Deflationists are saying 1.2 Trillion printed won't be enough.
In a sense they are right, as hyperinflation is born out
of debt deflation.
The key is intent, not the amount. In hyperinflation no amount
is enough, no matter how large, because the real economy
died and all that money goes into inflation. We have witnessed
enormous moral hazard and very lopsided bailout behavior of
the Fed and the treasury when it comes to finance vs all other
industries, did we not? 2 page application for TARP + buying
all bad assets vs firing the CEO by the President (GM) + no
LOANS unless you go bankrupt outside the court. That's
what "agreement with bondholders" amounts to. Note that nobody
ever wanted to buy GM's bad debt or tainted assets.
While I would not argue that the government should bail
out GM, I would just argue that the treatment of financial
industry and the real industry in bailouts should be the same,
if any bailouts are administered at all. It's actually best to let
the financial speculators fail. They also should understand
that as we lose the real economy, all the money they create
will lead to much higher prices, because the "financial
economy" does absolutely nothing productive. It's a parasite
on the real economy. A huge parasite as of today.
Why did GM or airlines go bankrupt? Because of the financial
bubble, of course. The Debt bubble first hyperinflated
gas prices, making their relatively good trucks not possible
to sell, then the debt bubble popped, making it impossible
for customers to get a loan. For a while GM and other big
DOW industrial companies that are now in bad shape lived off
finance. Why? Moral hazard that benefits financial industry
made it impossible to run a real economy business. |
