Federal Reserve Chairman Ben Bernanke told Congress Wednesday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing.
Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures.
via Bernanke: Fed May Launch New Round of Stimulus – CNBC.
TAL Commentary: I guess they figure we’re beyond the point of no return, and there’s nothing to do but tear off as much as they can before everything implodes. If the bee colony is doomed, just go ahead and rob all the honey, instead of leaving some to sustain it through the winter.
We’re following the classic inflationary pattern. Because the earlier Stage 1 inflation has caused a recession, the government is facing a revenue crisis, so it inflates the money supply even more. Because at this stage the money supply rises faster than prices, it profits from the “inflation tax.” But hidden inflation has been occurring for some time now; real prices were rising, as calculated by purchasing power, but the money supply was rising faster, so it looked like prices were holding steady or even falling.
But this all depends on the government keeping citizens fooled, and this never lasts forever. Soon, very soon, prices will rise faster than the money supply, and possibly already have begun to do so, which is triggered when people clue into what’s happening and the demand for money declines. People start spending it just to get rid of it. This is Stage 2 inflation. But inflation rides on a gradual scale, without clearcut demarcations; Stage 2 inflation is just the beginning of Stage 3, hyperinflation.
When you spend more than you can ever repay, there’s only one outcome — liquidation. It always happens; it’s just a matter of how and when. Right now the Fed is kicking the can down the road, but you eventually come to the end of the road.
We can liquidate by choice, or we can drown in it. Doing it by choice means taking politically suicidal steps, like cutting spending. Or the politicians can keep spending, borrowing, and inflating, squeezing as much wealth as they can out of the system until it collapses and drowns us, while they stand high and dry.
What do you think they’re going to do?