posted on Aug, 17 2009 @ 06:19 PM
I'm not quite sure what to make of your comments in regards to Americans, in one post you hate, in one post your reasonable. In any case, I won't
I've looked it up on google and google search on this website and I couldn't find anything on the 27th, if you could direct me to it I would
I'll present my arguement: hyperinflation can start from several ways. The one that would apply to this situation is as follows: The fed starts
printing money, lots of money. Anyone who knows basic economics knows that when supply increases without an equivalent increase in demand price, or
value, of that thing drops. In this case its the US dollar.
Now this affects the consumer. When a working person find that tommarrow their paycheck will be worth less than today, that person naturally spends it
today. This leads to an increase in demand, and without an increase in supply this leads to prices increasing. Now the value of the dollar doesn't
increase because people generally buy goods, not US Treasuries.
Now the value is shrinking in value and goods are increasing in prices. This leads to more people spending their money now rather than leader, which
increases prices, which leads to more people spending their money now and so forth. The end result is inflation, and in extreme scenerios
hyperinflation. Lets bear in mind the Fed has engaged in a MASSIVE amount of dollar printing. In economics this is called an increase in the monetary
Now here is why that won't happen: we are not in a normal scenerio. As you all know demand right now for goods, or basically how much people spend,
is shrinking not increasing. We are in what is called a liquidity trap (liquidity in economics basically means the amount of dollars going around)
basically buisnesses layoff people, those people spend less money, buisnesses earn less, they layoff more people, and so forth.
In terms of those big banks and hedgefunds we have read about, they have tons of assets that are worth nothing. What basically happened was tons of
people bought the subprime mortages, and when the housing bubble burst NO ONE wanted to buy those mortgages, meaning they were worthless. Now they
have lots of assets worth nothing and no money to invest in other things. Then these firms go into bankruptcy and go under, which is what happened to
This leads to the deflationary spiral. Its what fueled the Great Depression and what fueled our current recession. Though what we have seen so far is
disinflation, when the inflation rate goes down without going negative, since the federal reserve and government stepped in before buisnesses made the
psychological leap from not increasing prices to decreasing them.
Now the Fed didn't just print money for the sake of printing money. They printed it so they could give loans to the big financial buisnesses like AIG
and smaller, less well known banks. This gave them money to start lending, since lending is the life blood of the economy. Also the government, along
with some investors, bought the bad investments from the financial industry, giving the financial industry more liquidity and taking bad assets off
This, however, only fixed the lending part of the problem. People were still being laid off and the deflationary cycle was still in effect. For this
Obama passed the stimulus, which basically hired people, which gives them more money to spend, which makes buisnesses more profitable and so on. The
stimulus is designed to have a big effect starting in September and on. One important fact is that the Fed prints money by selling treasury bills, or
IOUs, and China largely, though no soley, buys them which is why they are so important.