Posted on 03/27/2009 11:16:31 AM PDT by Lorianne
Hong Kong, China Last week, Mr. Bernanke announced that the Federal Reserve would buy $300 billion worth of U.S. Treasuries and another $700 billion worth of government-agency mortgage debt. In order to finance these purchases, the Federal Reserve would simply create this money out of thin air.
It is worth noting, that the Federal Reserve has already dropped the Fed funds rate to a historically low range of 0-0.25% and now it is desperately trying to use other unconventional methods (quantitative easing) to stimulate the economy. In my view, this latest development of the Federal Reserve monetizing debt is inflationary and confirmation that the Federal Reserve wants to debase the U.S. dollar. It is worth noting that the total debt in the United States now exceeds $60 trillion, and its economy is around $14 trillion. So, the United States is already bankrupt, and the only way it can ever hope to repay this gigantic sum is through monetary inflation and debasement.
(Excerpt) Read more at dailyreckoning.com ...
I buy 10 vac bags of WalMart coffee every two weeks. It will be great barter stuff, and tastes great, too. ($2.07 per bag.) It'll probably be good for a tank of gas, or something.
Do I think it's going to be necessary? We're in the weeds!
Most people haven't a clue that we as a nation are on a razor's edge with hyperinflation staring right at us. China has already mentioned on 3 separate occasions that they are no longer confident in the USD...they are buying up oil wells, gas wells, mines, etc., with US Treasury debt notes and bonds.
Zer0 and the liberal elitist New World Order power brokers are on schedule to completely destroy the US middle class.
They haven’t disappeared .... they are busy rewriting FR history. Keep good records if you care about keeping score.
In theory no, in practice yes.
I think the Feds are counting on inflation erasing a certain chunk of that debt (note: I don’t distinguish between curent and future debt).
In fairness to Obama, it is not Obama who “has rendered the world’s economic model invalid”. It was already invalid and unsustainable.
He’s making things worse while we finally get our heads out of the sand and understand this (some of us), but he didn’t single-handedly invalidate the model.
Smoking nothing. If the government went by real accounting principals they made everyone else use, this figure would represent "off balance sheet" obligations. This is Social Security benefits, Medicare payments and other obligations the congress has made without the ability to pay.
I should probably re-state what I wrote because I agree with you. Yes, in the long run, the model was not sustainable. We couldn’t keep running twin deficits forever. Everyone else in the producing nations should have realized this too, but there was money to be made.
0bama’s policies are not only bringing matters to a head, it seems he’s doing everything he can to tear down the existing world economic order, and make the calamity as bad as he possibly can. I don’t know whether he envisions building some “new world order” out of the ashes like Stalin, or whether, like Hitler from 1943 to 1945, he lusts after destruction for it’s own sake.
There are certain commonalities with Germany in the 1920’s. Germany’s hyperinflation of the 1920’s was caused by the internalization of their war debt. Britain was able to externalize all of the allied war debt by financing the allied war effort in America. We held their Exchequer notes. We thus had a “stake” in keeping the UK propped up to get our ROI.
Germany just printed notes for themselves because they didn’t have access to American credit markets. And they made the mistake of making the notes short-term debt, requiring continuous re-issuance. Without any external props to their economy to get ROI, the currency quickly ran out of control.
America, like the UK, was able to keep the game going as long as we could externalize our debt. However, now that China, Japan and Saudi Arabia aren’t getting the flow of American dollars for goods and commodities, they aren’t going to externalize our debt. The Treasury department is left with the German recourse of internalizing it by printing money.
Yep, we are heading for inflation like we’ve not seen in this country.
RE :”They haven’t disappeared .... they are busy rewriting FR history. Keep good records if you care about keeping score.’
Normally I am not that organized but in this case I keep a menu of all those posts so it’s just a matter of scanning through those threads. Some of them were down right insulting so I may do it.
For one troll I had to go back to September where he was predicting an easy win for McCain based on high gasoline prices and re-post his prediction, and then he stopped ‘deflation trolling’ my posts, calling others stupid.
I've been buying coffee in the vacuum packed metal (not plastic) cans. Coffee in metal cans will taste fresher, longer.
It took almost 100 years to make our dollar worthless. Considering how politicians love to spend money, cause inflation and devalue the dollar that is not too bad.
But at the rate we are now spending, the dollars we have today could become almost worthless tomorrow. Think about that, you have $250.000 in net worth today and tomorrow it is only worth $25,000 or less. And this has a very high probability.
Indeed, inflation is the solution for governments that borrow too much. If I can borrow $100 in 2009 and pay you back with $100 in 2014 dollars that are worth only $70 or $60 in 2009 dollars, it's a good deal, right?
Zimbabwe resident who can't afford a wheelbarrow:
But... I suppose the government could get around that by printing bills with lots of zeroes.
Or whether he’s like the dog who caught the car, and is now going “Oh crap! Now what do I do!?”
Not that I think your alternatives are unlikely, I just think this one belongs in the mix as well.
ping
” Back in January the FR deflationist trolls used to swarm my Schiff, Farber, Rogers, Beck threads calling them stupid for predicting inflation under Obama. They all disappeared. I never could understand their reasoning. “
I don’t know what their reasoning was, but I do know the rationale for predicting deflation- it’s massive debt default. An inflation bet hinges on whether the Fed’s monetary expansion can overwhelm the collapse occurring in the credit markets.
Japan wasn’t able to overcome the deflationary forces that hit their economy when their bubble popped, and they used policies similar to what is being done here. A trillion dollars of expansion may get swallowed up by tens of trillions of dollars of collapsing debt.
“All they had to do was look at Germany in the 1920s. Severe depression after Armistice and then with massive stimulative spending to grow GDP... poof! Hyper-inflation. Just like Bernanke & Co.”
That’s not exactly what was going on in Weimar Germany. The German hyperinflation was a consequence of the massive reparations payments forced upon them by the Versailles Treaty, it had nothing to do with an attempted stimulus program. The Germans devalued their currency to pay the nominal value of the money owed in cheaper marks.
Just curious if you were still confident that would happen. The warnings of inflation are now coming from everyplace it seems. The inflation would come once some recovery would take place, and the fed would not contract until it was too late, because of fears of debt and another collapse, like 1970s, by the time they do you have inflation, recession and high interest rates. ala 1980
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