By Dick Morris
Mar 6, 2009
In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled. Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-2 and perhaps since the Great Depression.
So where is the money? If it isn't being spent, where is it? It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway -- not the one in the dealer's lot. Businesspeople are buying T bills, investing the money and saving it. They aren't spending, either.
But one day this recession -- despite Obama's best efforts -- will end, and things will begin to look up again. Then, we can expect all of this money to come out of its parking space and get back on the highway of commerce. All at once. The inevitable result will be double-digit hyperinflation.
Since the spending and borrowing splurge is not confined to Washington, but is being mimicked all over the world, the inflation will not strike just one country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II). It will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics texts. There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.
The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obama's excessive spending and trillion dollar-plus deficits. This spending, of questionable utility in overcoming the current recession-depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.
In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled. Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-2 and perhaps since the Great Depression.So where is the money? If it isn't being spent, where is it? It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway -- not the one in the dealer's lot. Businesspeople are buying T bills, investing the money and saving it. They aren't spending, either.
But one day this recession -- despite Obama's best efforts -- will end, and things will begin to look up again. Then, we can expect all of this money to come out of its parking space and get back on the highway of commerce. All at once. The inevitable result will be double-digit hyperinflation.
Since the spending and borrowing splurge is not confined to Washington, but is being mimicked all over the world, the inflation will not strike just one country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II). It will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics texts. There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.
The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obama's excessive spending and trillion dollar-plus deficits. This spending, of questionable utility in overcoming the current recession-depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.
