http://www.investors.com/NewsAndAnalysis/Article/567894/201104011939/Inflation-Nears.htm Editorial: When Inflation Comes, Blame Big Government Posted 04/01/2011 07:39 PM ET Economy: Amid the good news of a rebounding stock market and better job growth comes a warning: Inflation may flare up soon. If it does, donât blame business. Maybe you think it's crazy to worry about inflation when the consumer price index is rising at a modest 1.5% year over year. That's a valid point. It's also true that many of the items that make up inflation in our daily lives are climbing fast. Raw food commodity indexes, for example, have hit all-time highs. And the broader CRB Commodity Index, including food, energy and industrial commodities, has run up 32% the past 12 months. As anyone who owns a car or truck knows, oil prices have jumped 29% in the past year to more than $108 a barrel. This has pushed gasoline prices over $3.60 a gallon nationally, twice what they were when President Obama entered office. As for that weak CPI, there are good reasons to question the government's benign official readings. Bill Simon is one of them. When the CEO of Wal-Mart's U.S. arm talks, we listen. And last week he told consumers to get ready for a burst of "serious" inflation. Toyota Motor Co. is another. Americans typically ignore the impact of a weaker dollar. But the biggest carmaker in the world has announced price hikes across the board for all of its vehicles, in large part due to the weaker U.S. currency. Monetary officials, including the presidents of the Federal Reserve Banks of Richmond, Minneapolis and Dallas, have also weighed in. They too see inflation ahead and suggest the Fed may start raising rates soon. John Williams, of the useful and iconoclastic Shadow Government Statistics website, measures prices the old-fashioned way. He employs the methodology used before 1992, when Labor Department changes started producing milder readings. By his measure, inflation is close to 10%, tracking price increases for commodities, energy, food, precious metals and health care, among other items. Once this is recognized, expect business to get the blame and Congress to convene hearings on "price gouging," as it's done dozens of times (without finding any). It's really government that causes inflation with actions such as: ⢠The $2 trillion in money created by the Fed under "quantitative easing" since 2008, an unprecedented shot of liquidity pumped straight into the economy. ⢠The $5.5 trillion in new debt added by our government in just three years â nearly a 60% rise. ⢠The Environmental Protection Agency's move to regulate all stationary producers of carbon dioxide, which has led businesses to put off large investments. ⢠The surge in regulation at all levels of government, which has added to small-business uncertainty and reduced hiring. ⢠The record 29% jump in federal spending in President Obama's first three years, which has crowded out private spending and business investment. ⢠Spending on TARP and "stimulus," which could total nearly $2 trillion when all is said and done. The list goes on. The point is, don't blame companies like Wal-Mart, a proven price cutter, when inflation hits home. Blame the federal government, which seems dead set on repeating the same errors it made in the stagflationary 1970s.
Surely you are joking? It's not about how much debt you have it's about what you do with the money. And the US made some mistakes but it's also an awesome country with lots and lots of productive capacity, innovation and a highly educated workforce. China, on the other hand, has a lot of useless cash, a lot of useless and empty appartment buildings, government compounds and what not and they are STILL BUILDING. Believing in China is like believing in US real estate in 2007.
Russia has an aging population, huge amount of brain drain, vastly corrupt government and culture, and crumbling infrastructure. They are only somewhat relevant because they have oil.
I agree that there are a select few that are very good at capitalism. It's always that way when you have rampant corruption at all levels of society. Gangsters are the ultimately capitalists. But their demographics are horrible. Low birth rates will decimate countries such as Russia, in the not too distant future (20 years or so).
When you have to incentivize your population to have children, it's too late for you as a country. There are in horrible shape and throughout history, you never want to bet on countries where corruption is rampant.
I'm biased? You just told me that Russia, who has a significantly lower birth rate than the US, a vastly inferior culture of corruption, and per person income that trails economic powerhouses such as Argentina, Portugal, Columbia and Peru is going to eat our lunch. They are less than half the size of the US and a quarter of our income. At least China has such an enormous population that their case can be debated.
Debt is good. Look to the 20 highest indebted countries off the world and compare their living standards with the 20 least indebted countries.
It is a bit of a stretch to blame big government for inflation. The size of government is not related to inflation as cause and effect. In the USA, much of the inflation appearing since a fiat currency was adopted has been caused by a combination of Central Bank Policy and Government Deficit spending. But there are other contributing factors as well. This is only a guess, and I am not inclined to do any research to determine if it is correct, but I wouldn't be surprised to find that historically nearly all countries that got involved in wars that could not be paid for out of current revenues later suffered from increased inflation. In practical terms, inflation is an indirect tax. However the burden of inflation is usually not distributed among a population in the same way as direct taxation. Consequently, when politicians choose inflation over direct taxation, they are also choosing, perhaps unwittingly, which segments of a population will bear the greater relative burden of paying the inflation "tax". Thus inflation may be somewhat diabolical as well as being politically preferable to direct taxation, depending, of course, on one's point of view. Inflation is helpful to individuals and governments heavily in debt at fixed rates whose incomes will rise commensurate with inflation. For governments, this is especially true if much of the debt is held externally, so long as they are able to borrow at rates below the rate of inflation. Inflation is harmful to those with little or no debt and large cash reserves and/or on fixed incomes. Inflation is neutral for those with little debt, whose wealth is mainly in the form of hard, liquid assets, especially commodities, and whose incomes will keep pace with inflation.
Also, when you blame "big government", in a democracy, you are blaming the public. We are the ones that continually put these jokers in office. Everyone wants spending in various segments, such as welfare, retirement welfare, defense spending..........yet no one wants to pay high taxes.
Good grief, citing IBD for anything should be banned from this site. This is the paper that said if Stephen Hawking had lived in the UK, he would have lived as long as he has because of socialized medicine. The U.S. is still in the liquidity trap. Watch what happens when rates start to rise, you'll understand.