The reason why GDP is shown growing although no one benefits is pretty clear.

The private sector is shrinking and is only being augmented by government spending and commodity related goods are offsetting deflationary forces everywhere else.

If the Federal Reserve is honest in reversing QE in 2010 then I agree we should not see major inflation. If, however, it does not and the government and Federal Reserve decides to print more money, engage in more QE, and monetize then we will see inflation.

So given this is a policy decision only one can not call inflation or deflation unless you know what they will actually do. Given they lie, issue inconsistent statement, are wishy washy, and backtrack, listening to what they say doesn’t work for more than a week usually if that. Perhaps waiting to see what gets leaked to Goldman Sacs might work if you are a conspiracy theorist, although they have a heck of a prescient track record as of late. Otherwise we must sit and wait to see which trigger the government will pull next year.

If I had to guess it will be some QE draining, threats or rates rises, and then back to the monetization, stimulus till. In general I don’t trust anyone with free access to unlimited money will ever lay off it for long. Neither Congress, the President, or the Federal Reserve can be trusted. If things get tough they will always run to the public ATM machine no matter how harmful it is to their citizens. Funny how that is. It brings up an interesting question. If this is true, can we really say that they really have our interests in mind?

- Moon Kil Woong

Related Posts:

• Government needs to fill up the gap for consumer spending to delay the collapse
• No fundamental reason for a recovery yet.
• The great depression and this crisis have to be viewed from the perspective of the run up to the crisis.
• Most people DO NOT understand stimulus money:
• “Deflation or inflation, what is it going to be?”

Leave a comment