Is the Obama Administration Dooming Us to HyperInflation?

30th May 2009

Is the Obama Administration Dooming Us to HyperInflation?

posted in economics, history, politics |

According to today’s English WikiPedia entry, “hyperinflation” in economics is:

…inflation that is very high or “out of control”, a condition in which prices increase rapidly as a currency loses its value. Definitions used by the media vary from a cumulative inflation rate over three years approaching 100% to “inflation exceeding 50% a month.” In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.
The definition used by most economists is “an inflationary cycle without any tendency toward equilibrium.” A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply (or drastic debasement of coinage) usually accompanied by a widespread unwillingness to hold the money for more than the time needed to trade it for something tangible to avoid further loss. Hyperinflation is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

I voted for President Obama and do not regret that decision. The Bush administration not only provided poor leadership for our nation in foreign policy and military affairs, but also advanced a destructive agenda of high stakes accountability for our schools which I staunchly oppose. I defy stereotypical categorization as an extreme conservative or a bleeding heart liberal, because on different issues I don’t fit clearly into either box. I was very dissatisfied and upset with the leadership of the Bush team on both domestic and international issues, but I am ALSO unhappy with the economic approach we see the Obama team taking toward our present recession. Are we speeding headlong into an era of hyperinflation due to government spending and unbounded borrowing? I hope not, but I fear that may be the case.

As a student of history, I’ve read scholars who contend the only thing which truly brought the U.S. economy out of the great depression was World War II. The administration of Franklin D. Roosevelt worked to spend the United States out of the depression, but I’m persuaded to think the unemployment rates of the 1930s were only remedied by the industrial full-court-press of the United States in supporting the war effort.

This historical issue is relevant to our current economic and political landscape today, since the Obama Administration seems bent on trying to SPEND our nation out of our financial slump. I don’t think that is the right course forward, or a course which can be effective in the long term. Conservatives have long-criticized Democrats as being “tax and spend” politicians. Where is all the money coming from for our current economic stimulus package spending spree? President Obama is mortgaging the future economic spending potential of MY CHILDREN and yours, borrowing YET MORE against the good name of the United States in the fervent hope that these injections of borrowed capital can jumpstart a sluggish economy. This is a bad plan, and I think as voters we should be speaking out loudly against it.

Our national as well as global economy is very complex, and I am not going to attempt to over-simplify it. A few things seem clear, however, which are NOT going to be effectively addressed by the American Recovery and Reinvestment Act. These include:

1. Americans need to save more money and spend less. Our savings rate is much less compared to many nations (like those of east Asia) and we need a higher savings rate to be economically healthy.
2. Too much debt is bad, for individuals as well as nations. We see evidence of this all around us. From individuals going bankrupt as well as corporations, to nations which are ostensibly drowning in their debt obligations to the International Monetary Fund, examples of excessive debt hazards abound.
3. Printing money is not a viable solution to get out of a recession or depression. Is it true the United States government was the primary buyer of the last two months of treasury bill / bond auctions? How would that be possible? There is a limit to “the good name” of any individual, organization or nation, and the Obama Administration seems to be acting like the United States has an unlimited national debt ceiling. We don’t, and it is foolish to act like we do.

As a nation, WE SHOULD DEMAND that our nation STOP spending more money than we are taking in. WE SHOULD DEMAND that we start paying off our debts NOW, and stop mortgaging the futures of our children. Yes, our former national leaders have declared a never-ending “war on terror” analogous in many ways to the ill-informed announcements of prior chief executives of a never-ending “war on drugs.” The “weed the garden” metaphor from the Nixon administration for drug control is also applicable to crime and terrorism. We’re never going to completely eliminate crime worldwide, or terrorism in all its forms. It’s stupid to “declare a war” on something that is never resolvable entirely by military means. We are NOT fighting Hitler in Europe and Japan in the Pacific today, facing a global war which can have a definable endgame. THIS MEANS WE SHOULD NOT BE SELLING GOVERNMENT BONDS TO FUND OUR CURRENT SPENDING SPREE. This economic strategy is rash, hard or impossible to defend, and will lead our nation (in all liklihood) down a dark path of hyperinflation and even worse economic suffering.

I will readily admit that some of my thinking about these issues today was colored by a conversation with a friend who is an big fan of Rush Limbaugh. I’m not a big fan of Rush, but I am a big fan of anyone who has good ideas and gets me thinking. It doesn’t take a rocket scientist to figure out that individuals, businesses, and governments need to carry LESS rather than MORE debt today. The U.S. National Debt Clock should not just get our attention, it should GALVANIZE us as voters to take action.

Frank Rich gives McClatchy/Knight Ridder a shout out

Sun, 05/31/2009 - 10:40am — lambert

Better still, Rich makes the explicit comparison between that coverage, and the Times's own disinformation campaign in favor of the Iraq invasion.

Rich writes:

At the McClatchy newspapers’ Washington bureau, the reporters Jonathan S. Landay and Warren P. Strobel detailed 10 whoppers. With selective quotations, Cheney falsified the views of the director of national intelligence, Adm. Dennis Blair, on the supposed intelligence value of waterboarding. Equally bogus was Cheney’s boast that his administration had “moved decisively against the terrorists in their hideouts and their sanctuaries, and committed to using every asset to take down their networks.” In truth, the Bush administration had lost Osama bin Laden and his deputy, Ayman al-Zawahri, not least because it started diverting huge assets to Iraq before accomplishing the mission of vanquishing Al Qaeda and the Taliban in Afghanistan. That decision makes us less safe to this very minute.

You can find a link to the complete Landay-Strobel accounting of Cheney’s errors in the online version of this column. The failure of much of the press to match their effort has a troubling historical antecedent. These are the same two journalists who, reporting for what was then Knight Ridder, uncovered much of the deceit in the Bush-Cheney case for the Iraq war in the crucial weeks before Congress gave the invasion the green light.

On Sept. 6, 2002, Landay and Strobel reported that there was no known new intelligence indicating that “the Iraqis have made significant advances in their nuclear, biological or chemical weapons programs.” It was two days later that The Times ran its now notorious front-page account of Saddam Hussein’s “quest for thousands of high-strength aluminum tubes.” In the months that followed, as the Bush White House kept beating the drum for Saddam’s imminent mushroom clouds to little challenge from most news organizations, Landay and Strobel reported on the “lack of hard evidence” of Iraqi weapons and the infighting among intelligence agencies. Their scoops were largely ignored by the big papers and networks as America hurtled toward fiasco.

For me, at least, there is no forgiving or forgetting on this one. The contrast between the coverage and self-criticism the Times put in place after the relatively minor Jason Blair fiasco, and its complete inability to hold itself responsible for the role that it played, institutionally and personally, in getting us into Iraq couldn't be more clear.

Trip report from single payer rally in Augusta, ME

• single payer

Sat, 05/30/2009 - 6:43pm — lambert

I went to one of today's single payer rallies, up here in Zone 5b,

I'm afraid I don't have a lineup of the speakers, but I'll try to get one; maybe we can do some live blogging with them. So, just a few quick points:

1. It was sunny! After two weeks of cold and rain, the sun was amazing and wonderful (and burn-inducing, since I owe my pasty white complexion to being at the keyboard all day and all night).

2. Jerry Call of South Thomaston, ME, one of the Baucus 8, spoke.

3. The Molly Ivins of Maine, Pat LaMarche, was the MC.

LaMarche: "Citizens don't need leaders. They need representatives!" Amen.

4. The average individual deductible is $6000 (Blue Cross, so there's an angle. But.) The average group deductible is $1400. So, if you're self-employed, you could be looking at getting insurance for the privilege of paying $6000 before they try to deny you care and throw you out of the plan if you get it.

5. The Raging Grannies are great! I had a nice talk with one and we agreed we were going back to our gardens.

6. And three very interesting data points:

Both (a) the Democratic county apparatus and (b) the Union locals are very strongly in favor of single payer. In both cases, it's the national leadership that's not listening and holding them back. Seems that lack of accountability and transparency are happening across the board, wherever you look. And people are looking. Also, (c) the Raging Grannies got their own OFA house party to come out for single payer, and the "young man" running it said that a lot of other house parties were doing the same. As one of the Grannies said: "If it's only an act, learn your lines and get on the stage!" I agree.

7. A rousing speech at the end by an old-time leftist (or so it seemed) against the oligarchy. Thing is, you've got former IMF chief economist Simon Johnson saying the country is an oligarchy too, so where's the "left" in that statement?

8. Several hundred people (a lot in a small state, some coming long distances). About 30 conservatives somewhere in a free speech zone somewhere; I suppose I should have gone to visit them, but I couldn't be bothered.

9. Lots and lots and lots of doctors speaking, some of them in positions of authority in the hospitals (big institutions in the State). Meaning that they were taking risks to speak. Impressive.

All in all, I found it very hopeful. No matter what the FKD manage to foist on us, if it's not single payer it's a guaranteed FAIL, and people won't stop working until success is achieved. The rally wasn't so much energized or rock stadium-like, but very focused, very good on the talking points, and in no mind to surrender to the injustice.

Oh, no Obama-realismbashing (except from the leftie in the rousing speech). But absolutely zero expectations of him, too, except for a half-hearted "Help him do the right thing" plea from one speaker. We are definitely in "make him do it" territory, up here.

to let building insurance

Support HR 676 Single Payer Medicare for All NOW

maryellen.marino 1 day ago

This health program will save $380 billion at least over the cost of the plans that include private insurance. Currently 31 cents from every health care dollar goes for profits and paperwork of the insurance companies. Yet we Americans pay twice what citizens of every other industrialized country pay, and still don't cover 47 million and we have people losing their jobs and health care every day.

Enrolling everyone automatically in a national plan with administrative costs of 3% not 31% will create and expand the risk pool to the entire US population. This will enable negotiating prescription drugs and medical supplies, eliminating the need for administrative costs,profits and billions spent on marketing.

Employers will be free of a huge cost that has made global competition a challenge and a huge expense for small employers. Current plans do not cover many essential health care needs like prescriptions, vision, hearing, dental, mental health, drug rehab, podiatry, chiropractic, palliative care and long term care. HR 676 will cover all of these equally for everyone. The US will improve from 37th in the world!