Inflation alert: Bills' money-supply mayhem

[runeight]

INFLATION ALERT: BILLS' MONEY-SUPPLY MAYHEM

By RICHARD MORRIS & EILEEN MCGANN

Published in the New York Post on February 2, 2009

The central economic crisis of the next five years may not be the greed-induced worldwide recession we're now mired in - but the rampant global inflation that the politicians' response to that recession could trigger. Recessions, and even depressions, come and go. But inflation has the potential to stick around for decades.

Look at what the TARP bailout has done to the money supply. From 2000 through 2007, the money supply rose on average by $351 billion a year, with annual growth only once exceeding $400 billion. In 2008, the money supply grew by $691 billion. And that includes only the first half of the TARP package and none of the coming "stimulus" package.

In the short term, this increase in the money supply won't cause inflation, but only counteracts the deflationary effect of all the money that vanished in the meltdown, or went into hiding since. But when confidence returns and that cash comes back into circulation, we'll have much too much money chasing too few goods and services - a prescription for rampant inflation.

Today's woes were induced by a combination of a political willingness to let businesses make money by making loans they shouldn't have and of businesses' alacrity in walking through that open door in search of mind-numbing profits. But we seem to be collectively blind to the likelihood that the same political tendency to give out goodies and spare us pain is now leading the government to borrow so much and so increase the money supply that inflation will be the consequence.

After all, it was the political desire to bring good news to voters that led government to make it possible for people to buy homes they couldn't afford and kids to go to colleges they couldn't pay for and families to buy cars that were too costly and businesses to survive off debt long after they ceased to turn a profit.

Now, the same desire to get re-elected is leading politicians to offer a trillion-dollar stimulus package to benefit (some) voters, along with a bailout to banks, insurers, car companies and (soon enough, no doubt) countless other failing firms.

Eventually, we will all feel the pain when inflation sets in. Then, government will have no choice but to induce a deep recession akin to the one Paul Volker triggered in the late '70s and early '80s to cure the "stagflation" left us by the policies of Presidents Lyndon Johnson, Richard Nixon and Jimmy Carter.

President Obama and the Democrats in Congress are selling soothing syrup to their political base at a price of massive inflation and agony for the future. What Franklin Delano Roosevelt said in his first inaugural address holds doubly true today: "Faced by failure of credit, they have proposed only the lending of more money."

Democrats have, of course, always been willing to tolerate a certain level of inflation in an effort to hold down joblessness. But the lengths to which they are now going to spare us immediate pain and the implications of a doubling of the money supply in one year are beyond rational calculus.

It's hard to believe that any administration, set of economists or political party could be this irresponsible or so focused on the next election that they are literally willing to mortgage much of the next decade to win it.

r8

[Mr Bogus]

yea, just throw more cash at it... works every time....

never mind just lowering taxes... that makes too much sense.. politicians are not going to cut their own cash cow off... jerks...

[runeight]

The reality of this "porkulus" package is that every working family would not pay taxes or social security until August of this year.

Now, to stimulate the economy would it not make sense to give the working taxpayer the breaks instead of more BIG Government? Who drives the economy? We do, not more Government. Never worked..never will.

I have stated in the past I wish President Obama well.
(the alternative is Joe Biden <idiot)

Obama is rolling the dice on this one. Princess Pelosi wrote the "porkulus" package and Obama is standing with it. He should instead say, NO, this will not work and we need to make changes for all and not the few. (<government)

Will $500 help you while Amtrak gets 1 billion? (remember, you report the rebate as income next year and pay tax yet again)

Pinheads.

r8

[Mr Bogus]

gimme my friggen money back so I can spend it where I want

so if EVERYONE refuses to pay their taxes for a few months... what is the govt going to do? really?

[dadofthree]

It's not a voluntary program Bogus ...

[runeight]

Originally Posted by dadofthree

It's not a voluntary program Bogus ...

Yeah, ask me! The write offs are in the IRS code but Noooo..one year later I still have to pay. $4430.50 to be exact. The IRS doesn't live up to their own rules written in black and white. It's now a "gray area".

I will also have to pay interest between now and when they post the check so yet another bill to pay.

r8