Bernanke and the Fed are starting to panic…

[Arraya]

If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.

They have been trying to inflate for over a year now with no luck. Then after EVERYTHING failing that they have tried, they started buying our own debt to keep interest rates down. Which is inflationary, but really does not solve a thing except to keep rates down for an ever dwindling pool of buyers to buy over priced assets. This does not stop the job and wage deflation which is the problem. This did however catch the attention of the world and made them lose faith as apparent by all the jawboning about finding another currency. Ok, but we are still deflating. So what is next? Buy more debt? When is this inflation coming that you are talking about? How is printing money to buy debt going to solve the massive credit contraction going on that is causing the job and wage deflation? Which has a negative multiplier effect. Do you see the problem? They are impotent. They have no more tools and the problem is too much debt. The are in a sense, insane.

Now, Hyperinflation is a currency event due to non-confidence in the implied economy vis-a-vis it’s currency. All past hyperinflations have started in the trough of a deflationary trend. Wiemar actually had two troughs, a double bottom, and then it was a hockey stick to irrelevancy. Hyperinflations are actually better termed hyperdevaluations. Which is the obvious next step when the world gives up on the US.

All they are doing is pouring gas on a fire and the only OBVIOUS conclusion is destruction of the currency via no confidence.

Why? Because you cannot inflate your way out of a deflationary depression caused by too much lending.

[paramount]

Aren’t all FIAT currencies doomed to fail eventually?

[paramount]

Aren’t all FIAT currencies doomed to fail eventually?

[paramount]

Aren’t all FIAT currencies doomed to fail eventually?

[paramount]

Aren’t all FIAT currencies doomed to fail eventually?

[paramount]

Aren’t all FIAT currencies doomed to fail eventually?

[Bob]

[quote]How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters.[/quote]

What I jokingly said was I was hoping for high interest rates AND hyper-inflation. While the feds are hoping for moderate inflation, I can guarantee you that they do NOT want hyper-inflation,…nor do they want extremely high interest rates. If interest rates went through the roof, while at the same time unemployment worsens, and prices of goods and services skyrocket, the recession will get much worse….some might even call that scenario an inflationary depression.

And as history shows us, in nations that were subjected to hyperinflation, incomes never came close to inflating at the rate of everything else. While it would hurt just about everyone, people who would be hurt the most would be those on fixed incomes.

[Bob]

[quote]How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters.[/quote]

What I jokingly said was I was hoping for high interest rates AND hyper-inflation. While the feds are hoping for moderate inflation, I can guarantee you that they do NOT want hyper-inflation,…nor do they want extremely high interest rates. If interest rates went through the roof, while at the same time unemployment worsens, and prices of goods and services skyrocket, the recession will get much worse….some might even call that scenario an inflationary depression.

And as history shows us, in nations that were subjected to hyperinflation, incomes never came close to inflating at the rate of everything else. While it would hurt just about everyone, people who would be hurt the most would be those on fixed incomes.

[Bob]

[quote]How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters.[/quote]

What I jokingly said was I was hoping for high interest rates AND hyper-inflation. While the feds are hoping for moderate inflation, I can guarantee you that they do NOT want hyper-inflation,…nor do they want extremely high interest rates. If interest rates went through the roof, while at the same time unemployment worsens, and prices of goods and services skyrocket, the recession will get much worse….some might even call that scenario an inflationary depression.

And as history shows us, in nations that were subjected to hyperinflation, incomes never came close to inflating at the rate of everything else. While it would hurt just about everyone, people who would be hurt the most would be those on fixed incomes.

[Bob]

[quote]How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters.[/quote]

What I jokingly said was I was hoping for high interest rates AND hyper-inflation. While the feds are hoping for moderate inflation, I can guarantee you that they do NOT want hyper-inflation,…nor do they want extremely high interest rates. If interest rates went through the roof, while at the same time unemployment worsens, and prices of goods and services skyrocket, the recession will get much worse….some might even call that scenario an inflationary depression.

And as history shows us, in nations that were subjected to hyperinflation, incomes never came close to inflating at the rate of everything else. While it would hurt just about everyone, people who would be hurt the most would be those on fixed incomes.

[Bob]

[quote]How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters.[/quote]

What I jokingly said was I was hoping for high interest rates AND hyper-inflation. While the feds are hoping for moderate inflation, I can guarantee you that they do NOT want hyper-inflation,…nor do they want extremely high interest rates. If interest rates went through the roof, while at the same time unemployment worsens, and prices of goods and services skyrocket, the recession will get much worse….some might even call that scenario an inflationary depression.

And as history shows us, in nations that were subjected to hyperinflation, incomes never came close to inflating at the rate of everything else. While it would hurt just about everyone, people who would be hurt the most would be those on fixed incomes.

[Bob]

[quote=patientrenter]
Banks would be perfectly happy with a solution that dropped house prices and forgave debts, as long as they got bailed out. But notice how the primary effort has actually been to pour truly vast amounts into more cheap and easy (<5% rate, 3.5% down, tax credits...) loans to buy homes - to keep the prices high. That's for voters.[/quote]

What you're conveniently ignoring is the fact that the overwhelming majority of Americans OPPOSED the bailouts of the banks last fall, and the majority of Americans OPPOSED the bailouts of the auto industry. Yet, the bailouts went through anyway. Why ? Because the banks and the corporations are given priority over the citizens. And I disagree with you on why the Feds are handing out cheap loans as well. They're not doing it for the voters, as Bernanke is immune to voter reaction. Rather, they're doing it to stop a deflationary cycle which would destroy some of the largest US banks, while at the same time hoping to prop up the value of MBS.

[Bob]

[quote=patientrenter]
Banks would be perfectly happy with a solution that dropped house prices and forgave debts, as long as they got bailed out. But notice how the primary effort has actually been to pour truly vast amounts into more cheap and easy (<5% rate, 3.5% down, tax credits...) loans to buy homes - to keep the prices high. That's for voters.[/quote]

What you're conveniently ignoring is the fact that the overwhelming majority of Americans OPPOSED the bailouts of the banks last fall, and the majority of Americans OPPOSED the bailouts of the auto industry. Yet, the bailouts went through anyway. Why ? Because the banks and the corporations are given priority over the citizens. And I disagree with you on why the Feds are handing out cheap loans as well. They're not doing it for the voters, as Bernanke is immune to voter reaction. Rather, they're doing it to stop a deflationary cycle which would destroy some of the largest US banks, while at the same time hoping to prop up the value of MBS.

[Bob]

[quote=patientrenter]
Banks would be perfectly happy with a solution that dropped house prices and forgave debts, as long as they got bailed out. But notice how the primary effort has actually been to pour truly vast amounts into more cheap and easy (<5% rate, 3.5% down, tax credits...) loans to buy homes - to keep the prices high. That's for voters.[/quote]

What you're conveniently ignoring is the fact that the overwhelming majority of Americans OPPOSED the bailouts of the banks last fall, and the majority of Americans OPPOSED the bailouts of the auto industry. Yet, the bailouts went through anyway. Why ? Because the banks and the corporations are given priority over the citizens. And I disagree with you on why the Feds are handing out cheap loans as well. They're not doing it for the voters, as Bernanke is immune to voter reaction. Rather, they're doing it to stop a deflationary cycle which would destroy some of the largest US banks, while at the same time hoping to prop up the value of MBS.

[Bob]

[quote=patientrenter]
Banks would be perfectly happy with a solution that dropped house prices and forgave debts, as long as they got bailed out. But notice how the primary effort has actually been to pour truly vast amounts into more cheap and easy (<5% rate, 3.5% down, tax credits...) loans to buy homes - to keep the prices high. That's for voters.[/quote]

What you're conveniently ignoring is the fact that the overwhelming majority of Americans OPPOSED the bailouts of the banks last fall, and the majority of Americans OPPOSED the bailouts of the auto industry. Yet, the bailouts went through anyway. Why ? Because the banks and the corporations are given priority over the citizens. And I disagree with you on why the Feds are handing out cheap loans as well. They're not doing it for the voters, as Bernanke is immune to voter reaction. Rather, they're doing it to stop a deflationary cycle which would destroy some of the largest US banks, while at the same time hoping to prop up the value of MBS.

[Author]

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