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View Diary: Where is the Hyper-Inflation (22 comments)

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  •  this is what happens to when economics becomes (2+ / 0-)
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    ScienceMom, Youffraita

    a religion.  Facts don't matter, they BELIEVE that hyperinflation will occur from stimulus and they BELIEVE that tax cuts for the wealthy are the best way to stimulate an economy and they BELIEVE that if it weren't for that meddlesome Govt the perfectly rational "market" will perfectly be perfect...... and there is nothing that can happen that will shake their foundational beliefs......exactly like a religion.

    "The Earth is my country and Science my religion" Christiaan Huygens

    by Auburn Parks on Mon Apr 29, 2013 at 05:29:55 AM PDT

    [ Parent ]

    •  Back in the 80's the economy had supply side (0+ / 0-)

      problems and supply side easing helped address them.  Ever since then, it has been a form of voodoo religion and the entire economic emphasis has been on the supply side.  Of course it doesn't hurt matters when govco is controlled by plutocrats who benefit from supply side easing.  

      For the last several years, the economy has been facing a demand side problem.  There is plenty of cheap capital (money, credit, equity) available for investment, but there is no demand for it.  The consumer doesn't want or need any more debt and as long as people aren't buying goods the suppliers have no need to expand, which means no jobs.

      Jobs are a feedback mechanism that balances the forces of supply and demand and there is currently no demand.  As govco continues to release more fiat currency into a system that is already awash with it via the bond buying, it will do nothing buy go into the stock market and help inflate the bubble.  

      Many other countries are worse off and have been attempting to inflate their way out of the problem which is causing a relative strengthening of the US dollar, which is why (internationally traded) commodities like gasoline, steel, and copper, have been declining in price.  Don't be fooled by this, as it is a sign that things are getting worse, not better.

      •  First of all, QE adds zero NEW net fincancial (0+ / 0-)

        assets to the economy, its an asset swap cash for bonds.  Since the private sector bond holders previously had the cash with which to buy the bonds originally, there is nothing new added to the system.  This is part of the reason why QE has not been as effective as people thought it would be (along with the fact that people don't want to take on more debt as the crisis was caused by too much private sector debt).  

        Secondly, this is precisely why fiscal policy is the only way to get the economy back to full capacity given our current economic conditions.  We need alot of new money (re: much bigger deficits) in the hands of the middle class so that they can buy enough goods and services to employ everyone.  Suspending FICA would add $1 trillion more dollars to the economy, of course a few hundred billion each year in infrastructure each year until the unemployment rate gets below 5% wouldn't help either.....not to mention how much it would help our long term productivity improvement.

        "The Earth is my country and Science my religion" Christiaan Huygens

        by Auburn Parks on Mon Apr 29, 2013 at 05:05:11 PM PDT

        [ Parent ]

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