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This Scares Me A Bit – or Maybe it Doesn’t
Filed Under (Economics And Politics) by rgreen on 19-02-2009
Tagged Under : Economics, Inflation, Politics
The US True Money Supply can be seen here. Talk about inflation. Dang. But I do have some other thoughts on the current economic situation.
One one hand we have Bernanke and his cronies inflating the life out of our money supply. Everyone knows this is bad. Nobody in their proper mind thinks that this is good. (As a side note, if economists would just agree that the definition of inflation is an increase in the money supply I think this whole debate – of whether expanding the money supply is good or not – would finally go away.)
On the other hand we have a scared public – both national and international – who are afraid to spend. So, despite the fact that the money supply is increasing dramatically, the cash is simply not circulating. This is hedging inflation to some degree.
On the mystical third hand we have the appointment of Paul Volcker as the head of President Obama’s Economic Recovery Advisory Board. Volcker is an avid inflation fighter from the Reagan days.
My conclusion (more of a guess I suppose)? The government is going to expand the money supply. Once things start freeing up and moving they will attempt to allow the dollar to devalue just enough to make the US debt manageable. Then, using a Volckeresque strategy, the US will see a rapid increase in interest rates reminiscent of the 1980s in order to scare off more inflation.
It just seems like everything is pointing in this direction.Welcome to the world of fiat money folks.
