes who what.
The reason we don’t see hyperinflation is because of the incredible efficiency of modern companies and their model of cutting costs all along the supply chain. It creates a deflationary environment because they lose market share if they raise prices. And all that money printing created massive inflation...in stocks and bonds. Banks aren’t lending it out, they make more money pouring it into the markets.
All true.
Except;
“All that money printing created massive inflation”
....in stocks and bonds
Stocks yes, Bonds, not so much.
Any honest and objective view of the economic history of the Western world would see that we transition between a series of technological breakthroughs that are transformational.
From the Industrial revolution which was truly economically transformative, to the most recent breakthrough and its natural extensions.
The most recent, truly game changing technological breakthrough was the integrated circuit and that happened 50 plus years ago. Everything from the PC, the Web and smart phones have been an extension of the I.C.
The FED may be misguided, they may be overly optimistic, but they are not stupid.
I think that the FED was and is counting on the next “revolutionary technology” to emerge to save them and our nation. It’s all they know.
There are in fact an number of areas that “could” provide the next economic revolution. We are getting closer in alternative energy (nevermind climate change), Bio-tech and Nano-tech. We are close and the choice the FED is faced with is to either let the economy collapse into depression or attempt to delay depression and hope that one or more of these technologies becomes viable.
And BTW, if one were to take hold, our debt would be gone faster than you could elect a new president.
In the meantime the choice they are presented with is to either let our nation slide into a deep depression or do whatever they can to buy time.
Would would you do if you were in charge of the FED?
Fiat currency is backed by a gun- the state, that’s it. US is the world currency because it has been the largest economy and has the strongest military.
But the US is losing its grip because 0bama and his globalist puppets are destroying the US by weakening it economically and creating the conditions for rebellion and civil war.
Hyperinflation and dollar collapse will coincide with economic and military collapse.
Money velocity is very slow inhibiting inflation.
So many dollars have been produced that in the short term, even an expansion of the balance sheet by one or two trillion doesn’t cause a large percentage increase in the money supply.
It doesn’t have to be Wiemar — it only has to be the 1970s again and tens of millions will suffer.
Oh yeah. 15% is a bitch. And we don't have the backstop of a recently strong economy. Everything is so much more fragile than it was when the 70s inflation hit.
Which brings us back to the *fact* that the Fed can not fight inflation with higher interest rates because it will crash the federal budget. Rock, meet hard place.
Inflation creates bubbles. It's all great, until it isn't, then pop goes the bubble.
This isn't difficult to understand. You need a certain level of miseducation in order to believe the nonsense produced by this author.
(2) we aren’t actually printing money; and
That’s soooo 20th Century. Computers are much faster than printing presses......
The solution to that is yet more QE. The Fed can raise rates to "fight inflation" while at the same time still buy treasuries at whatever rate they want since nobody is stopping them and they can buy as many as they want (as many as the politicians want).
In the end what it will come down to is the Fed will print money and the politicians will hand it out. Right now that won't cause hyperinflation, just increasing wealth disparity, economic distortions, sluggish growth, increasing "disability" and similar ways to get on the federal dole.
But given time the politicians (both parties) will take us full Zimbabwe. The only difference between the two parties will be which segment of the electorate they will be bribing.
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