What the Future Holds

What will happen when all the money being pumped into the economy starts to come out.  This article will tell you.


ObamInflation: Coming Next Year   By **** Morris
FrontPageMagazine.com | Thursday, March 05, 2009


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.

Grits4life Grits4life
46-50, F
5 Responses Mar 5, 2009

Safeguards against another Great Depression were dismantled by the Carter Administration and the Clinton Administration and their respective Congresses with the repeal of the Glass-Steagall and enacting the Community Reinvestment Act.<br />
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Sufficient damage to good practices to cause the problems of today, precipitate them.<br />
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Plus, unfortunate, the Reagan Administrations deregulation practices.

Keynesian economics is what the Administration is practicing. There is a history for those who chose to look. Keynesian philosophy will surely lead us down a path of utter destruction and devastation ... economically for sure.<br />
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If there were only three people in this world who understand the American economic plan as presented, Barack Obama would not one of them.<br />
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In reality there IS NO PLAN to bring us out of massive consumer debt, massive government debt and fantasy ‘profit’ off of tricky ‘financial instruments’. <br />
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The plan is to indebt this nation for generations for the goals of a few. This point being missed by almost everyone ... but practiced by this Administration and Congress.<br />
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Anything is possible ... true. Most likely, that all nations will be on an equal footing. As 3rd world poverty stricken nations seeking someone or some other organization protection.

I wish someone, anyone had a clue. There is no historic evidence for what is happening now. We are truly in uncharted waters.<br />
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i used to teach with smug assurance that a depression could never happen again because we had so many safe guards. I am sorry but we are in a world wide storm that is off the charts in its magnitude. I think I am lucky that I am going to die soon. I am so sorry for my children and all others of their generation.<br />
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Josie06 I used to attend classes by special invitation from the Federal Reserve. I remember the profound feeling that radiated from the instructors that the Fed knew all the answerers and Mr. G was a God.<br />
They knew nothing. Josie06 the storm we are in is far worse then you know or could know.<br />
We are at the brink of chaos and the once wealthy Nations will not go down with out drawing there swords.<br />
Anything is possible...DD

Dewduster, i respectfully disagree. If you taught economics, which i studied also, you would see this for what it is.<br />
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Keynesianism An economic theory developed by Keynes which holds that imperfections in the economy can be corrected through government policy. <br />
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Keynesian economic policy is a failed policy! Failed throughout history starting with the Great Depression. Not to mention the disaster in Argentina, Zimbabwe and Japan.<br />
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This latest attempt by President Obama and his advisers and the Pelosi-Reid Congress is also doomed to failure. <br />
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It is however the only vehicle liberals, Democrats, RINO's and dare i say socialists and communist have to destroy the United States of America. Something they have been attempting slowly over decades and now have sufficient power to achieve.<br />
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We can rightfully surmise this as a failure also based on historic evidence.<br />
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Can corrections be made ... i dearly hope so.

I am a retired teacher and I taught Economics. I am certain that no one knows what is going to happen next. Not even the people at the Federal Reserve. Not even our elected officials. Not the talking heads, the blogers ETC. Not me. Not you.<br />
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We are in for a wild ride and I wish someone, anyone had a clue as to what is down the road a year from now.<br />
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I believe we are flying down the road at over a hundred miles an hour and we are in dense fog. <br />
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I wish you knew what you are talking about, but you don’t…DD