Get Ready for Inflation and Higher Interest Rates

Get Ready for Inflation and Higher Interest Rates

online.wsj.com

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.
Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mo

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The Weimar Hyperinflation: Time to get out the wheelbarrows?
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Money supply plays a large role in inflation..Economists believe that if the Federal Reserve does not control the money supply appropriatly, it may actually grow at a rate faster than that of the output in the economy, or real GDP. This will drive UP prices and therefore cause, inflation. Low interest rates correspond with a high levels of money supplyit allows for more investment in big business and new ideas which eventually leads to unsustainable levels of inflation as cheap money is available. One example is Inflation can artificially be created through an increase in wage earners demands and then the increase in producer costs which will drive up the prices of their goods and services. This will cause higher prices for the wage earners or consumers. As demands go higher and, inflation will continue to rise! Inflation can be brutal for the anyone looking to retire on a fixed income. The dollars that they expect to retire with will be worth less and less as time goes on and inflation goes higher. When the balance between supply and demand gets out of control, buyers will change their spending habits as they meet their purchasing allowances and producers will suffer and be forced to cut output. This is also connected to higher unemployment rates. When extremes arise in the supply/demand structure, imbalances are created. We know that inflation is just around the corner but we should also consider the nasty word HYPERINFATION!

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Is the Fed Losing Control of Rates and Inflation?

Once again we have a weak dollar helping to push the price of crude oil even higher (see Bloomberg article, see first WSJ article on crude, second WSJ article on the dollar). In the CNBC video below, the technical analysts Nicole Elliott is absolutely beside herself, and even giddy at times, regarding the absurdity of the move in 2-year U.S. Treasuries. She eventually comes to the conclusion that the central banks have lost all control of the setting of interest rates, not to mention the long bond and interbank loans which have been outside of their control for a while

.

seekingalpha.com...



Inflation and Government Spending

The federal government is spending a lot these days, and going deeply in debt. Although it is easy to imagine high inflation as a consequence of excessive government spending, inflation rates and government spending are weakly correlated, if correlated at all.
John Maynard Keynes wrote the most important and insightful economics book ever —

“The Economic Consequences of the Peace” — successfully predicting an instance in which excessive government spending would create inflation, and worse. Published shortly after World War I, the book analyzed the economic capacity of Germany, and explained how it was not nearly enough for the German government to pay the debts (“reparations”) imposed on her by the Allied powers’ Treaty of Versailles.

Dire political and economic consequences would result from the excessive debt burden created for Germany by the Treaty of Versailles, Keynes wrote. The Allied powers did not reduce the reparations nearly as much as Keynes recommended; the German economy and polity subsequently produced hyperinflation, the Holocaust and violent contributions to World War II.

The Bush and Obama administrations have added, and continue to add, much to the United States’ national debt. Both Republicans and Democrats spend too much of taxpayers’ money, but excessive government spending does not mean that inflation will necessarily — or even probably — follow

.

economix.blogs.nytimes.com...

Good post.

And yes, it's coming. Bernanke's horrible Idea of Quantitative Easing has allowed this to happen.

S&F

reply to post by Tentickles


This is the exact strategy by the Bank of Japan in the late 1990s.

Bernanke should know better. He cant just manipulate the balance sheets but that is what he's doing.

I'm starting to wonder if this is intentional. (Raising interest rates!) !!

We are in big trouble. It only began about 3 weeks ago, I think? What happens next year?

I can tell you right now: Economists, Stock Market Experts and many others whom I have spoken to over the last 2 weeks are predicting a bad fall season.

really bad.

reply to post by Tentickles


I agree the fiscal quarter ends in September. This also coincides with the next G20 meeting to help the economy. Honestly I'm not one to feel helpless but we cant control what is going on.

Many think the worst is behind us but we are in the eye of the storm.

Please tell me your not now just thinking this will happen.... Read Urbanservival.com every day... You'll be ahead of the curve.

reply to post by wixx24


I've been aware for a long time. The raising of interest rates got me going this time. Did you see my Germany Hyperinflation article. This is what I am concerned about.

We could easily see a 20%-25% annual inflation rate causing hyperinflation in just 3 years. Just a thought.

Ah, you beat me to it!

I have kept saying we are in for pre-Naziesque hyperinflation...and here it comes.

reply to post by Amaterasu


I didnt beat you to it we can both watch inflation spiral out of control as currency loses its value. Can you believe all this!! It happened to Germany it will happen to us,

Originally posted by wonderworld
reply to post by Amaterasu

 

I didnt beat you to it we can both watch inflation spiral out of control as currency loses its value. Can you believe all this!! It happened to Germany it will happen to us,

LOL! I meant posting this article. I thought, Hey! I'll post that on ATS. But did a search...and there this thread was.

I can believe it, since there are Nazis involved with controlling us. They saw how well hyperinflation worked to take wealth away from the people and gain control. They're setting us up to do it again.

reply to post by Amaterasu


Yes I know what you meant I was being weird, as usual. You are really going to get me now. check this one out. You will like it, not many understand. We can see a very clear picture when combining these 2 threads. www.abovetopsecret.com...

Ive read a few of yours and agree. You know what we are dealing with.



[edit on 10-6-2009 by wonderworld]

well it's interesting to see others also see hyperinflation as a possibility. The last time I mentioned that word, I was told it wouldn't happen and we would probably see deflation before hyperinflation. I don't know what to believe anymore, but I do know that printing money without any backing and ways of repayment equals a worthless dollar and henceforth hyperinflation that's just my logic, doesn't mean that logic applies to the markets and the so called real world though.

reply to post by worldwatcher


Remember we were also told we werent in a recession and a month later Bernanke said we had been in one since December 2007.

At first I was worried about stagflation, then deflation now inflation. We could easily see a 25% annual inflation and get to HYperinflation in a 3 year period of time.

Raising interest rates, with the printing presses rolling full speed ahead. there isnt many other options.

We have never experienced it but if we make the comparison to Germany in in 1930 it's an identical match.

Scary isnt it?

reply to post by wonderworld


very scary. It's the same thing with the monthly revisions of govt numbers that affect market moves, does anyone actually knows what is really going on? I doubt any of the gurus or pundits have a real clue, right now it all seems to be reactionary without much thought of the later consequences. The next three years will be written about in history for a number reasons, I'm hoping but not betting on "some positive" changes. It has to get worse to get better right?


[edit on 6-10-2009 by worldwatcher]

Oh, don't worry about any of this, if inflation makes buying stuff too expensive, socialism will subsidize your lifestyle. Take automobiles for example. Uncle Sham is now trying to socialize even that too (of course they are, now that they own Government Motors, Inc.). When you open your next pay check and begin to wonder why it is smaller, know where your hard earned income went, when you see your neighbor pull into their driveway (which was also subsidized by YOU, the tax payer) with a brand new Government Motors automobile.

What if inflation has been by design? "Woe is me, I can no longer afford to support myself. Please, Uncle Sham, take over my life for me, I want to be a communist now!" Yeah, sure you do.

Inflation is merely a tool they use to keep you down and poor. They can mess with the value of a dollar quite easily. But imagine if you were paid in some kind of currency that would always retain its given value at the time you earned that dollar? What if you got paid with a piece of paper that said, in exchange for your one hour of labor, you are entitled to one lunch, one gallon of gas, and a loaf of bread? Inflation couldn't touch THAT, because 20 years from now it would have retained its original value. Inflation is a side effect of fiat money, it allowed THEM to ROB from YOU what you worked darn hard for all your life. Fiat money is a mean of CHEATING and the cause of inflation. We need to get off this funny money standard! We need a currency that can't be JACKED with!

reply to post by worldwatcher


Yes be prepared for the end of the second and third fiscal quarters, the last day of June and September. These will not be good numbers. It may be the beginning of a Catastrophic economic collapse.

This is no secret to the global bankers, these numbers are calculated in advance. so see what they are dealing with?

I think we are in the eye of the storm. What happens on the other side is anyones guess. I'm going with a Global currency.

reply to post by Divinorumus


Indeed. If we adjusted the 1964 minimum wage honestly for infflation, our minumum wage would be $17.50 an hour.

But the magic of inflation has undermined the reason we instated a minimum wage to begin with.

Originally posted by wonderworld
reply to post by Amaterasu

 

Yes I know what you meant I was being weird, as usual. You are really going to get me now.

check this one out. You will like it, not many understand. We can see a very clear picture when combining these 2 threads. www.abovetopsecret.com...

Yeah, when you presume a conspiracy, it's amazing what can be explained and predicted.

Ive read a few of yours and agree. You know what we are dealing with.

I surely hope so. It's easier to find solutions when one had the right picture to work with. [smile]