Will the stimulus lead to hyper-inflation?

[FluffyMcDeath]

video

 

[redrumloa]

This should be in politics.

Will the stimulus lead to hyper-inflation?

I don't have bandwidth at work to watch this, will have to do at home later.

How can it not cause hyper-inflation? I guess that is why the Obama adminstration is pushing for a a coordinated global stimulus package. If every western nation is running the money printing press, they cancel each other out? I still don't see it.

I fear scary times ahead, despite what Obama's teleprompter is saying. Did you see what happened to the US dollar yesterday? The Federal Reserve plans to buy $1.25 trillion of government bonds and mortgage-backed securities? Obama throws around trillions like a drunk sailor at a whore house. Yes, I know. Obama inherited this mess, but he is just making things far, far worse.

 

[Wayne]

Yes, I know. Obama inherited this mess, but he is just making things far, far worse.

I'm not an economist, so I can't truly agree, or disagree with the latter part of your statement. What I can say is that traditionally, Republicans run things into the ground, then when people have had enough, Democrats come in and put in these big civil plans (to much protest) and they seem to work for the greater good in at least the short to mid-term to get us out of a financial hole. (The great depression, Social Security, etc)

Get people working, get people spending. That's how you save an economy, and I'm just not sure how else you'd do it, since companies who were once profiting have been nose diving and laying off thousands sans a little thing we humans would call remorse.

edit: just thought of something. It occurs to me that the politically unmotivated seem to move freely between being democrat and republican with the turn of the tide. As republicans come in and take over giving control to big business, people see their wealth expanding, hence become "leave me alone" republicans themselves. Later, as it peaks and business goes crazy with ravenous greed, the *average* Americans see their wealth shrinking dramatically, hence they find themselves voting democratic. It's all one big happy loop. At least there is symmetry for Zathros.

Wayne

 

[FluffyMcDeath]

Did you see what happened to the US dollar yesterday?

When I fired up my firefox and opened my charts tabset the first thing I saw was the Euro way up and the DXY way down. It was pretty extreme.

 

[JoBBo]

How can it not cause hyper-inflation?

Actually, there has been no excessive expansion of the money supply so far although the Federal Funds Rate has never been lower.

Inflation might still happen in the future if the Federal Reserve fails to raise the Federal Funds Rate and sell government bonds as soon as the economy improves. But to be fair, it is far too early to tell whether they will screw this up or not.

I guess that is why the Obama adminstration is pushing for a a coordinated global stimulus package.

In terms of the crisis, Europe (and pretty much every other Western nation) lags between 6 and 12 months behind the US. Even if the Europeans were in favour of additional spending sprees (and they are not), it would not be smart to announce them at this point in time even if Obama's administration might prefer that.

If every western nation is running the money printing press, they cancel each other out? I still don't see it.

Only a small fraction of the money supply are notes (and coins). Most of the money is literally just numbers in a computer network that can appear and disappear within seconds. Today's money supply is more flexible than the mental image of a printing press conveys.

Did you see what happened to the US dollar yesterday? The Federal Reserve plans to buy $1.25 trillion of government bonds and mortgage-backed securities? Obama throws around trillions like a drunk sailor at a whore house.

I find it important to point out that the Federal Reserve is not a branch of the federal government. Bernanke was appointed during the Bush presidency in 2006, and it is entirely reasonable to assume that Bernanke would be doing exactly the same if McCain was in office right now.

Yes, I know. Obama inherited this mess, but he is just making things far, far worse.

Again, I think it is too early to tell whether the current administration's actions have been a failure.

The problem I see is that the Obama adminstration and the Federal Reserve appear to be more or less in denial mode about the true cause of the on-going credit crunch. They still seem to believe that the financial system will magically heal itself if they can just help the banks, lead by the same managers who helped create this crisis, to survive on their own for another few months, maybe a year until the all the bad assets somehow turn into good assets again and housing prices go back up.