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In one of my previous blogs: Is the stock market spring loaded? I coined the phrase Lightspeed Inflation in reference to the rate at which the government was able to dilute our currency. It is time we stopped referring to the government's over spending as "running the printing presses".We have reached a point, given our maximum note size of $100, that we would actually be better off if the government did have to print the money. Now they can just add whatever amount they want to the balance sheet electronically.
In 1974, the year I started college, we went off the gold standard. Prior to that time we required ourselves to maintain the precious metal in sufficient supply to back up the currency. Now we just have the government's word. This reminds me of a comic I read with the caption "Our standards are very high. We even have double standards" The sad irony here is that there is nobody less trustworthy than a politician. There might be one somewhere, but they are few and far between.
The Bush administration, which I have described as economically comatose; (see: Serious Money: Don't overlook these regional banks!) followed a Clinton administration that was self-indulgent, and left the new Obama White House with such a mess that the old joke about a "billion here, a billion there" is viewed as petty cash.
Now we are all convinced that if we do not create trillions of dollars more to sprinkle around on Wall Street like pixie dust we face present and certain doom. They actually have convinced me of that.
The problem that I have is that hidden in all the real scary economic news, the current President and Congress has now decided to link a long list of other spending items. These should be separate pieces of legislation, to be debated on their specific merits!
The fact that everything is being lumped together, is just one more example of absolute power corrupting absolutely. I was not a Bush supporter for many reasons, and I do think Obama can make a positive difference for our country. However, if I am to understand that every new idea, and program, is to be "railroaded" down our throats then I will be screaming loudly against him too.
Just because we long ago decided to free ourselves from the gold standard does not mean that we should have no standards. The idea, becoming policy, of expanding the currency to any level without feeling the burden of our actions will create Lightspeed inflation.
| Yes | |
|---|---|
| No | |
| Clueless |
| 18 months | |
|---|---|
| 24 months | |
| 30 months | |
| 3 years or more |
| General Electric | |
|---|---|
| Wells Fargo | |
| Goldman Sachs |
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GE and WFC.
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Reader Comments (Page 1 of 1)
3-24-2009 @ 5:30PM
huangmt said...
we all know it is not a question of if but when hyperinflation will set in. How else can the US govt avoid the inevitable? the artificial strength of the USD and Euro will slowly decline. interesting read on what happened to germany back in the 20s. http://theinflationist.com/stockpicks/european-financial-crisis-2009
3-24-2009 @ 6:52PM
Dan Barnett said...
The problem is that hyper-inflation had been predicted using the money supply as a measurement since the mid-80s. I believe a better measurement is money supply vs GDP. How much money chasing how many goods & services.
By the way we can debate the "self-indulgent Clinton administration". I'll take the negative. Or positively, the Clinton Administration was (on the whole) fiscally responsible.
3-24-2009 @ 9:11PM
Bruce said...
Maria
There are so many critical issues to be discussed---WHY---is CNBC interested whether Obama is overexposed.
CNBC and many others have been critical of Obama for not being transparent. Now he is trying to be transparent, people think he is over exposed. He can't win.
The issue should be, have we seen improvement in the economy. If yes, give him and his people credit.
3-24-2009 @ 9:40PM
Beltway Greg said...
Inflation is the first and sadly necessary step. By devaluing the dollar, which has become a "haven" currency in the last couple of months our manufacturing will get a boost. Volker had to raise rates back in the early 80s to head off inflation. The Obama administration will be forced to the same. Painful? Yes. But we really have no other choice. Think of it as a medically induced coma to protect the patient. Oil is going to rise and fixed income will rule in about a year and a half.
It's "Back to the Future" Michael J. Fox.
3-24-2009 @ 10:13PM
william lindblad said...
I think that Lord Acton was talking about Gladstone.
There is not enough gold, even at 1,000 a troy ounce, to support the U.S. dollar, given the amount out there. Nice thought, but if we went back in that direction it would actually make things worse.
Given current, it is possible to expand the money supply without inflation. For future reference, do remember that I said Possible - not probable. The possibility is only due to the fact that a novel situation exists in which the entire world is in the same boat and, as long as there is currency balance - this possibility remains.
(by the way - the first two questions look between a conundrum and a paradox?)
Inflation is in the cards, but I doubt that what the 24/7 presses are doing will have much influence. The problem that seems to accompany every severe economic condition is always not economic. In 1857 Russian wheat rotted in our warehouses. (Library of Congress).
Labor day and 1893 have the same thing in common with the last time NYC was hit by a hurricane. The 30's had the dust bowl. 2009 has Australia and Argentina in a severe drought. Hey, summer comes to the Southern Hemisphere before the Northern. We are Next! If this a harbinger, than we are in deep doo doo. I am not alone in this thinking as Obama mentioned Atlanta and So. Cal. in a recent speech. He did not elaborate and it probably blew by most as political rethoric
It's not.
Anyone that thinks that all the economic black holes are over and done is foolish. At present there is a proposal to establish a "world reserve fund" before the G20. Why in hell would something of this magnitude be necessary? Perhaps because the proposer is China - and they hold about 2 trillion of U.S. debt.
To the third and last GE - most diverse - light bulbs to tubines.
(other two still have dirty wash)
3-25-2009 @ 9:50PM
Diane said...
First lets avert a depression, then we can worry about inflation. The immediate problem is deflation, not inflation. Why do you think wars are good for the economy? Deficit spending. It's Keynesian economics and it works. Before inflation gets out of hand the Fed can reduce the money supply and raise interest rates.
3-27-2009 @ 1:29PM
William said...
I've always wondered who the person is that presses "Enter" after they "add" another couple billion to the till. That's gotta be an interesting job.