If I read Hussman’s view correctly, he’s only saying that if the govt wants, it can always create inflation. (Which is pretty much Bernanke’s view as well) So, that begs the question, is it your view that the govt will print enough money to cause inflation?
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Yes (eventually).
[quote=XBoxBoy]
1) While they are doing all they can to reinflate the various bubbles, they will stop (and put on brakes if necessary) as soon as the bubbles appear to be reinflated. (This is because although they don’t admit it, I bet they are scared of bubbles getting out of hand after the last couple of years)
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That’s certainly not how they’ve done it in the past. You are probably right that they are more sensitive to bubbles, but they are also more scared of causing another downturn by tightening to early (which BB considers to be the big mistake made by Japan in the 90s and the US in the late 30s).
[quote=XBoxBoy]
2) To cause inflation they have to print enough money to compensate for all the lost money due to defaulting loans, and then some more.
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In any case, it’s not like printing money is all that difficult or anything. (As a matter of fact, politically speaking, it’s difficult not to! And this will remain the case unless and until inflation becomes a problem.)
[quote=XBoxBoy]
3) Like most experts, the fed overestimates their abilities and powers. We see that today as they talk of how the recovery is progressing and there won’t be a double dip. Thus they are currently coming off the money printing throttle. If they are wrong, that’s all the more money they will have to print just to fight deflation.
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…at which time they will press down on the printing throttle again, no?
I don’t want to go down the whole deflation vs inflation rathole as I already said my piece in the article I’ve linked to a couple paragraphs up. My point in responding was that I think there is too much emphasis on employment and capacity utilization as the sole inputs into inflation, to the extent that people simply dismiss inflation risk due to high unemployment. There are many examples of countries (including this one) that experienced inflation during times of high unemployment and slow economic growth.
