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Dick Morris: Coming next year: Obama's inflation
The Hill ^ | March 3, 2009 | Dick Morris

Posted on 03/04/2009 1:25:30 PM PST by 2ndDivisionVet

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.


TOPICS: Business/Economy; Culture/Society; Editorial; Front Page News; Government; Politics/Elections
KEYWORDS: 111th; agenda; bernanke; bho2009; bho44; bhoeconomy; bhoinflation; budget; bush; democrats; dickmorris; economy; fed; federalreserve; impeachobama; obama; obamanomics; ourtaxdollars; porkulus; socialism; stimulus; taxes
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Sometimes even Dick gets it right.
1 posted on 03/04/2009 1:25:30 PM PST by 2ndDivisionVet
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To: 2ndDivisionVet

This one scares me more than any of the other big problems caused by “hope and change”


2 posted on 03/04/2009 1:27:06 PM PST by xcamel (The urge to save humanity is always a false front for the urge to rule it. - H. L. Mencken)
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To: 2ndDivisionVet

Predicting hyperinflation — That’s not too hard ... The money supply has been pumped up by near 80%.


3 posted on 03/04/2009 1:27:47 PM PST by Tarpon (It's a common fact, one can't be liberal and rational at the same time.)
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To: 2ndDivisionVet
Ahhh... I think a 271% increase would be almost quadrupling of the money supply?
4 posted on 03/04/2009 1:28:55 PM PST by Tallguy ("The sh- t's chess, it ain't checkers!" -- Alonzo (Denzel Washington) in "Training Day")
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To: 2ndDivisionVet

We have been without significant inflation for so long, people don’t know any better. It will be a rude awakening.


5 posted on 03/04/2009 1:29:15 PM PST by b4its2late (Ignorance allows liberalism to prosper.)
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To: xcamel

Me too. Morris has been speaking on this for a while. $1.9 trillion deficit in 2009. We can’t get away with that I’m afraid.


6 posted on 03/04/2009 1:29:24 PM PST by Anti-Bubba182
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To: b4its2late
"..people don’t know any better..."

People under 40 don't, older ones do or should.

7 posted on 03/04/2009 1:30:59 PM PST by Anti-Bubba182
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To: 2ndDivisionVet

Yeah, the broken clock routine. He is long overdue for one correct prediction and I think this is it.


8 posted on 03/04/2009 1:31:06 PM PST by TCats
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To: b4its2late

“We have been without significant inflation for so long, people don’t know any better. It will be a rude awakening.”

I was too young to funny understand what was happening in the late 70’s to early 80’s, but I remember the layoffs, gas lines, and uncertainty of that time. I also remember when Reagon came along and helped bring back confidence and pride as a nation...we need another Reagon, not Carter II.


9 posted on 03/04/2009 1:32:00 PM PST by DonaldC
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To: Tarpon
Considering that the only commodity in short supply is “ink” for the world's currency printing presses, I'd say hyperinflation's not a stretch...
10 posted on 03/04/2009 1:32:03 PM PST by GOPJ (People who can't use the new WH phone system are trying to redesign half the US economy - Brooks)
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To: 2ndDivisionVet
I disagree with Morris' opening statement regarding the "money supply" in the U.S.

Morris has no idea how much the money supply has expanded or contracted in the U.S. over the last five months. Very few people do.

The problem is that the Federal Reserve stopped providing a full accounting of our nation's money supply a few years ago (I believe it was 2005 or 2006) when it stopped reporting the M3 figure. It was no coincidence that the period of time since then has seen plenty of inflationary evidence in places where one would expect to find it at its root -- mainly in commodity prices (remember $145+ oil in the summer of 2008?).

I suspect that much of the alleged increase in our money supply over the last five months is really just a matter of the U.S. government "legitimizing" prior (hidden) inflation by adding money to the M1 and M2 figures that would have been included in the M3 figure previously. This is why long-term U.S. Treasury rates were at or near historic LOWS even as many economists were echoing Morris' predictions about rampant inflation.

11 posted on 03/04/2009 1:32:48 PM PST by Alberta's Child (I'm out on the outskirts of nowhere . . . with ghosts on my trail, chasing me there.)
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To: GOPJ

Invest in “post America” currency-

ammo.


12 posted on 03/04/2009 1:32:51 PM PST by MrB (The 0bamanation: Marxism, Infanticide, Appeasement, Depression, Thuggery, and Censorship)
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To: 2ndDivisionVet
Americans born in the last 25 years, haven't lived with inflation or stagflation undermining the economy. If inflation rears its ugly head in the coming months or the year ahead, it will devastate the economy.

Time to buy stock in wheel barrel manufacturers.

13 posted on 03/04/2009 1:33:01 PM PST by Reagan Man ("In this present crisis, government is not the solution to our problem; government is the problem.")
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To: 2ndDivisionVet

“...The point of this gloom and doom is that all this pain is entirely preventable...”

And this is the thing the average idiot has NO CLUE about!!!

HE IS DOING THIS ON PURPOSE...IT’S HIS AGENDA!


14 posted on 03/04/2009 1:33:14 PM PST by mikelets456
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To: 2ndDivisionVet
Uhmm....Inflation is a great for those in debt (i.e. Uncle Sam).
15 posted on 03/04/2009 1:33:48 PM PST by Red Dog #1
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To: 2ndDivisionVet
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.

This sentence presupposes that 0bama gives a shit.

He puts ideology first and the economy a distant second.

Then Morris presents this tidbit that proves he knows that 0bama gives less than a shit. 0bama and his minions need to be stopped, somehow, before they ruin this country.

16 posted on 03/04/2009 1:34:31 PM PST by Bloody Sam Roberts (Despite all my rage, I am still just a rat in a cage...)
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To: Anti-Bubba182

Buy Silver, it’s the only commodity on the market that is still cheap enough to actually make some money. Gold is way too high and your margins to small.


17 posted on 03/04/2009 1:34:47 PM PST by Im4realamerica
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To: 2ndDivisionVet

Meltzer has said the coming inflation will make the late 70’s early 80’s look like a picnic. Thanks R’s and D’s.


18 posted on 03/04/2009 1:34:49 PM PST by BGHater (Tyranny is always better organised than freedom)
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To: xcamel

>> This one scares me more than any of the other big problems caused by “hope and change”

It sure keeps me awake nights.

Cash is a doomed investment. That much is easy enough to understand.

but...

What to do with it?
When?
Will the onset of inflation be sudden, or will there be a ramp?
Will there be a separate, delayed bottom in other asset classes, like real estate?
Will the signs be clear? Will I miss them?
Will I jump prematurely at a *false* sign?

&etc


19 posted on 03/04/2009 1:34:51 PM PST by Nervous Tick (Party? I don't have one anymore.)
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To: 2ndDivisionVet
Not to worry...it will all be taxed away. If no one has any disposable income there can not be any inflation.
20 posted on 03/04/2009 1:35:51 PM PST by JrsyJack (Oh dem golden slippers!!)
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To: MrB

>> ammo.

You can’t eat ammo. It’s filling, but poisonous.

However you can use ammo to shoot stuff that you can eat. Like PETA activists.


21 posted on 03/04/2009 1:36:40 PM PST by Nervous Tick (Party? I don't have one anymore.)
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To: BGHater
"Meltzer has said the coming inflation will make the late 70’s early 80’s look like a picnic."

It may make the Wiemar Republic look like the go-go 90's!!

22 posted on 03/04/2009 1:36:58 PM PST by 2ndDivisionVet ("To insist on strength is not war-mongering. It is peace-mongering." Barry Goldwater)
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To: 2ndDivisionVet

It would be awesome if just 50% of all of Dick Morris’s predictions came true.


23 posted on 03/04/2009 1:38:19 PM PST by exist
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To: DonaldC

Yes


24 posted on 03/04/2009 1:38:55 PM PST by b4its2late (Ignorance allows liberalism to prosper.)
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To: 2ndDivisionVet; dennisw

We need an inflation/deflation ping list for all the inflation and deflation predictions


25 posted on 03/04/2009 1:39:02 PM PST by sickoflibs (Keynesian Eco 101 : "If you won't spend your money WE WILL, and your kid's too!")
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To: 2ndDivisionVet

marking...


26 posted on 03/04/2009 1:39:33 PM PST by FreedomProtector
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To: Nervous Tick

It sure keeps me awake nights.

Cash is a doomed investment. That much is easy enough to understand.

but...

What to do with it?
When?
Will the onset of inflation be sudden, or will there be a ramp?
Will there be a separate, delayed bottom in other asset classes, like real estate?
Will the signs be clear? Will I miss them?
Will I jump prematurely at a *false* sign?

&etc


May you live in interesting times.......................


27 posted on 03/04/2009 1:42:18 PM PST by PeterPrinciple ( Seeking the truth here folks.)
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To: 2ndDivisionVet

As much as I disagree with the ballooning Obama budget and the stimulus package I just don’t see inflation coming back any time soon.

The reason I say this is the experience of Japan. They pumped much larger amounts of money into the economy than even Obama is (their national debt is around 150% of GDP, ours will be around 65%) and their inflation has been even lower than ours for years. In fact they’ve had deflation.

Yes a lot of money is being injected into the economy, but you have to balance that with the amount of wealth that is being destroyed. The destruction of wealth is at least an order of magnitude bigger than the money being pumped in. So deflation is much more likely than inflation.

I don’t so much object to the money injection, but the how and where. I wouldn’t mind if it did go for infrastructure and tax cuts (empowering productive people) - instead most of it is going to entitlements and new government programs that are going to empower the government and make us less free, productive and affluent.


28 posted on 03/04/2009 1:42:25 PM PST by aquila48
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To: 2ndDivisionVet
TOE-SUCKER SPEAKS!!!
29 posted on 03/04/2009 1:42:32 PM PST by Old Sarge ("Remember, remember, the Fourth of November, the Socialist treason and plot...")
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To: DonaldC

Obama is Carter II plus Mugabe/Chavez and the Islamification of America like what happened to
England(istan).


30 posted on 03/04/2009 1:42:41 PM PST by Frantzie (Boycott GE - they own NBC, MSNBC, CNBC & Universal. Boycott Disney - they own ABC)
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To: 2ndDivisionVet
First graph covers 1959-2007, second one comes up to date... notice any sudden increases?

****************


31 posted on 03/04/2009 1:43:36 PM PST by WVKayaker (When you come to a fork in the road, take it. -Yogi Berra)
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To: 2ndDivisionVet

The Obama presidency = Jimmy Carter II

I remeber those times well even though I was only 14 years old. My father owned a business and was paying 19.5% interest on his operating notes.


32 posted on 03/04/2009 1:44:11 PM PST by BobinIL
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To: GOPJ

maybe the could get the ink from the shrinking print media which by now has a huge surplus


33 posted on 03/04/2009 1:45:36 PM PST by al baby (Hi Mom)
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To: 2ndDivisionVet

271????

oh boy. so a dollar could actually lose half or more of its value.


34 posted on 03/04/2009 1:45:40 PM PST by GeronL (Will bankrupting America lead to socialism?)
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To: Nervous Tick

“boiled frog”


35 posted on 03/04/2009 1:45:52 PM PST by xcamel (The urge to save humanity is always a false front for the urge to rule it. - H. L. Mencken)
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To: Tarpon
The money supply consists of a number of elements ~ cash is one of them. Credit or lines of credit is another. There are yet other forms.

For a variety of reasons (disastrous rise in price of oil, crash in home prices, even more productivity improvement in all sectors of our economy, and so forth) we suffered a severe reduction in the money supply. The loss is in excess of $6 trillion.

At some point deflation plus more cash should create a new equilibrium. Inflation can occur afterwards simply through creation of more wealth to be pledged as credit.

36 posted on 03/04/2009 1:46:06 PM PST by muawiyah
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To: Im4realamerica
Buy Silver, it’s the only commodity on the market that is still cheap enough to actually make some money. Gold is way too high and your margins to small.

But if (when?) hyperinflation hits, gold prices will skyrocket too. But I take your point.

I've heard the Fed claim they can just mop up all that extra money when the time comes, and thus prevent hyperinflation. This sounds a little (ok, a lot) too simple for me. Can anyone comment on how plausible it is that the Fed can change course and restrict the money supply when the time comes, without more economic havoc?

37 posted on 03/04/2009 1:46:13 PM PST by Liberty1970 (Democrats are not in control. God is. And Thank God for that!)
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To: Tallguy

Remedial Math 101 for you!


38 posted on 03/04/2009 1:46:27 PM PST by GeronL (Will bankrupting America lead to socialism?)
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To: Im4realamerica
Silver

Silver was higher this time last year, but it might go up in Hyperinflation.

39 posted on 03/04/2009 1:47:22 PM PST by Anti-Bubba182
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To: Im4realamerica
A company called Delft in Nederlands is actually manufacturing silver out of other substances.

I'd be careful buying silver.

40 posted on 03/04/2009 1:48:40 PM PST by muawiyah
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To: PeterPrinciple

I’d settle for sleeping in interesting times.


41 posted on 03/04/2009 1:49:04 PM PST by Nervous Tick (Party? I don't have one anymore.)
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To: muawiyah

Velocity is way, way down as well.


42 posted on 03/04/2009 1:50:10 PM PST by Andy from Chapel Hill
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To: muawiyah
The report I saw said that CASH in circulation went up 80%. Beck was talking about it a few days ago as well. And the inflation that it will cause. One of his shows he made a graphic.

Agree with others things mean money, but this was specifically cash being dumped in the market by the fed. Beck was talking about it in the vein that the promises made by Nixon for doing away with the gold standard have been tossed out the window.

But hell, there is so much manipulation going on who really knows what is going on.

This we do know — Obama lied, the economy died.

43 posted on 03/04/2009 1:51:20 PM PST by Tarpon (It's a common fact, one can't be liberal and rational at the same time.)
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To: 2ndDivisionVet

Dick Morris again gets paid for pap.


44 posted on 03/04/2009 1:51:38 PM PST by don-o (My son, Ben - Marine Private First Class - 1/16/09 - Parris Island, SC)
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To: 2ndDivisionVet
so i guess i picked the right time to buy a used car from a private seller?

here's my question: if you have high job security, should you be spending money now in anticipation of this type of inflation?

45 posted on 03/04/2009 1:51:45 PM PST by thefactor (yes, as a matter of fact, i DID only read the excerpt)
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To: 2ndDivisionVet

hey Republican Party stand up for FREEDOM its a all out WAR now


46 posted on 03/04/2009 1:52:21 PM PST by patriotmediaa
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To: Anti-Bubba182
“people under 40 don't, older ones do”

To put it more simply, if you remember Jimmah you remember inflation.

47 posted on 03/04/2009 1:52:25 PM PST by Tail Gunner John
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To: 2ndDivisionVet

The Wizards of Smart are going to respond that they had to address the first priority, massive unemployment on a global scale, with their Stimulus Maximus. Then they will deal with inflation via monetary policy. They will also claim they are smart enough, and good enough, they can do both with elegance and precision.

Don’t hold your breath!


48 posted on 03/04/2009 1:53:05 PM PST by bigbob (-)
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To: 2ndDivisionVet

And you posted this as breaking news?! Yer killin’ me over here


49 posted on 03/04/2009 1:53:08 PM PST by don-o (My son, Ben - Marine Private First Class - 1/16/09 - Parris Island, SC)
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To: xcamel

>> “boiled frog”

You’re not helping! :-)


50 posted on 03/04/2009 1:53:30 PM PST by Nervous Tick (Party? I don't have one anymore.)
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