Chronic inflation threatening to get ballistic (Hyperinflation
a la Germany in the 20-s or Zimbabwe currently)
will happen in the US if the World abandons the
dollar peg and starts selling US dollar debt, while the Fed
responds by monetarizing the bad debt.Given their current
inclinations, I'd venture a guess that this will be the Fed's
policy response. I would define such action, de-pegging
and selling of USD assets by foreigners, as the dollar crisis.
Thus, so far the dollar has lost a lot of value, but the
dollar crisis has yet to occur.
Nobody any longer knows
what real inflation is in the US, since the BLS is producing
fake numbers, but according to some statists, such as
John Williams, who attempted to reverse all BLS CPI revisions
(lower, of course), US is already in chronic inflation mode,
defined as inflation above 10% per year. Oil=80 does not
really go together with 2% BLS inflation. I'd guess it is
somewhat below 10%, but way above current rates for treasuries
of all maturities, probably running at 7-8%, which by itself
makes the Fed's policy extremely accomodating. Such action
certainly promotes more inflation. The only thing that can
provide some relief from accelerating inflation is a recession
and debt collapse, but the Fed would allow neither |
