USA Today: Rising national debt raises prospects of eventual inflation

Posted by Kendall Harmon

Inflation is as dead as the Wicked Witch of the West in a waterfall. The consumer price index has actually fallen 1.3% in the past 12 months. So why is everyone so worried about soaring prices?

In a word: debt. The government owes the world $11.4 trillion — $37,000 for every person in the U.S. In the next fiscal year, the government will add $1.8 trillion to the deficit.

The government could simply print more dollars to pay off our debts with cheap currency — a tempting but inflationary solution. Politicians wouldn't have to ask citizens to pay for the government's services, and citizens wouldn't have to think about the actual cost of what they demand — until, of course, the currency collapses, interest rates soar and the economy craters. Some on Wall Street are betting on just that scenario. Universa Investments — linked to Nassim Nicholas Taleb, author of Wall Street's biggest book, The Black Swan: The Impact of the Highly Improbable— is adding strategies that will soar if inflation takes off. Respected hedge fund adviser 36 South Investment Managers is raising $100 million for a fund that will bet on soaring price increases. And Marc Faber, editor of the Gloom Boom & Doom Report, a newsletter, predicts that U.S. inflation will someday match Zimbabwe's — that would be 236 million percent a year.

Read it all.

Filed under: * Economics, Politics • Economy • The U.S. Government • Budget • The National Deficit

5 Comments
Posted June 29, 2009 at 7:30 am [Printer Friendly] [Print w/ comments]



1. BlueOntario wrote:

Why isn’t the gap between declining income and benefits and increasing unit costs at the grocery store considered inflation?

June 29, 9:24 am | [comment link]
2. jkc1945 wrote:

Of course we are “in for” massive influation.  We are in the middle of a massive run of the government printing presses with the intent to push the due lunch bill off into the future, past the terms of the current congress and President.  And when it finally catches up with us - - or our children - - we may find ourselves, as the people of the Weimar republic of Germany found themselves, burning our money rather than the coal it would buy, simply because it is cheaper to do so.  I do not have a clue what our “leaders” are thinking of;  I am resisting the urge to reconsider their general corporate intelligence level (I never did think it was too high, frankly) but I may have to.  Clearly, we have some fiscal ignorance going on out there within the beltway, and at some of the state capitals, as well.

June 29, 11:29 am | [comment link]
3. John Wilkins wrote:

All the federal reserve would need to do is raise interest rates.  Japan finally decided to use “targeted inflation” to do just that. 

We’re still in deflationary mode:  so it’s just chicken little all over again.  The spending hasn’t even begun.

June 29, 3:53 pm | [comment link]
4. gdb in central Texas wrote:

John,
Your economic understanding is quite wanting.

June 29, 4:21 pm | [comment link]
5. John Wilkins wrote:

why is it wanting, gdb?  The fact is that there isn’t any inflation right now.  It’s chicken little.

I’m all for being proven wrong, Gdb.  Why not offer an argument, rather than an assertion?  I admit, I’m a lay student of economics - if diligent.  Are you an economist?

June 30, 11:06 pm | [comment link]
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