Thorsten Polleit explains here why the incredible growth in the monetary base caused by the Fed during 2008 is extremely dangerous. Once again, politicians and their bureaucratic minions ignore the lessons of history.
Are you worried about hyperinflation? If your personal income rises as fast as prices throughout the economy, you won't need to worry. But will your money income keep up?
Is it possible for inflation in the United States to follow the same path forged by Germany following World War I or Zimbabwe today? What will stop the seeds of hyperinflation sown by the Fed from blossoming? We appear to have a perfect storm of Fed policy coupled with a sharp move toward socialism at the federal level well underway. Aren't you worried at least a little bit? I'm worried a lot.
If the Fed continues to pump base money into the banks, and the banks continue to purchase Treasury notes and bonds with the money, and the federal government continues to spend the borrowed money on transfer payments, what will keep the United States from experiencing hyperinflation?
And if the federal government continues to push its tentacles of regulation, command, and control into private enterprise, what will cause production of real goods and services to rise? We had that social experiment already, too. It's called the rise and fall of the Soviet Union. The Soviet what? Some of us still remember.
If you instinctively understand that printing money does not increase production of real goods and services, then trust your instincts. New base money that's borrowed by the federal government is just running the money printing press.
I hope we the people can eat greenbacks, because running the money printing press will eventually push the prices of real food higher. I hope we the people can run our cars on greenbacks, because running the money printing press will eventually push the price of oil and gasoline higher. I hope we the people can use greenbacks for band aids and cardiovascular splints, because running the money printing press will eventually push the price of health care higher. Get the picture?
We've run this particular social experiment several times before. Why are we running the experiment yet again? I think we know why. Because politicians find it easy to promise a free lunch and then blame the bad outcome on their predecessors. It won't be long before we're hearing daily about the bad hand BHO was dealt and how the previous eight years are to blame.
We're already hearing that what we really need is more government intervention in private enterprise from bureaucrats who have never had a productive job in their lives.
We are already hearing that what we really need to straighten out financial markets is more regulation (we're not supposed to notice that what we've had since 1913 is massive regulation of financial markets).
We are already hearing that what the auto industry needs is command and control from Washington. Bureaucrats can straighten it all out. Never mind that the people who are supposed to accomplish this feat have no knowledge or experience in business or the auto industry.