Posted by
Andrews on Friday, March 20, 2009 11:20:37 AM
It appears Obama is well along his way to jumping into full fledged Carter-like "stagflation". The good news is he probably won't suffer "stagflation" for long, as his plans seem to be directed at full fledged hyperinflation.
Last time I checked, the Federal Reserve system had assets of about $14 to $15 trillion. Obama plans to print $1 trillion to buy treasury bonds and mortgages, which represents a 6-7% increase in the money supply. That is on top of the "normal" inflation of the money supply which has been eroding purchasing power at 3-5% per year. And if his spending spree continues at planned levels, we can expect a trillion to two to be printed in each of the next four years.
That is, if prices remain constant. With an expected 10% growth of the money supply per year, you can bet prices will rise faster than 10% per annum, meaning Obama's deficits will balloon far beyond the $1-2 trillion planned. As he prints money to keep pace with soaring prices, we can expect to see the money supply grow at rates we haven't seen since Carter worked the printing presses overtime int he late 1970's.
Well, the good news is we can expect to see the Dow hit 10,000 again, the bad news is that $10,000 won't buy a loaf of bread when it does.