The Coming Runaway Inflation
Date: March 5th, 2010
Category: Philosophy of Life
By Robert Ringer
I had a long visit a few days ago with a Republican Congressman, who assured me that even if the Republicans win back both the House and Senate in 2010, government spending will continue unabated. He agreed with me that, with few exceptions, Republicans are as lacking in courage as Democrats.
But he also made one other point that I thought was significant. While BHO and a handful of far-left Congresspersons are driven by ideology and really do want to see the U.S. transformed into a socialist (if not communist) state (apologies to Bill O’Reilly, who “doesn’t believe for a second that Barack Obama doesn’t have the best of intentions for his country”), most are simply ignorant.
That’s right, even though they are involved in government and economic issues every day, they simply do not have an in-depth understanding of what they are doing. It’s so easy to keep saying yes … Yes … YES to spending programs without worrying about how the bill will ultimately be paid.
What does this all mean? That the runaway inflation scenario I’ve been predicting for more than thirty years is now a certainty. The game is over. Our unfunded liabilities and debt now total twice the amount of wealth of all individuals and corporations in the U.S. And BHO and his socialist allies in Congress are just getting started!
The days of being able to borrow limitless sums of money will soon be behind us. And even the most ardent socialist knows that there’s a limit to how much you can raise taxes. If you raise taxes too much, the economy ultimately shuts down completely.
Thus, printing worthless dollars is the only “solution.” The practice of indiscriminately increasing the supply of money gives politicians the ability to have their cake and eat it too. They know that the surest way to be kicked out of office is to vote for cutting back on sacred-cow government handouts like Social Security, Medicare, and unemployment benefits.
To the rescue: Inflation! Inflation provides politicians with a way out. As most everyone serious enough to be reading this article knows, inflation is a hidden tax. By printing up enough “money” to cover the remainder of each year’s deficit, politicians get off the hook, because they don’t have to vote for tax increases.
Once rampant inflation hits the U.S., people will see prices rising rapidly as a result of fiat-money creation, but most will have no understanding as to the cause. As a result, they will be all too willing to take up the government’s battle cry to “fight inflation.”
And how do you fight inflation? By pointing a guilty finger at all the wrong parties, of course. Which brings about proletariat reactions like, “Gol’ darn it, Maude. Them thar big corporate guys is stealin’ us blind. That O’Reilly feller’s been right all along about them oil dudes makin’ obscene profits.”
When Congress accuses others of causing inflation, it’s tantamount to a bank robber shouting to a bunch of depositors, “The culprits went thataway! Let’s catch ‘em and string ‘em up!”
The truth of the matter is that for many years we have been experiencing what I would call an “invisible depression,” a depression camouflaged by easy credit. But it’s becoming harder and harder to hide the truth. As I said at the outset of this article, even if Republicans take back both houses of Congress in 2010, out-of-control spending is almost certain to continue.
Few if any politicians have the courage to allow market forces to prevail, because they know it would cause a deflationary depression much worse than that of the 1930s. Prices would plummet, and the living standards of most people would dramatically decrease. Which leaves an inflationary depression as the only option.
The problem is that in a runaway inflation scenario, commercial transactions become almost impossible to engage in, because people will not accept paper money in exchange for their goods and services. And because very few people understand the real cause of their personal financial problems, the move toward a dictatorship begins to look appealing to them. (Adolf Hitler’s rise to power is a charming little example of this.)
Someday, I might be tempted to write about some really depressing realities of our suicidal nation-state. Today, however, I’m on a high, so I think I’ll just leave it at that and end on a positive note: Isn’t it great that you and I are alive? Hmmm … actually, let me think about that one. I don’t want to be accused of jumping to conclusions.
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March 5th, 2010 at 10:59 am
I woke up this moring thinking about the two primary characteristics of our (and just about any) government, and why governments, throughout history, even “empires,” have failed, long-term…
1. Government (expediently, to buy more time)devalues and ultimatelydestroys its own currency, the lifeblood of every society.
2. Failed governmental economic policies, such as inflation, exhorbitant debt, and rabid dog spending prompt government to seek the “quck fix” of savaging the estate net worth and freedoms (see: victimless criminalization statutes and foreign investment proscriptions) of its own citizenry via the all too often, trumped-up expropriation of corportate and individual property, net worth, and basic freedoms of choice and speech.
When currency value, basic freedoms, and assets are usurped and destroyed, the pertpetrating system of government is foreordained to collapse. The Roman Empire may be the best example of policy excesses and internal corruption leading to inevitable and dramatic downfall, in world history. Our nation, today, shows all the signs of going the same way, especially when you factor rampant corruption and influence-peddling, not just at the top, but throughout the system, into the mix. Short-term patching always has, and always will undermine long-term planning.
March 5th, 2010 at 11:57 am
I agree. Inflation and/or stagflation is a given at this point. A future move by the government to devalue the dollar is also highly likely. At best, dollar devaluation will only postpone hyperinflation.
If John Maynard Keynes was alive and well, he would be horrified at what the government has done with the money supply. Dr. Keynes developed his theory of money as a means to offer limited, stop-gap spending by the federal government to ameliorate suffering and preserve capitalism.
It is neither a mistake nor a misunderstanding; It is a crime, the way in which those who currently control the money supply are acting. Criminal acts are being committed that jeopardize the future of America. Allen Greenspan(aka the Prince Of Darkness) turned himself away and betrayed everything that he ever learned from Ayn Rand. As I watched the Prince Of Darkness destroy the dollar as a medium of exchange, I knew that in the end things would turn out badly. Greenspan’s young apprentice, Ben Shalom Bernanke, will finish what the Prince Of Darkness started, and drive us all further down “The Road To Serfdom.”
March 5th, 2010 at 12:03 pm
So many Americans are just so clueless, out to lunch, and completely disinterested at making an attempt in understanding the horrific and frightening national financial situation. Their view is myopic and as long as they’re entertained by Hollywood gossip, sporting events, black hole television programming, and the like, the politicians will lead and enough fools will follow……taking us all right over the cliff.
Like a few of the people who have recognized the path we’ve been on as a nation and the accruing balloon note that will have to be paid, one way or another, the quality of life for the average American is going to dramatically decline in the not too distant future.
The irony will be that this will come as a complete and total shock to millions of Americans who refused, or didn’t have enough intelligence, to look at the clear political and financial reality that was clearly discernible and right in front of their eyes. As long as the gravy train was rolling in the present and handing out loot, they were too complacent to consider the future.
March 5th, 2010 at 4:00 pm
I’m not so sure about runaway inflation, because I think the Fed will be able to keep inflation in check. Besides, the lousy economy has kept inventories at record highs, and the high unemployment rate will keep wages depressed for at least a decade.
I’ve followed the “conservatives” for a while now, and, from what I’ve learned, they’ll do nothing once they get into office. The “small government” mantra they repeat over and over again is just a line to get you to vote for them. What did they do in 1994? Nothing. If they get elected in November, what will they do? Nothing. The government isn’t getting smaller because the special interests that put these people in office don’t want them cutting certain government programs. Besides, even if we were able to get a “small government”- you still have two giant entitlement programs- Social Security and Medicare. The money required to keep these programs running, and the interest payments on the money we already borrowed will keep our government “big” for years to come. These two entitlement programs will only expand over time, and will really start to take larger and larger chunks of the Federal government’s budget. You’ll never hear a single politician or commentator speak about this, however. All you’ll get is thinly-veiled race-baiting and “class warfare”. Stay tuned, folks!
March 6th, 2010 at 12:22 am
“The future is disorder. a door like this has cracked open five or six times since we got up onto our hind legs. It is the best possible time to be alive, when almost everything you thought you knew is wrong.” -Tom Stoppard, Arcadia
“Of all 36 ways to get out of trouble, the best way is-leave.” -Chinese Proverb
Bye Bye Big Brother- Gone PT- Grandpa
March 6th, 2010 at 10:49 am
Kleptocracy, alternatively cleptocracy or kleptarchy, from Greek kleptes (thieves) and kratos (rule), is a term applied to a government that takes advantage of governmental corruption to extend the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. The term means “rule by thieves”. Not an “official” form of government (such as democracy, republic, monarchy, theocracy) the term is a pejorative for governments perceived to have a particularly severe and systemic problem with the selfish misappropriation of public funds by those in power.
http://en.wikipedia.org/wiki/Kleptocracy
March 6th, 2010 at 11:42 pm
Kleptocracy: A government characterized by rampant thievery and corruption.(i.e. The U.S. Government)
Yes, I agree with this excellent description. Deusimplicitus you hit the nail right on the head.
March 8th, 2010 at 9:23 am
Actually conducting business in a highly inflationary economy is not as difficult as it might seem.
What it takes is an adaptation which has happened in many countries that have experienced this. Chile, is one example that I’m familiar with.
When inflation was rampant in Chile business contracts which spread over a period of time were written up in a new “currency” which they called UF (short for Unidades de Fomento — or Development Units.) These UF are readjusted on a daily basis, according to a formula which is somewhat similar to the Consumer Price Index.
So if you take out a loan, you express the amount you borrow and your monthly payments in UF and, as long as inflation continues, each payment increases according to the published figures.
You can buy insurance expressed in UF and many other transactions such as property, pension payments, etc. are also conducted using this alternate currency.
I’d be quite surprised if the US does enter into a period of high inflation to not see something similar to this come into play.
March 9th, 2010 at 12:21 pm
[...] The three republican candidates were all for cutting back government spending, which I liked. Their problem was that they wanted to increase our military power throughout the world. At least that is what sticks in my mind.I am writing about this because I liked what Robert Ringer had to say in his newsletter last Friday, which I just read today. You can read what he had to say at http://blog.robertringer.com/2010/03/05/the-coming-runaway-inflation/ [...]
March 12th, 2010 at 7:32 pm
“Prices would plummet, and the living standards of most people would dramatically decrease.”
If prices had actually been allowed to plummet after the crash of 29 without any government intereference, the economic adjustment would have been much quicker. Without all the controls, subsidies, new taxes and other interference, employment would have been much higher. People would have been earning lower wages, but also paying out less for goods and services. However, the government intereference that leads to these massive downturns is generally followed by more of the same, adding injury to injury.