The Federal Reserve under the leadership of Ben Bernanke is in the process of doing something called Quantitative Easing 2 or QE2 – which means they will print money and loan it back to the federal government by purchasing its bonds – basically the idea is they will print money and subsequently lessen its value and generate inflation.
In response to massive so-called stimulus spending and QE1, the US dollar is losing its value and will be able to purchase less. Please take a moment and read about the Weimar Republic so as to understand the gravity of the situation. In that case, the government printed so much money that the currency became worthless and was used as wallpaper.
Keep in mind that when you print more money out of thin air, the stock market could go up giving the general population hope that the economy is improving and making them feel wealthier. This is exactly the sort of thing you may be counting on if you were looking to be reelected in the short term in fact.
In reality though the value of the stock market is not increasing in real terms, the money is just becoming less valuable. This scenario is the cumulative result of the trillions of dollars of irresponsible spending the US has embarked upon – $5 Trillion since Nancy Pelosi became Speaker in fact. The result of a less valuable dollar is increased prices for oil and other commodities like corn, wheat, milk and everything else we consume.
The reason we haven’t seen widespread inflation so far is likely because we had an overinflated economy where prices had risen too high – and it is currently deflating. At some point, we are likely to see the inflation issue become a real problem.
New York Times columnist Paul Krugman is a huge fan of virtually infinite spending and perhaps the best recent article which takes issue with his philosophies was written by Tyler Durden at Zero Hedge where he says Krugman has dementia – it is really worth a read because Mr. Krugman has picked a war of words with legendary investor Jim Rogers – the quirky Rogers has been a fan of commodities for many years and an advocate of letting failed companies fail. If anything, Rogers has been spot on about the value of commodities in the long-term. Krugman for his part says Rogers has been wrong about everything – pretty much forever – while he thinks he has been right. It is worth a read.
The loudest critics of this policy of printing more and more money have been the business leaders – one after another has been warning about it. Now we have prominent Tea Party leaders speaking up and doing their best to educate the US population about the dangers of policies which involve borrowing money and/or printing it in quantities we are fairly certain we can never pay back.
Here is an excerpt:
And if it doesn’t work, what do we do then? Print even more money? What’s the end game here? Where will all this money printing on an unprecedented scale take us? Do we have any guarantees that QE2 won’t be followed by QE3, 4, and 5, until eventually – inevitably – no one will want to buy our debt anymore? What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher. And it’s not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar – a direct result of the Fed’s decision to dump more dollars onto the market – is pushing oil prices upwards. That’s like an extra tax on earnings. And the worst part of it: because the Obama White House refuses to open up our offshore and onshore oil reserves for exploration, most of that money will go directly to foreign regimes who don’t have America’s best interests at heart.
We shouldn’t be playing around with inflation. It’s not for nothing Reagan called it “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” The Fed’s pump priming addiction has got our small businesses running scared, and our allies worried. The German finance minister called the Fed’s proposals “clueless.” When Germany, a country that knows a thing or two about the dangers of inflation, warns us to think again, maybe it’s time for Chairman Bernanke to cease and desist. We don’t want temporary, artificial economic growth bought at the expense of permanently higher inflation which will erode the value of our incomes and our savings. We want a stable dollar combined with real economic reform. It’s the only way we can get our economy back on the right track.
This past weekend one of us attended a party where a guest said he can’t wait for Obama to leave office but when faced with voting for Palin as an alternative he said he would rather vote for Obama because he is smarter. We all know at least one person who is very book smart but is lacking in common sense. When we step back and look at this issue objectively we wonder if Obama is so smart, why he doesn’t see the common sense of not continuing to print money and as a result decreasing the buying power of ever US dollar on the planet.
Moreover, is it time we as a society started to vote for leaders who use common sense as opposed to so-called intellectuals who tell us they know what they are doing is unpopular but is the “right thing to do?” I believe last week’s election was the first step in the American people waking up to the fact that allowing these “elites” in Washington to try to engineer our new economy is ridiculous. In less than two years voters will send yet another message and if you are a Democrat and looking to get reelected, you should be aware the decisions you are making with your votes are being watched closely and the people are not in the mood to see their life savings destroyed as a result of your irresponsible spending. Moreover, this devaluation is taking place under your watch – you better start speaking out against it or get prepared to be voted out for good.