Posted on 08/25/2009 12:10:00 PM PDT by Palin Republic
Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke's ability to hold down inflation would be the metric by which the Fed's success would be measured.
"We won't know for a year if he's done a good job so far, because he shoveled money out of an airplane to save banks and the financial system," Grassley said in a conference call with Iowa reporters. "But shoveling money out of an airplane to solve problems can be inflationary — in this case, hyperinflationary — if he doesn't start mopping up some of the money that's out there."
Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent.
(Excerpt) Read more at briefingroom.thehill.com ...
What is PM?
I imagine it'd be impossible to drive a firm out of business if that firm controls the Federal Reserve. Please, let me know who drove them out of business.
Based on what? Given what evidence?
Based on the cyclical nature of our economy. Based on the actions taken by the Fed and Treasury.
So, either tell me your understanding of the Fed and its relationship to our government
The Fed is a semi-independent central bank. Subject to regulation by Congress.
Is Grassley joking or just someone that slept through macroeconomics in college? We have our necks pinned against the zero lower bound (effective rates 0 to .25) and he is talking about hyperinflation? This has to be some kind of joke or a political maneuver because it makes zero sense. We have PLENTY of room vis a vis monetary policy to head off problems going north but nothing other than fiscal policy and “pseudo-monetary” policy available going south.
Anyone positing hyperinflation in our current economic situation is flat out ignorant or disingenuous, or maybe a little of both.
“If the Fed sells bonds, they are reducing the money supply. That would be deflationary, not inflationary.”
When the U.S. sells treasury securities (bonds) to China for instance, the U.S. is essentially borrowing money from China. A bond is a formal contract to repay borrowed money with interest. The money that is borrowed from China should then add to the money supply I would think, so I don’t see how this is deflationary. When the U.S. wants to borrow a lot of money by selling lots of bonds (as is now the case), if there’s not enough buyers for the bonds, raising the interest rate can attract more buyers, and it seems to me that this should also create some inflationary pressure. On the other hand, there’s a strong incentive to keep the interest rates as low as possible so that repayment of debt is at lower interest. But if you have high inflation, repayment of debt becomes much easier, even if interest rates are somewhat elevated. This is why high inflation (not necessarily hyperinflation) seems to me like a realistic possibility in the not-too-distant future.
Don't confuse the Fed with the Treasury. Money that China has is already part of the money supply.
if there’s not enough buyers for the bonds, raising the interest rate can attract more buyers, and it seems to me that this should also create some inflationary pressure.
Actually, raising interest rates is deflationary.
“However, the Fed is currently paying interest on those excess reserves..”
Since when? I mean, yeah during most of history it has, but the last I heard, the Fed cut the rate to 0%.
Your forecast is as flawed as mine. I certainly HOPE you’re right and I’m wrong; but I’m NOT betting on the economy getting better for at least a few years. There’s just too much going against it.
Bernanke is a Repub. Maybe a RINO, but a Repub nonetheless. Not all people assume he's a Dem. Only those who don't know the facts like you.
Support Whole Foods isn't cheap!
But seriously. There are two kinds of inflation.
Monetary inflation is when you print oodles of new money. Price inflation is when stuff costs more.
Bernanke has engaged in massive monetary inflation. It hasn't yet led to uniform price inflation.
Prices of non-essentials (wine) and overvalued assets (real estate) are falling.
While prices of essentials (gas, metal, food) are rising.
The world is expecting something big, and bad, soon.
Precious metal. What the US dollar was backed by during America's glorious first 200 years.
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