Creating Inflation - or "Why the US government will continue Deficit Spending"

[iamKEMZ]

one quick question.. who is the goverment in debt with? 

[RoySC1]

The only way to stop deficit spending is to take away Congress's power to borrow money on the credit of the United States, (the people), by abolishing Clause 2, Section 8, of the US Constitution. It is because of this power of Congress that we have the corruption, debt burdens, and taxes today.

[mustang607]

I find that the book Atlas Shrugged makes a good case of why what is going to happen is going to happen.  There are also answers for what to do.

[NorceCodine]

If inflation and printing money were the answer, then Mexico and Argentina would be the financial titans of the world.

There is no way out, you gotta have a STRONG currency that attracts investment on the macro level and brings home the goods on the family level. Only deflation strengthtens money. It doesn't matter how many businesses will go bankrupt - some will survive. Its called capitalism. No country ever made a career with a week currency - financially or otherwise.

[NorceCodine]

I think the real reason for the government ruining the dollar is because China is sitting on over 1.2 trillion dollars cash, and the only way we can deal a blow to China if we destroy "their" core currency - which, unfortunately, is also our currency. Thats why the Chinese are so mad at America - they are between a rock and a hard place - either watch America destroying the dollar, or do it yourself by trying to dump it.

[NorceCodine]

I completely don't agree with that deflation is bad - when money is scarce, it becomes very strong, because businesses are vying for your cash, and they lower prices (hence the deflation).

And not just that, but foreign investors are flocking to invest in the strong currency.

Remember that back in early 90-s, when we had deflation, the dollar was king. Even in 2001, 78 US cents traded for 1 Euro (!) as a result of deflation strengthening the dollar for 10 years straight.

[doctorofghetto]

Nice explaination, jberni1. However, and in analogy, if I continue to keep spending with my debit card that is tied with my checking account (like buying a $21 Million painting, $1000 stereo system, and only having $0 in the account to start with), I put myself into bankruptcy, up to the point also of being on trial and go to jail for what I did.

Overall, the more you tried to spend, the more you will put your self into insolvency. The government is litterally doing of my personal analogy.

[doctorofghetto]

In conclusion to my commenting, that is just as bad for the U.S. Government to keep spending. Peter Schiff warn us about this, as he is running for Senate 2010 elections (from his inflation perspective):

[doctorofghetto]

/watch?v=5r2-5uOlZ1U

[redcat362]

I never heard that before. That they want inflation to 'make' your money lose valve just so you need to work to create cash flow. Good point.

[PlatinumGordon]

Great vid mate. I love cofee.

[dojufitz]

I read somewhere that the all the people in the world own more Gold privately that all the central banks put together.

Can anyone verify this?

[orangedac]

Most of the gold is in private hands in India. The country has accumulated gold throughout history.

2 times in history it was accumulated and twice it was robbed. Once by muslim invaders who robbed all the gold and killed people. And once by the British who did the same.

This is the 3rd time that India finds itself with a lot of gold in private hands. Central banks around the world are wondering how to get people to trade their gold for worthless paper like gold ETF, currency..etc.

[dojufitz]

Thanks for the info.....very interesting.....i'll be holding on to my Gold and Silver as this mess plays out worldwide.

Merry Xmas from Australia.

[imsailing2]

But wouldn't hyper-inflation be every bit as bad or worse than hyper-deflation? Just look at Zimbabwe, Germany & Brazil ending up with worthless currency.

Are there any examples of countries whose entire economies were completely destroyed with hyper-deflation?

Sorry, but I just do not trust that the Federal government manipulating the economy is going to make things better. Are we supposed to believe that the highest deficits in the history of mankind are going to save us?

[Sepero1]

I think you may be reading too much into this single video. I don't think he was saying that inflation or deflation is bad or good. He's just explaining what he believes will happen, regardless of what he believes is the best policy.

[imsailing2]

It's possible. Sounded to me like he was saying the deficit spending was necessary & saving our economy.

I see the point he is making on trying to avoid deflation.

[ben5017]

The Federal Govt in the USA is going to collapse before they idiots could ever get their shit together ... I think the Russian Professor who predicted the collapse and second civil war in America is more plausable.

Most Americans are tired of the democraps and rapeublicans who have been screwing us.

The govt will continue to spend because the people taking the free money would riot tomorrow if the free money quit coming to them.

[Sepero1]

In this video, you state that inflation creates jobs. Could you tell me me, or link me to information as to why this is so? The only reason I can currently think of, is because it makes the dollar worth less, therefore lowering the true price/cost of minimum wage employees.

[rdority]

There are various types of inflation. Inflation can simply mean an increase in the money supply, which means more $ is available for lending, buying and labor.

Price inflation of course is when the cost of goods goes up. It always (?) follows the inflation I describe above because with more money chasing the same amount of goods, the higher the price becomes for those goods!

[imsailing2]

Sepero1: I doubt he can. Inflation causes business not to hire. His point was because of rising prices people will take any wage offered & not sit around waiting for a better paying job because they are desperate.

But if business expenses are up & the gov continues to make it more & more expensive to have employees via taxes & regulations, there won't be any hiring no matter at what pay grade.

[fox20012]

Id love hyper deflation, cheap houses! bring them on

[thirdcoastguy]

Quick, someone go deflate Obama's ego and inflate Bernake's brain cell count.  Don't worry about Geithner, he's hiding in the empty vaults at the U.S. Treasury.

[imsailing2]

thirdcoastguy: LOL...your great! But actually, I think we would have to inflate Bernake's moral compass. No use in making him smarter if he will only use those brain cells to figure new ways to destroy us & enrich himself & his cronies.

[libbinmauzi]

Bin total kuschel bedürftig aber niemand da ;(

[blepat]

refixing the ombilical cord back to a child that is not able to live on its own is not the solution. As soon as you cut him off again, he is gone.

With the US economy its the same, but if it remains on the oc. it will die together with the mom...

[MainTightSqueeze]

this reinforces a fear i had earlier in this year about unemployment. it seems like the less jobs we have the less we can spend and the less we can spend, the less jobs will exist. vicious cycle. nice video!

[huskerbird1]

damn glad i found ya

[KiaOra53]

Thank you - most interesting information.

PS Your english gets better and better, :-)

[solojam]

defizit  is spelt deficit

[ormnotme]

... and spelt is spelled spelled ;)

[elboertjie]

That depends on where you learnt English.

[ormnotme]

I see, thank you, Elboertjie.

[solojam]

your volume is not loud enough brother

[bluecat1122]

Thank you very much for the video, very informative!

[ang60]

As always, excellent.

[oc5nsli341nforce4]

A days works for a loaf of breed. To be in hell is truth realized to late.

[whiskerchild]

You were more upbeat and moved around on the screen more-  it keeps it interesting- you're improving your teaching style.

[tabcan]

What did you come for?  To gain good information, or to be entertained?

[iknownothingnow]

Thank you for another great informative video. Five stars again. It seems that countries can raise debt up to the point where the interest on the debt can no longer be paid.

The link on the side that has all the charts and numbers is truly fantastic! Thank you for the data!

[Alexiscom1]

First time I disagree with you my dear colleague. In Russia in 1991-1992 from where I come from we experience the hyperinflation and the height unemployment in the same time. I am not sure also that the deflation is the bad thing. Before the fiat money was introduce in the economy I believe the world live with the constantly falling prices. I think that we have been convinced by our politicians that deflation is really bad

[peckiledorf]

a true thinking man

[Igentenos]

Veeery interesting.

[robert4you]

A very good and informative presentation. Thanks!

[ecospirit99]

I love this coffee guy.

B

[Nosheepfull]

the more they try to fix it the worsen it will be ! when this shit crash hard it will be a global tsunami for the economy around the world, buckle your seat belt, and don't forget to thank your goverment for trying anything they can to get this thing worse..

[trentontrading]

so do we buy gold or what ?

[bweazel]

To do what? Look at it? Trade it with who, exactly? The public that has little to no gold? Sorry, you wouldn't stand a chance against the gold horders and your doomsday savior (gold) would be as worthless as a penny when all the dust settled (if we were to hit a doomsday, that is) So, you want to buy gold, priced largely by inflation, when the economy is wanting to do nothing but deflate? Baddd move. Don't buy into the gold rush, it's for suckers, to push ETF and future prices up.

[trentontrading]

and that's why I hesitate to buy it, although one should have some in the name of diversification. I'm not sure shorting the market into the collapse is a good idea either as there may not be anyone on the other side of the trade to collect from.

[bweazel]

Diversity, yes, I agree with you there. It's never a bad idea to have precious metals at your house. Although I dont think these metals are too precious to people anymore. I think it works out to their advantage, short the market until everyones pensions have dried up, and use the money to buy the market back. I think they've been playing this game since shorts were introduced.

[ShillBasher]

I sometimes find it hard to believe people are still asking that same question.

Would I buy Gold: yes

Would I buy Silver: yes

Would I buy any other commodoties: yes

Have I already done this: yes

Would I continue to do so: yes

Why (to all the above): Inflation hedge/ investment op' and other reasons..

But that's me, you would obviously do a little of your own research 1st.

[InTheSticks1881]

I would rather have an honest depression where the government gets out of the way.

Like a stalled plane that tips and heads downward, it will naturally regain it';s airspeed and fly once again. That's assuming of course that we have enough altitude to complete the move.

Inflating our way out has a down side as well. They could send us and the currency into outter space never to be see again.

[InTheSticks1881]

There are competing interests and opinions with in the Fed and Administration, yet it is hard to actually distinguish between the two. The politicians will not take a measured approach and ignor the warnings in order to retain their office and so we'll have runaway inflation. A hyper inflationary depression would be the worst as we'll have both a high inflation (rising prices) and contraction in business. Those who do have jobs will have their purchasing power destroyed quickly.

[GlobVetus]

Thank you..

Great video.

[i4Truth]

Deflationary Economy + Inflationary Monetary policy = Stagflation. That is where I think we are headed.

[freedominsomalia]

deflation is good. it makes my savings more valuable

[florgat91]

so things are stablizing and looking up ?

[sltb4u]

No. At present Gov. is choosing the lesser of two evils, but will have to face the music eventually (2 yrs max?). By putting off the inevitable they will worsen the depression when it hits. Good luck, get prepared.

[robert4you]

100% right!

[Trazom24]

I like the charts. Very effective in getting your point across.

Am I thinking right, or need we only look at Iceland to see where this country is headed? Their government just defaulted on its debt and they are now dealing with a currency crisis. Within a few months the value of their currency fell like 30 or 40%. However, with so many lost jobs there were deflationary forces at work too.

It is confusing but seems more and more to me that inflation/deflation are just 2 sides of the same coin.

[boprn]

Very good explanation/video.

[fal2grace]

Great analysis Dr. Berninger. Thank you.

[masterix6]

Sorry you lost me at 1:53 in your example the government would have to pay back a minimum of 360 billion to its creditors. Not borrow but pay back. It would do this by raising the taxes it gets back from its citizens. I think the lady asked you if the government could do better by not SPENDING

[lilbitparanoid]

hyperinflation the only answer. I believe we are going to go through a hyperinflation crisis, then a world currency will be introduced along with world government.

[artdeco101010]

Thanks man - excellent as always !

[JimGraham1973]

thanks for a great video

[MaxZagar]

When the interest rates go up doesn't the taxes have to increase as well ? It's kind of interesting, as the few who have jobs have to pay the cake. This will further reduce the spending. Due to the high interest rates also the government will have limited opportunities to invest and build. In practice the banks will swallow large chunks of the economy for a very cheap price. People will see large parts of the industrial and intellectual capital "stolen", by a few.

[jberni1]

if interest rates go up you will have inflation! Tax income goes up automatically !

Have been writing about this in my Dossier: "Attack on capital rights"

[MaxZagar]

But aren't the interest rates suppressed artificially now. This means that he governments will just keep them suppressed. Otherwise the firms and the mortgage owners will go bust. Due to the flight of jobs to Asia the jobs in the west will not return in the same scale. Where is the threshold where the governments can't take more debt ?

[bweazel]

Supressed and manipulated are two different things. The fed and all the other central banks in the world have tools on both sides of the table. They can cause them to go up, they can cause them to go down, it's all within their power. It's a balancing act. As we can see from the last year, the government cares little to nothing about mortgage holders and small firms. Everyone has been saying America is on the down and outs. From my point of view, it looks like the USA is making a huge power grab

[bweazel]

There is no limit. As long as they keep everyone in line, keep foreign investors happy, keep the money flow of the world oligarchs positive, this ponzi scheme can go on forever. Population has a big deal to do with it too, in my opinion. Anyways. They'll keep it going until another system will serve them better, and as long as people make the correct percentage to offset how much things cost, your average person won't care. 1 dollar an hour, 1,000 dollars an hour. All the same.

[TheCZMan]

The Ponzi scheme cant go forever.

Currently, the US and Europe go deeper and deeper in debt, use the money collected through debt to buy real wealth (mostly goods and industrial oriented resources) and repay the interests on debt with paper money.

So far so good.

Two limits: countries yielding their real wealth against money acquired through debt reject the deal. Unlikely as the US has peepered the world with military bases.

The other limit is the compulsory one: countries yielding

[TheCZMan]

their wealth run out of real wealth to yield. As this point, they are unable to answer the new emitted wealth, no matter their "good" will. The ponzi scheme is over.

[CelticReject]

Does this mean that we are between the proverbial rock and a hard place? Here in the UK the interest rate is soon to go up.

[jberni1]

Hi,

I have not finalized my "Berninger report" on the UK, yet. But once I have I can tell you what the options of central bank and gvt are and how that will impact job losses, prices and currency

[kricke243]

Will all interest rates sky rocket, in all countries? Last Wednesday, the 2y-10y went up here in Sweden, quite dramatically. They are falling somewhat today (after the Riksbank did not change the 0,25% repo rate today, actually contrary to the US long term interest rates). But all in all, government deficits in Sweden are like -3%, after ~10 years of surpluses, which is better than many other countries. I have a 3 months mortgage at 1.56%. The 10 year mortgages are at almost 5%. Should I Switch?

[mikewalker260]

Thanks for another great informative video. -- Mike

[davincij15]

Hyper deflation under a debt based paper money system? No such thing as there will be a bottom to the market.

Please tell me how would by home that sold for 500k at the peak of the market for 5k?

I am sure 90% of your viewers would say yes, and since not all of them can do it the prices will get bid up to reality.

However you hyper deflation does not work in reality UNLESS part of the government cut backs includes FDIC and social security. Then the bottom is much lower.

[jberni1]

Good question !

Now, I tell you a secret from my reports: "There was no real deflation in the US (yet)!"

All what happened was deleveraging in speculative assets.

[cbr6864]

i really dont see any way out of this. unemployment is around %20 (true number). they are spending like crazy on unemployment extensions. there is just no money coimg in it has to fail.

i have a feeling another bailout is coming soon.

[grossleinbach]

Great video Mr. Berninger! However the government is creating inflation not only for jobs BUT FOR THEMSELVES. If they stop taking more debts then they have to start cut back spending and that would hurt the rulling party at the next elections furthermore the people would feel on their skin the WHOLE cost of the welfare state because getting rid of debt with inflation (hidden tax) would be impossible.

[davincij15]

Deflation is not bad prices going down in the script you have saved is a good thing.

[capcom101you]

Very good work. Thank you!

[SamuraiCommando]

Simply amazing video. Thank you. Very clear and concise.

[gr8wg]

in summary:)

interest increase = increased spending !

uppaid debt + increased interest = more debt ! :(

[Danster82]

I opt for the blow out!

[modelmark]

yes, let's get it over with.

[LondonCrusader]

Good video.

Its nice to have someone doing a board presentation! Its perfect for economic stuff. Lots more like this!

--

*I am resigned to seeing commodity inflation of 15/20% next year, maybe more, despite the continuing 'depression' scenarion playing out, as I believe we are in.

I can only guess the stock markets will eventually soar, on the basis that higher prices is a good thing for sellers.

Very bad in my view.

[meikagirl]

There will be no happy medium.Default here we come.Thanks for the vid.

[llothar68]

And the winner is Ben Bernanke. Unbelievable. So far for mainstream media.

[cowboycarl04]

Will, to be devil's advocate about Time magazine, they pick the person of the year, good or bad, that made the most influence on the world.

Personally, I think they just showed the world who is REALLY in charge..

[dlmaniac]

If a junk stock at 5$/share is hyped to 20 by manipulation, then it will drop below 5 once that hype goes bust. That's just how market works, which is a mini-case of "hyperdeflation". It's painful but it should happen just like that junk stock deserves to go below 5 due to its previous irrational surge. That's not even a deflation at all, just market in action. Government intervention is only turning a necessary asset price correction (however painful it is) into an insane currency depreication.

[jberni1]

That's actually what I call deleveraging or negative inflation. It is not causing immediate issues to the company (if it is financed in a meaningfull manor)

[MrPhajlee]

can you make your videos a bit louder?  thanks

[clayvessel]

I agree that the $12 Trillion US debt stock is probably underestimated... .. if your $53 trillion debt stock figure is correct, EACH ONE PERCENT INCREASE in interest rates will cause the deficit to balloon due to increased interest payments on the STOCK of debt... EXAMPLE:.. a 1% increase on $56 trillion is $560 BILLION WHICH IS ALMOST OUR ENTIRE DEFENSE BUDGET OF $600 BILLION!!! WOW.

We are in deep deep doo-dooo, thanks to Congress!

.

[jberni1]

That is exactly how you kick-start the inflation.

Thanks

[snslion]

Very good video. Thanks for the update jberni1!

[Eraser7622]

Good Video.. enjoyed my coffee, thank you!

[cowboycarl04]

great commentary. I've been thinking this for a while, but you explained it very well in a way that just clears the issue.

Too many people/friends/family members simply are picking "deflation or inflation" camps and simply refusing to budge.

[jberni1]

Thank you. you are very kind to save my day by confirming that my job here adds value to people.

[jberni1]

That is one of the reason why deflation is bad and inflation needs to be created !

[facethesouth]

Danke, Herr Berni. Thank you for the straightforward explanation. Can't wait to hear more about step 2: inflation.