Originally posted by Keyhole
Now they are talking about another "stimulus package" for us to help people through this hard time.
From what I'm understanding is that this stimulus package may do more harm than good?
And this would be due to the fact that the government is just going to print this money up, which will cause this hyper-inflation due to the fact that
this newly printed money wil be "moving into the day to day economy"?
An earlier post on this page claims we're not experiencing deflation because there's more money entering the system, so to speak. By the definition
of deflation, it is a reduction in monetary supply or credit; a reduction in gov't, personal or investment spending. As is becoming obvious, we are
dealing with a tremendous reduction in credit
a decrease in personal spending
, both of which are deflationary.
In the short term the proposed bailout may have an "okay" effect in that it could counter some of the the stagflation/deflation effects we're
In order to get the spending to happen again, Congress wants to push through a $150B "stimulus." This, as mentioned, may
be a benefit in the
short term. This assumes that the money will be spent on goods rather than put in savings or used to pay down debt.
In the long term, though, it's inflationary. We won't be looking at effects within a month; it takes time for everything to work through the
system, so to speak.
These measures have the possibility of causing hyperinflation
Note that it remains a possibility; I won't say it's certain nor should anyone else. These trillions of dollars are
they're potentially hyperinflationary, but no one's going to call it a definite at this point. The government can pull money out of the system by
raising interest rates (a lot), raising taxes, etc. That's probably what will come down the line at some point.
The way I see things, it's gonna go like this:
We're entering a deflationary period and will remain stagnant or deflationary as long as people aren't spending (due to tight credit and banks
When the banks start monetizing the money they're receiving, via loans or spending or whatever, we'll start to see inflation.
As more and more money enters "the wild," inflation will start to increase a whole lot.
As the inflation increases, the gov't is likely to hike interest rates and raise taxes.
If they don't try and stem the inflation, or if they don't do it aggressively enough, then we're ripe for hyperinflation.
Timeframe? I don't know. We could deflate or stagnate for years. We could move to inflation in six months. We could spiral out of control and
hyperinflate by '10. What does seem certain is that period of deflation/stagnation/stag-deflation followed by a period of high inflation...what
happens after that is reliant on what steps the gov't takes.