Hate to say I told you so, but. . .

[MadHound]

Over the past couple of years, the Fed has been engaged in a policy of monetizing our debt, ie, letting the printing presses roll. The Fed is essentially purchasing the US debt, ie US Treasury Bonds, by simply printing the money to pay for them. The Fed has already purchased 1.15 trillion in US Treasury bonds in 2009, and is currently engaged in another 600 billion dollar purchase of US Treasury bonds. Thus, by roughly June of this year, the Fed will have printed and put into circulation another 1.75 trillion dollar bills. 1.75 trillion dollars, printed out of thin air.

Of course we have seen what happens when a country tries to run the presses in order to pay off its debt. The most famous of example is the Weimar Republic of post WWI Germany. They too turned on the printing presses and tried to print their way out of debt. This led to their period of rapid hyperinflation, where an individual had to pay for a loaf of bread with a wheelbarrow full of Deutsche Marks. The most recent example of hyperinflation is Zimbabwe, where the situation became so bad, they couldn't print currency large enough to keep up(at one time they were printing 100 billion dollar notes) and abandoned their dollar in favor of the South African rand, the US dollar, and the British pound sterling.

I'm not saying that we're in for a period of hyperinflation(though if we continue to monetize our debt the possibility remains), but the problem is that even growing inflation is going to hurt people. And inflation is indeed growing this year.

"On one side of the misery equation, Americans have been seeing retail prices rise at an annualized rate of more than a 5.6 percent so far this year, according to the Bureau of Labor Statistics.

Plus, the upward pressure on prices is growing as crude oil prices keep heading higher. U.S. crude oil has been trading at more than $110 a barrel, sending the average price of a gallon of gasoline up to $3.74 a gallon — compared with $2.86 a year ago, according to AAA, the auto club.

Last week, Federal Reserve Chairman Ben Bernanke said he is watching inflation data closely, but still feels this recent surge in prices is "transitory" and should ease soon.

In Europe, however, the central bankers are taking the opposite position. On Thursday, they stopped watching for signs of inflation and took action, raising interest rates to slow economic growth. Their goal is to tamp down consumer demand enough to cool price hikes."

<http://www.npr.org/2011/04/10/135272006/paychecks-cant-keep-up-with-rising-prices>

Our inflation rates over the past few years have been relatively low, 1.5% in 2010, 2.7% in 2009. The hundred year averages stands at 3.38%. So as you can see, 5.6% inflation is a fairly big jump, and frankly it probably isn't going to end anytime soon. As I stated earlier, the Fed's latest period of "quantitative easing"(ie printing money) isn't due to end until June of this year. Who knows if another such period will follow. Meanwhile our dollar continues to be weak. Worse yet, employers aren't handing out the pay raises needed for Americans to keep on top of this inflation. Neither is the government, remember, there haven't been Social Security COLA's for the past couple of years.

Thus, the squeeze is on for US citizens. Gas prices rise, food prices rise, utilities, rent, everything continues to go up and up in price, while we are stuck trying to scrape by on the same wages we were getting before.

This is the pain caused by monetizing our debt, ordinary people finding that their budgets simple won't stretch as far as they used to, having to decide on whether to put food on the table or gas in the tank to get to work. Seniors having to decide whether to pay for the heat in the winter, or their medicine. Worse yet, this contributes to the downwards economic spiral we find ourselves in. As prices rise, people simply do without. They don't buy that book at the bookstore. They don't go out to see the latest movie. They don't take that vacation this year. And in an economy that is in a barely viable recovery, such a blow can send it right back into a tailspin.

It is time for the Feds taking the debt out of our hides by monetizing it. It is time for Bernanke to step down in favor of a more humane Fed chair. And it is past time that this administration truly tackled the issue of our debt, not by taking it out of our hides, as has been the practice for decades, but rather by cutting back on the biggest debtor in the country, the US military.

Otherwise, the pain we're feeling now is simply going to get worse.

[Taverner]

1. Hyperinflation, followed by Hyperdeflation...

Is what happened in the Weimar Republic

And then the NAZIs took over

Is the "Tea Party" our Nazi party?

They certainly seem like fascists in waiting

[roguevalley]

16. my aunt and uncle lived in Brazil back in the day when you needed

a wheelbarrow to carry the money needed to by bread. Oh joy.

[Taverner]

17. That happened in quite a few Latin American nations, didn't it...

I remember an Argentinian Family who fled due to the "Guerro Sucio" going on

It was like that at times...

[roguevalley]

23. yes poor things damned near died trying to get through it. I pity

the poor everywhere. they are my people.

[L0oniX]

2. Bernanke is one of the foxes in the hen house.

[hfojvt]

3. nope, I think a little inflation is a good thing

soon it will lead to COLAS, which are generally based on the inflation rate. Then when people get the COLA, they will feel richer even though they really aren't. Higher interest rates will also help seniors, many of whom have investments in CDs.

This time, I agree with Bernanke, as I explained here http://journals.democraticunderground.com/hfojvt/142

[MadHound]

6. Soon it will lead to COLA's? For those on SS and Medicare, but the rest of us won't be so lucky

Many local, state and federal jobs have had their wages locked down, no increases in sight. Private employers are essentially doing the same. Nice that higher interest rates help seniors, but again, the rest of us are screwed.

Actually all of us are screwed until the end of the year, when the official numbers are tabulated and taken into account. Meanwhile, we're all left out here alone, facing higher energy prices, higher food prices, higher retail prices in general. That is not a good thing, no matter how you try to spin it. Worse yet, in a recovery, which is really a recovery in name only, since people will be spending less on the extras, concentrating on simply paying the bills, our recovery, such as it is, is going to go to hell. People won't take those vacations, they won't buy that new computer, they won't buy that new whatever. Slowing the economy down, throwing people out of work, again.

And speaking of people out of work, what about those millions and millions who are still out of work, the ones this administration and everybody else seems to have forgotten about? What are they supposed to do? With already limited resources, any rise in prices is going to hit them especially hard. So again, what are they supposed to do, simply die quietly?

Sorry, but this is not just a little inflation, it is a tripling of last year's inflation rate. And it certainly isn't a good thing. At best, it is playing with fire, and in the process possibly slowing down whatever nominal recovery we've got going. At worst, it could be a catastrophe.

It never fails to amaze me how Obama supporters will try to spin any bad news as something good, something brilliant, only to be proven wrong, time and again.

[hfojvt]

12. sorry I cannot join in the doom and gloom

because inflation is actually gonna help the economy. As such, it will create more jobs and more government revenue.

Tripling? That is mere hype. 5.6% is a long way from scary to me, and some of that is probably driven as much by gas prices as it is by money supply.

Note in my link, I was calling for the printing of money back in September, so it has nothing to do with being an Obama supporter, especially since as of his pathetic December betrayal/capitulation, I no longer support the jackweasel. Check my latest journal entry http://journals.democraticunderground.com/hfojvt/146 It is meant to shame Obama, not to support him.

[MadHound]

13. Again, what are people supposed to do in the meantime?

COLA's won't kick in for another eight, nine months? That means that those on fixed incomes are going to be screwed until then.

Meanwhile, how will this create jobs? The tourist industry will take a huge hit, as with rising gas prices, people will simply do a staycation this year. There will also be less spending on non-essential goods, so tell me, how in the hell will this create jobs?

Tripling is not mere hype, it is reality. And while 5.6% doesn't scare you(must be nice to be that well off), it is already scaring a lot of people.

And while you were calling for rolling the presses in September, apparently you didn't even know what the hell what going on, and that the presses had been rolling since '09, and that Bernanke had already started round II in August of last year. Why should I give any credibility to somebody who doesn't even keep up with what is going on.

Oh, and meanwhile, back in the world of reality, the hits just keep coming. The world's largest bond holder got the hell out of US bonds recently, PIMCO. The Russians and Chinese have agreed to drop the dollar and go to a combination currency for their bilateral trade, Moody's is threatening to drop our credit rating if we go much further in debt, and our dollars status as the petrodollar is under assault. None of this is good news, and having rising inflation on top of it just adds to the misery.

[themadstork]

19. How will inflation help the economy?

I'm not challenging you, merely trying to learn about this stuff better.

[MadHound]

20. It won't,

I'm already starting to see the hits this economy is going to take due to high energy prices. Truckers staying home, tourist industry not getting up to speed since people are already taking "staycations". Inflation won't help the economy, it will plunge it back into the depths.

[hfojvt]

21. a big part of it is optimism

in a world with lots of money circulating, there are lots of opportunities to make money. People see that and jump in. Also, when wages go up in response, as they are very likely to, people feel better. Most people would rather get a 5% raise than a 0% raise, even if the actual result is the same (a 0% raise with 0% inflation being the same as a 5% raise with 5% inflation, but the latter scenario allows the worker to think and feel "woohoo, I got a 5% raise".)

The other part is shares of expenditures. Let's say I make $20,000 a year and get a 2% raise while the price of gas goes from $2.00 to $3.50 a gallon. You might think "holy crap, 75% inflation on gasoline, the worker is screwed" but that depends on how much gasoline they buy. If I drive 5,000 miles a year then I buy about 200 gallons of gasoline a year. If I drive 10,000 miles a year then I buy about 400 gallons. In the first scenario, my expenses have only gone up by $300 whereas my wages went up by $400. Further, if the workers engage in cost-saving measures, like riding the bus, walking or cycling, then they can be even further ahead.

[MadHound]

24. Optimism? HAH!

Where in your rose colored world are you seeing optimism? Here in the real world, there are almost 25 million people unemployed, and millions more underemployed. The poverty rate is rising, the middle class is shrinking, and the poor, elderly and needy are in dire straits as even more of the social safety net unravels beneath them.

Most people aren't getting wages, wages are staying flat while prices rise, and in real world monetary terms that means that their wages, their purchasing power, is actually decreasing, just like it has for almost every single year for the past four decades.

As far as your gas analogy goes:rofl: Extrapolating your own personal experience to that of the hundreds of millions of the rest of us is laughable on the face of it. First of all, most folks are far more likely to put 10,000 miles plus on their cars. Second of all, rising fuel prices ripple throughout the economy, increasing the prices for everything, because every single business is touched by fuel prices one way or the other. Cost of fuel goes up, that causes an increase in food prices, an increased price for other consumer goods, and increased cost for manufacturing, an increased cost for energy in general, and all of that is passed on to the consumer. Add those cost increases on to the inflation caused by monetizing our debt and guess what, the ordinary person is in for one hell of a hit.

You can keep trying to preach your happy, happy, joy, joy message all you want. But the fact of the matter is that here in the real world, things are starting to turn seriously south for a lot of people. Adding inflation due to monetizing the debt into the mix, and there are a lot of people who are going to be in for a world of hurt.

[On the Road]

15. I am Also Cautiously Optimistic

Bernanke has multiple problems of debt, deficits, sluggish growth, and a depressed dollar.

"Quantitative easing" could be an excellent tool if it's done quietly and not overused. It's the only thing in recent memory the US has done that could legitimately be called printing money.

It's dangerous. But it keeps the debt ratio under control, and it stimulates the economy. The long-term solution is economic growth, and it doesn't stand in the way of that at all.

[MadHound]

18. Really? Inflation due to monetizing the debt doesn't stand in the way of economic recovery?

Tell that to the people in the tourism industry, who are going to lose jobs due to the fact that people are staying home. Tell it to the trucking industry, where rising gas prices are starting to idle lots of truckers.

If you want to truly do something about our debt load, and not take it out of the hides of the population at large, then we need to make meaningful spending cuts, which means we need to start making serious cuts to the military. We need to start bringing in more revenue, which means raising the tax rates on the rich and closing corporate loopholes. Monetizing the debt, which is bringing about inflation, is simply another way of balancing the books on the already broken backs of the people of this country.

Oh, and you don't call "quantitative easing" to the tune of 1.75 trillion dollars overuse? One only has to look at the rising inflation rate to see that you're wrong.

[On the Road]

22. It's Not Overuse if the Comparison is to Weimar Germany

Some inflation is going to happen, but the fears of hyperinflation are wildly overblown.

Inflation is stimulative. Rather than costing jobs, that is still what the economy needs for the next year or so.

The effect on gasoline and other imported goods depends on the exchange rate. So far, QE does not seem to have killed the dollar. The dollar was lower three years ago before QE started. The 5-Year US dollar index as of March 2011:



I agree with cutting the military budget and raising taxes. But Bernanke has no control over that. He is a lot more cautious then Greenspan, and is using debt retirement as one part of an overall package to keep the total debt from getting out of control until the recovery is underway. Growth is the way out, and he is trying to keep things within reasonable bounds until that happens.

[MadHound]

25. I'm not comparing it to the Weimar Republic,

I'm simply pointing out the fact that due to monetizing the debt, inflation is rising, our dollar is weakening, our ability to borrow more money is eroding, and all of this is being taken out of the hides of the ordinary person in this country, those who can least afford it.

Meanwhile the dollar is slowly being phased out as the reserve currency of choice. Countries that used to trade in dollars are going to other currencies. Oil producing countries are looking towards trading in a basketful of currencies. Russia and China have dropped bilateral trade using dollars. The dollar has been in the tank for awhile, and is starting to sink further.

Meanwhile our debt load is providing a strong economic headwind that we have to sail into. Hell, Moody's is threatening to downgrade our credit rating, PIMCO, the largest holder of bonds worldwide just got out of Treasuries, and other countries simply aren't buying up our debt, hence the monetization policy. That debt is being taken out of the flesh of the regular people, first by cutting services, now by forcing inflation upon us.

No, Bernanke doesn't have control over policies such as reducing military spending or raising taxes on the rich. But with these kind of red flags being thrown up, the Obama administration needs to wake the fuck up and start doing the right thing, the common sense thing, now. Otherwise we'll simply take the Soviet method of ending our empire, spending so much on the military and the rich few that it completely collapses the economy. Of course that could be the plan all along, after all, such a collapse would be looked upon as nothing more than a buying opportunity for the wealthy elite in this country and abroad.

[Blue-Jay]

4. I wonder if you actually enjoy saying "I told you so"?

Most people enjoy it, and I doubt that you're so very different than everyone else.

[MadHound]

7. No, actually I don't. But nice of you to ass u me character traits about me.

No, I don't enjoy saying these things, but they need to be said. If you don't like the way I express myself, tough shit, deal with it.

[Blue-Jay]

8. heh. OK.

When you assume, you make an ass out of u & me! That's some fresh material right there!

[MadHound]

11. Not looking to be fresh, looking to make a point

I highly dislike people who try to stick words in my mouth, or attribute thoughts that aren't mine to me. You tried to do just that, and I responded. You don't like how I responded, oh well, deal with it. Perhaps next time you will have the common courtesy not to stick works in my mouth or attribute motivations to me that simply aren't there.

Understand now?

[Blue-Jay]

14. I understand. I'm highly disliked by by you, and I need to deal with it.

How will I ever survive your disapproval? It'll be difficult, but I might manage.

[midnight]

5. Put Brooksley Born in charge...

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... 13 bankers in his office who informed him of this. Stop, right away. No more.'"



Read more: http://www.pbs.org/wgbh/pages/frontline/warning/view/?utm_campaign=homepage&utm_medium=top5&utm_source=top5#ixzz1JAAoBlpj

[Citizen Worker]

9. It is the price we must pay to maintain the empire. We're in the same place Spain was a few hundred

years ago. The rich refused to pay the taxes necessary to maintain the empire. The burden of taxation fell more and more on the backs of the working class and eventually Spain had to drastically cut funds to maintain the military and the once vaunted and feared Spanish Armada was soundly defeated in the English Channel. Our turn is coming and I fear we will resort to the use of nuclear weapons.

[Poboy]

10. Recommend