Comments on: The inflation time bomb http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/ Option ARMageddon Tue, 14 Oct 2014 13:06:34 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Joe Sheperd http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3442 Mon, 16 Nov 2009 21:14:22 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3442 When speaking of unfunded liabilities, why is there no mention of defense spending? Isn’t it better to care for our own people instead of paying for global empire?

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By: Brian http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3422 Mon, 16 Nov 2009 11:22:16 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3422 Arther, What have you been smoking? What kool-aid is in your refrigerator. Get a clue!

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By: CHRIS http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3372 Fri, 13 Nov 2009 19:35:49 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3372 And if it fails you are going to see hyper-inflation occur that is prophesized in the bible. Revelation 6: 6Then I heard what sounded like a voice among the four living creatures, saying, “A quart[a] of wheat for a day’s wages,[b] and three quarts of barley for a day’s wages,[c] and do not damage the oil and the wine!”
Wow, a quart of wheat for a day’s wages? That’s like a loaf of bread for $150? Who can afford that? You will see the super rich become middle class and the middle class become poor. Jesus is coming soon take heed to His warnings!

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By: Dan Hess http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3332 Fri, 13 Nov 2009 05:44:47 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3332 How the Fed is inflating:

“Isn’t the Fed Monetizing Housing Debt? ”
Tim Iocono

http://seekingalpha.com/article/173073-i sn-t-the-fed-monetizing-housing-debt?sou rce=article_sb_picks

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By: mICHAEL R STEINBERG http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3306 Thu, 12 Nov 2009 18:45:31 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3306 THE FED WILL WITHDRAW THE INCREASED LIQUIDITY ONCE THE ECONOMY SHOWS SIGNS OF IMPROVEMENT. THIS WILL PREVENT HYPER-INFLATION.

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By: Peripeton http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3299 Thu, 12 Nov 2009 16:37:18 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3299 Dan Hess says:
“If I were them, I would much prefer to buy American physical goods rather than bonds. They (China) are comparatively young and poor. What are they waiting for?”

Well, China is right now spending like there is no tomorrow in buying or leasing land in Africa mainly but also in S.A. (mainly for food production), buying rights in mines, oil fields and ports and also buying property all over the world. Also, CHina sends millions of her citizens abroad subsidizing their immigration process, their businesses and them importing from China in order to sell to their new home countries.

China is taking over and we’re watching

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By: Dan Hess http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3245 Wed, 11 Nov 2009 19:27:05 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3245 Okay, Pete, here’s more, now it’s too long!

The fed keeps telling us (again today) they plan to hold rates down for a considerable period and they can, by QE.

This extracts capital in the form of inflation (or foregone deflation) from our bondholders worldwide, ranging our own retirees and 401K holders to foreign sovereign holders, in terms of likelier inflation.

The result is an engineered dollar decline. It has already happened — all summer and fall, and risk assets have revived!

The global rebalancing solution needed would be for Asia and especially China (and Japan too) to quit their dollar pegs now and take the adjustment of rebalancing.

The longer they peg the more they hurt themselves. We can do this QE thing all day as long as they are buying our bonds (to maintain their pegs) and thereby sanitizing the inflation risk by getting the dollars off of our shores. Funny thing is, with our QE fun, all their bonds won’t be worth as much as they think.

As long as they keep buying our bonds to maintain wrong pegs rather than spending the dollars they earn on stuff we sell, this weird situation will continue. If I were them, I would much prefer to buy American physical goods rather than bonds. They (China) are comparatively young and poor. What are they waiting for? What cruel dictatorial oppression by China’s leaders, stopping their currency from appreciating and keeping the people poor and unable to afford things! The people should ask, if they produce all the goods for the world, why aren’t they rich yet?

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By: Pete Cann http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3236 Wed, 11 Nov 2009 17:31:01 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3236 Dan Hess, that’s interesting, but when you say quantitative easing should make our creditors nervous, isn’t it because the dollar is worth less, and isn’t that pretty much what inflation means? I guess we never know what will happen when when we increase the money supply, but QE seems to be the Fed printing money and giving to to the Treasury to spend, thus putting it in circulation. I don’t know much about this stuff. Yours is the rare post that should have been longer!

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By: Dan Hess http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3234 Wed, 11 Nov 2009 17:06:30 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3234 Rolfe —

You and sidefx are both right. But the wildcard card is quantitative easing. At rollover time, the Fed shows up with a bunch of new money (already 1.0 trillion in 2009) and holds interest rates much lower than they would otherwise be.

If interest rates on new borrowing leap, this will threat to throw the economy back into the pit at a time of double digit unemployment. The urge for a new round of Q.E. will be strong.

Assuming the QE is not ultimately mopped up (and I can’t see how it will be) each round of QE reduces the national debt by the amount of the easing.

QE should make our creditors nervous indeed.

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By: Cheshire http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3231 Wed, 11 Nov 2009 16:48:13 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3231 To fix this problem you must reduce the total cost of medical care. Step 1, provide health insurance to everyone. (a)The result will decrease the cost of the hospital bill, because it is no longer inflated to cover for the default risk among patients.(b) The result of lowered medical bills is lowered insurance cost because cheaper care is cheaper to insure.(c)If care is cheaper and access is universal, then people will go to the doctor instead of waiting and going to the emergency room as a problem gets worse.(d)Emergency care is more costly than primary care.(e)Reducing the total cost again, reducing insurance risk again, allowing the companies realize profit without bankrupting America. Ta da

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By: Cassandra http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3230 Wed, 11 Nov 2009 16:46:09 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3230 Typical wealthy view of how the fix the US debt problem:

(1) ignore the $12 Trillion in current public debt (this is the part of the total US debt directly attributable to the wealthy from their recent excesses (like tax cuts for themselves, the Iraq war, pork barrel spending on favorite projects, “outsourcing jobs” for cheap labor, etc.), and

(2) instead “put Medicare and Social Security on a sustainable path, cutting benefits or raising taxes dramatically” (they don’t mean raising taxes on themselves, of course, just the middle-class).

They want to pass the entire burden of fixing this economy onto the middle-class when, in reality, it is the wealthy who are the ones who created unfunded programs like Medicare and Medicaid, as well as looted the Social Security “trust fund,” which never really existed at all.

They are, in effect, blaming the poor and middle class for their greed and duplicity.

It is the ultimate rip-off by the US wealthy running the government. They created the illusion decades ago that they were actually doing something beneficial for the people (remember Johnson” “Great Society”?), instead of just lining their own pockets, but the American people should have looked this “gift horse” in the mouth more closely to see what we were getting from them. Remember, the old saying, “if it looks too good to be true, …”? Now, it looks like the whole thing was really nothing more than a massive Ponzy scheme by the wealthy.

Unfortunately, all Ponzi schemes have to come to an end eventually and we are now faced with the reality that we really don’t have any “safety net” at all. It was nothing but “smoke and mirrors” all along.

Along with the 3 solutions outlined in the article, I could add a 4th, which I don’t believe the wealthy would like very much.

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By: dahc http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3229 Wed, 11 Nov 2009 16:30:04 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3229 Hello? Anyone home? Inflation has already began despite all the pretty graph and pie charts. Just ask the common folk.

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By: Pete Cann http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3228 Wed, 11 Nov 2009 16:24:50 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3228 I think it’s likely to be elements of (1), (2) and (3), with a lot of jawboning, hand-wringing, speechifying and excitement. Somebody (I think on Reuters) said we can’t inflate (without defaulting) because most of the debt is short term, and people won’t roll it over if they expect inflation.

Thought for the day: What if the Third Reich had had the Bomb, and won WWII?

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By: Rolfe Winkler http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3227 Wed, 11 Nov 2009 15:58:38 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3227 Sideefx…..one problem: Debt has to be rolled over. Try to inflate away the existing stock of debt and interest rates on new borrowing will leap. I can think of no better way to hasten the day of default…

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By: tired http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3226 Wed, 11 Nov 2009 15:52:10 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3226 The Woodrow Wilson quote would make a lot more sense if Woodrow Wilson wasn’t the man who initiated our current central banking system. In fact, some might argue that he personifies our current governmental control issue.

Good article by the author. I respect those who criticize the author’s analysis of long term unfunded liabilities number versus one year of tax receipts, but feel that viewpoint is somewhat irrelevant. Extrapolate the one year tax receipts to whatever time frame you want and match it up against our liabilities and there will be a short fall. So, the authors theme of unfunded liabilities holds true.

We spend too much and can’t sustain it. We need MAJOR modifications in what we know as government and their spending. Plain and simple. If you make 100k per year and spend 110k per year, it’ll catch up with you sooner or later. It’s no different here. We spend too much. We have too many entitlement programs. We discourage innovation. And we tax too much. Corporate giants are in bed with politicians and vice versa. It’s the way of the world. It’s always been that way and it’s no different now. Eventually, the society will collapse (at least to some degree) because it’s inevitable. It’s happened since the beginning of time and there’s nothing to indicate that things are different now. Go look up why the Roman Empire failed. Remarkably similar to our current situation…politically and fiscally (as if the two can be separated).

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By: sideefx http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3225 Wed, 11 Nov 2009 15:45:25 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3225 Many of us have been saying this for over a year now…..It was very easy to spot if you understand economics at all.

By inflating the currency, the debt gets cut down in size. If we use an example of 100% inflation, the debt will be cut by a coresponding 50% making it much more managable.

Remember the slow down last Christmas season? Well wait until you witness the slow down this year. With U6 at 20% conservatively we are going to be in for it!

Saving our income is good, (for the people) but the nations money supply relies on debt and so if the public starts to pay back their loans, the money supply will start shrinking. With the “Jobless recovery” and a “shrinking” money supply that equals stagflation, even worse than inflation.

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By: LestWeForget http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3221 Wed, 11 Nov 2009 15:06:00 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3221 Revolution is coming…

“(Our) great industrial nation is controlled by it’s system of credit, our system of credit is privately concentrated, the growth of the nation, therefore, and all our activities are in the hands of a few men…. who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom.”

“We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world – not government by free opinion, no longer a government…. by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”

Woodrow Wilson

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By: Peter Melzer http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3218 Wed, 11 Nov 2009 14:55:06 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3218 Scenario #3 would be great. But for that to find acceptance the collective mindset has got shift enormously. Where I live, state governments go through rounds and rounds of layoffs and cut fundamental services because of tax income shortfalls. On the roads that are spruced up by stimulus money, brand new extended cab pick up trucks are all the rage. Nobody seems to accept that life has fundamentally changed.

In short, Scenario #2 is more likely to unfold and may result in great hardship. Remember the Weimar Republic! It is an experience no German would like to repeat.

Read more and see examples here:
http://brainmindinst.blogspot.com/2008/1 2/reichsmark-fiscus-exuberance.html

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By: Michael http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3217 Wed, 11 Nov 2009 14:51:30 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3217 they are all future predictions..

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By: Gregg http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3216 Wed, 11 Nov 2009 14:47:00 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3216 I can agree that there are serious problems with unfunded obligations, but these analyses almost NEVER address the other major expenditure after social welfare — that is the huge costs maintaining an empire.

The US has 5% of the world’s population and spends almost 50% of the world’s military budget. In addition to the actual year-to-year appropriation, there are huge legacy costs and sunken costs. Also there are huge opportunity costs — just look at all the intellectual resources used to build an ever-more high tech military instead of solving problems of the environment, infrastructure and food production.

I would suggest if we cut DoD and all empire-associated expenditures to 1% of GDP (like the rest of the world) many of the issues related to deficits and adequately funding social welfare would be much easier to solve.

I am not optimistic, however. The politicians are heading towards the cliff like Thelma & Louise, with the population as ignorant passengers.

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By: Mike http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3215 Wed, 11 Nov 2009 14:33:25 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3215 I have no idea why Dan views US demographics as “healthy.”

The population is aging, and European-Americans are destined to become a minority by 2042 at the latest. The latter is something most people find difficult to bring up — unless, of course, they’re celebrating it.

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By: Rolfe Winkler http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3214 Wed, 11 Nov 2009 14:32:31 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3214 A few of the comments suggest it’s unfair to compare all future liabilities to present tax receipts. Here’s my thought, and I’d be curious to get reader comments: The $63 trillion figure works out to nearly $600k per household. That’s not a level of debt that households can feasibly pay off, no matter how long the time horizon.

Inflate it away? Not possible. Higher inflation means higher medical costs, which will increase the unfunded liability.

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By: Kramer http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3213 Wed, 11 Nov 2009 14:23:45 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3213 >But if history is any guide, the bond market is wrong.
I’m genuinely curious, but has there ever been a major debt crisis in a developed market that was not foreseen by the bond market? I don’t know of one.
The silly comparison of ALL future unfunded obligations with a single year of tax receipts doesn’t help your argument here either…

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By: Hal (GT) http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3211 Wed, 11 Nov 2009 14:14:50 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3211 None of those are pleasant scenarios. Is there a number 4? Throw all the bums out and start with fiscal responsibility/smaller government/common sense?

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By: Arpad Szasz http://blogs.reuters.com/rolfe-winkler/2009/11/10/the-inflation-time-bomb/comment-page-1/#comment-3210 Wed, 11 Nov 2009 14:07:06 +0000 http://blogs.reuters.com/rolfe-winkler/?p=4275#comment-3210 At the same time “Geithner seeks to reassure on dollar”, as I read at FT.com. Reassuring the dollar assumes it is strong, and they are keeping it strong. This is the rethoric since 2000, and in the meantime the dollar has gone down almost 50% against the Euro.

It is very clear that the past already 10 years was spent with destruction of the strong US economy in favor of profits of large multinational corporations. The process eventually started during the early Clinton years by off shoring production and services. The same trend continues. The rest is empty talk, smoke and fire.

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