Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Inflation and Debt (huge deficits may cause hyperinflation)
National Affairs ^ | Fall 2011 | John Cochrane

Posted on 09/29/2011 11:19:01 AM PDT by reaganaut1

For several years, a heated debate has raged among economists and policymakers about whether we face a serious risk of inflation. That debate has focused largely on the Federal Reserve — especially on whether the Fed has been too aggressive in increasing the money supply, whether it has kept interest rates too low, and whether it can be relied on to reverse course if signs of inflation emerge.

But these questions miss a grave danger. As a result of the federal government's enormous debt and deficits, substantial inflation could break out in America in the next few years. If people become convinced that our government will end up printing money to cover intractable deficits, they will see inflation in the future and so will try to get rid of dollars today — driving up the prices of goods, services, and eventually wages across the entire economy. This would amount to a "run" on the dollar. As with a bank run, we would not be able to tell ahead of time when such an event would occur. But our economy will be primed for it as long as our fiscal trajectory is unsustainable.

Needless to say, such a run would unleash financial chaos and renewed recession. It would yield stagflation, not the inflation-fueled boomlet that some economists hope for. And there would be essentially nothing the Federal Reserve could do to stop it.

This concern, detailed below, is hardly conventional wisdom. Many economists and commentators do not think it makes sense to worry about inflation right now. After all, inflation declined during the financial crisis and subsequent recession, and remains low by post-war standards. The yields on long-term Treasury bonds, which should rise when investors see inflation ahead, are at half-century low points.

(Excerpt) Read more at nationalaffairs.com ...


TOPICS: Business/Economy; Government
KEYWORDS: debt; deficits; entitlements; federalreserve; inflation; nationaldebt
It's a long but very important article IMO.
1 posted on 09/29/2011 11:19:04 AM PDT by reaganaut1
[ Post Reply | Private Reply | View Replies]

To: reaganaut1

We’re in a very interesting spot right now. Half the signs point to inflation, the other half point to deflation.

In the end, I’d say all signs point to a global war. :-(


2 posted on 09/29/2011 11:35:47 AM PDT by bolobaby
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

Thanks for posting. I think that’s how it would play out given enough time. I just don’t think time is on our side.


3 posted on 09/29/2011 11:38:15 AM PDT by Errant
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

“may”? When has it not?


4 posted on 09/29/2011 11:40:13 AM PDT by Darteaus94025
[ Post Reply | Private Reply | To 1 | View Replies]

To: bolobaby

Well, it’s fast transforming itself into a Ponzi scheme because the bankers cannot back it up.

But watch the lefties blame us for the next New World Order when we try to unscrew this, when in fact it is them who messed it all up.

They will then rally to the cause of the Weather Underground, which has now infiltrated even our government with muslims to boot.


5 posted on 09/29/2011 12:04:54 PM PDT by JudgemAll (Democrats Fed. job-security Whorocracy & hate:hypocrites must be gay like us or be tested/crucified)
[ Post Reply | Private Reply | To 2 | View Replies]

To: reaganaut1
" they will see inflation in the future "

If you go to the supermarket you see it now. Many higher prices, but mostly smaller amounts in the package or even a smaller package for the same price. Companies continue to make profits because they are selling less product for the same or more money.

6 posted on 09/29/2011 6:55:27 PM PDT by LZ_Bayonet ( I AM THE TEA PARTY LEADER !)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson