This second round of quantitative easing is meant to lower mortgage rates (boost the housing market) and increase demand for bank loans (grow the economy).
Yet many reading this must be thinking: What deflation? Prices of gasoline, food, health-care, education are all getting more expensive.
Ask Chris Martenson, inflation or deflation? The economic researcher responds, “Yes!”
“We’re seeing inflation in some areas and deflation in others,” he tells Tech Ticker in this clip. “We have powerful deflationary forces in play right now. It’s been well balanced, so far, by what the Fed has done.”
Martenson thinks we’re “dangerously close” to entering a stage of “stagflation” that crippled the economy and market in the 1970s. “It’s the worst of all possible worlds,” says Martenson. “(Stagflation) really squeezes the workers even harder than any other condition you can experience. Wages are weak. Job growth is weak. The main assets that the average person tends to hold like real estate – that’s going down. On the other side, we are seeing base inflation” in some commodities.
“Stagflation,” as defined by Investopedia, is: a condition of slow economic growth and relatively high unemployment — a time of stagnation — accompanied by a rise in prices, or inflation. The U.S. dealt with this in the 1970s when a recession was met with a spike in global oil prices.
With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says.
As a result, he’s convinced Fed chairman Ben Bernanke will continue to go back into his “tool box” in the near-term to try to help put the economy back on a path of inflation and growth. “All the signs are telling us that the Fed can go forward and expand their balance sheet and so far they’ve been able to get away with it,” he says.
But eventually, Martenson believes these actions to fight near-term problems will result in nearly insurmountable long-term dilemmas for the government
