U.S. Lacks The Fiscal Means And Political Will To Stop Hyperinflation

Mon, 1 Jun 2009

Hyperstagflation's Article Of The Week:
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/090...

Willem Buiter, Professor of European Political Economy at the London School of Economics and Political Science, speaks to CNBC's Europe Tonight regarding the likelihood of inflation in the American and European economies. Buiter is very certain that the U.S. lacks the political will and fiscal means to prevent inflation. In contrast, Buiter is more optimistic that European policymakers will be able to reverse course on the monetization of their debt.

"Central banks' actions in monetizing large amounts of bad private debt and large amounts of public debt will only be non-inflationary when the economy begins to recover IF they can be reversed... And they can only be reversed if the government has the fiscal means and the political will to use those fiscal means to reverse them - to have future tax increases and spending cuts. I don't see that in the U.S., AT ALL. I have doubts about the U.K...," says Buiter.

Buiter continues, "For the U.S., I think it (the likelihood of inflation) is a foregone conclusion. The kind of debts which are about to be accumulated by the U.S. have never been amortized to surpluses, or growth alone, in the past. They've always been inflation, unanticipated inflation. And given the inability of the U.S. political system to achieve consensus on future tax increases, which will be vetoed by the Republicans; [or] future spending cuts, which will be vetoed by the Democrats, I think there is no solution that does not involve a sharp increase in inflation... Inflation will ALMOST SURELY come."

"The inflationary phenomenon is driven by central banks that cannot reverse earlier monetization of public debt because of political pressure, and there, the [U.S.] Fed is the MOST suspect... because they have the LEAST independence of any of these central banks," stresses Buiter at the end of the interview.

Category:

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• stagflation
• inflation
• stagnation
• deflation
• hyperinflation
• depression
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• PPI
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• debt
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• Willem
• Buiter
• monetization

[largo2001]

Another thing the participants are wrong on one critical point: Inflation is NOT majorly related to excess production capacity and/of cost of labor.

Any person in Zimbabwe - where unemployment is 80%+ - can confirm that.

Case in point: If I print 100 Trillion per month even with excess capacity and unemployment at 80%, inflation will result.

[hyperstagflation]

As the great Milton Friedman once said:

"Inflation is always and everywhere a monetary phenomenon."

[largo2001]

BIG difference between Japan vs. America: One was the largest creditor nation and one is the largest debtor, hence the experience will be much more different.

Also, one has to think about the amount of USD held by Central Banks and other parties due to the "reserve currency" status of the USD. (Hint: Think what will happen if the USD stops being the sole reserve currency).

Great clip once again hyperstagflation. Thank you.

Let see if I can manage to get this one front page of iTulip.

[hyperstagflation]

You're welcome, largo2001!

Your point about Japan vs. America. That was my exact thought when I first watched the video. Completely agree with you.

[the1337k1ng]

'William Wh whwh hh wht join us ...'. Lol. +1 for the dutch economist. But before nations can 'drop' their liquidity, inflation would already have harmed the economy. Economists should loose their faith in countercyclical policy. It never worked and will never work.

[debtmanagementy]

informative file !!