Given that the government is now printing its way out of this crisis what are the risks for hyper-inflation? For those who believe that inflation is directly tied to the expansion of the money supply. That Hyper-infaltion is the result of a collapse in the confidence of a fiat-currency and by extension a collapse in the confidence of the Government backing the currency. What is the road forward We are promising risk free retirements, risk free medical care and now risk free financial systems and this all backed by the almighty dollar because we can just continue to print more.
Paulson's idea of new U.S $1 bill http://ylwong.files.wordpress.com/2008/04/zimbabwe-zim-currency-slide.jpg The good news is when someone on ET says they're a millionaire, now you can believe em :eek:
According to the Puplava show: If we want to tackle this problem now and avoid hyperinflation we have to cut government spending by 25% and raise taxes 35%. If we want to wait a few years and then want to avoid hyperinflation the cut in government spending will have to be +40% and the raise in tax +80%. fwiw
Cool poll but I would suggest that "<25% Legal Tender Baby!" is wrong. I would say that less than a 1% is "safe" without any real worries. Even a 10% chance is scary as hell IMHO. who would have thought a year ago when the stock market was at an all time high that even a 20% pull back would cause the SEC to put the breaks on short selling and everyone in DC would be running around trying to find someone to blame and a chair for themselves when the music stops. What if the market really drops, like a 1987 type or worse? Maybe they will stop all selling or say you can only sell if your stock is profitable??
I think the current economic situation is like 10-20-life. Nobody is going to "walk". It is either deflation (the great depression ver. 2.0), high inflation 20%+ or hyper inflation (300%+ for example) There is not going to be any soft landings.
I disagree completely. However, if you want deflation, it is very easy to cause. Forget about any bailouts and start raising interest rates decisively. Deflation would mean like 30+% unemployment and people looking in trash cans for food. It would be extremely difficult for US to recover from it. Manufacturing base is largely gone to China and US is no longer is self-sufficient in energy. I am hoping for high inflation but not hyperinflation although it would require a high wire act that may prove impossible to achieve.
It won't be deflation as long as Bernanke is running things. If you look at his academic research of the Great Depression, he is singularly motivated to avoid a repeat. He blames interest rates as being too high / too tight monetary policy as being the main problem. He has indicated through words and actions that his preference would be to inflate money supply rather than risk deflation. The only reason we're not looking at much higher overall inflation now is the unprecedented buying of treasury debt by the Chinese government, which is mostly related to their currency policies. What would normally look like the Japan 1989 decade long post-bubble recession (imo) is instead looking kind of unusual. When inflation truly strikes in force will depend on a combination of which fiscal and monetary policies are executed and the speed of yuan appreciation. But one thing is for certain (to me), we aren't going to see deflation. We'll see 0% 30-year debt before we see that. We'll see Hong Kong style direct trillion dollar purchasing of S&P 500 first. Overall deflation (imo) is fairly unlikely, with Bernanke at the helm. .
Nobody WANTS deflation... the good parts about inflation are (1) excesses will be squeezed out and value restored, and (2) "only" 30% of the population would suffer greatly and temporarily. But high inflation is a "wipe-everybody-out KILLER".... killer as in "permanent" for nearly all citizens.... bankruptcy.. NO RECOVERY. Many believe the deflationary forces will prevail regardless of how much Bennie prints.
Deflation=DEATH. U.S was able to climb out of the depression because of a vast manufacturing base, self sufficiency in energy and people being responsible with money. Plus 20th century saw a never ending stream of inventions that boosted the economy tremendously. Nowadays we import majority of our oil, have a garbage "service driven" economy and actually have competition instead of the rest of the world being bombed out. Bernake clearly does not want a depression otherwise he would have never cut interest rates.