Wednesday, May 06, 2009

What happens when Inflation returns?

Inflation WILL return once the economy starts to recover, because we will also have massive debt and compounded interest to pay on it. We are facing an unsustainable situation.

Obama sows seeds of demise
[...] Right now, Obama’s ratings must be pleasing to his eye. Voters like him and his wife immensely and approve of his activism in the face of the economic crisis. While polls show big doubts about what he is doing, the overwhelming sense is to let him have his way and pray that it works.

But beneath this superficial support, Obama’s specific policies run afoul of the very deeply felt convictions of American voters. For example, the most recent Rasmussen Poll asked voters if they wanted an economic system of complete free enterprise or preferred more government involvement in managing the economy. By 77-19, they voted against a government role, up seven points from last month.


For Americans to conclude that they disapprove of their president in the midst of an earth-shaking crisis is very difficult. But as Obama’s daily line moves from “I inherited this mess” to “There are faint signs of light,” the clock starts ticking. If there is no recovery for the next six months — and I don’t think there will be — Obama will inevitably become part of the problem, not part of the solution.

And then will come his heavy lifting.
He has yet to raise taxes, regiment healthcare or provide amnesty for illegal immigrants. He hasn’t closed down the car companies he now runs and he has not yet forced a 50 percent hike in utility bills with his cap-and-trade legislation. These are all the goodies he has in store for us all.

Obama’s very activism these days arrogates to himself the blame for the success or failure of his policies. Their outcome will determine his outcome, and there is no way it will be positive.


• You can’t borrow as much as he will need to without raising interest rates that hurt the economy;

• The massive amount of spending will trigger runaway inflation once the economy starts to recover;

• His overhaul of the tax code (still in the planning phases) and his intervention in corporate management will create such business uncertainty that nobody will invest in anything until they see the lay of the land;

• His bank program is designed to help banks, but not to catalyze consumer lending. And his proposal for securitization of consumer loans won’t work and is just what got us into this situation. [...]

I think there are many on the hardcore Left who don't want to see the economy fixed; they would like to see capitalism, our consumer-driven economy, and the system of government that supports it, ruined, so they can replace it with something else.

Pat's been telling me that sounds to much like a conspiracy theory; that in reality they are just dumb Marxists who haven't got a clue what they are doing. That's quite possibly true. But either way, I think it's going to end the same; in a mess. Jimmy Carter Redux. Only this time, with trillions of dollars of debt and interest payments on that debt, which will ultimately mean... what?

Related Links:

The problem with the banks: illiquidity

Advice to the GOP: "Shut up and remain calm"

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