The Inflation Will Come

Arthur B. Laffer has an article up at the Wall Street Journal (one of the only papers with increased circulation) where he discusses the inflation and high interest rates that will most assuredly come as a result of the out of control spending and the printing of more and more money. Laffer does a great job of going through the issues and the consequences. He has this bit of frightening information:

It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn’t a pretty picture. WSJ

There are quite a few people who say that there will be little or no inflation and some of them comment here. They seem to have a problem grasping the concept that actions have consequences and the consequences of out of control spending will be grave indeed.

Big Dog

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17 Responses to “The Inflation Will Come”

  1. Adam says:

    “They seem to have a problem grasping the concept that actions have consequences and the consequences of out of control spending will be grave indeed.”

    I for one being of no strong background in economics tend to rely on economists to grasp these concepts for me. Bernanke for instance believes that high inflation, while not impossible, is by no means inevitable. Paul Krugman for instance isn’t that worried about it either.

    What gets me most about your continued insistence that inflation is on the way for sure is that you still refuse to admit that there is much of a crisis needing action. You pretend this is trumped up by Obama to get spending passed and that things would be better left alone. This alone hurts your credibility on the subject for me and I will have to continue to rely on the opinions of folks like Bernanke instead.

    • Randy says:

      Not to mention that the article to which Big Dog links was written by Arthur Laffer, who in 2006 made somewhat famous bet with Peter Schiff that in the next two years, the housing bubble wouldn’t burst and that there would not be a recession.

      • Blake says:

        Evidently a lot of people missed that one, or we wouldn’t be here, right? I mean, Krugman missed the housing bubble also, Randy, so I wouldn’t hold him up for any kudos either.

      • Adam says:

        Randy:

        Crazy. I didn’t even notice the author was Laffer, mythmaker of the so called Laffer Curve, the magic glue that holds all of Republican policy together and solves every problem in the universe through the careful use of a tax cut.

        Blake:

        Right, Krugman doesn’t know squat, says the man that can’t grasp a concept as simple as a lagging indicator. You’re clearly an authority on the subject of which economists know what they’re talking about.

        Americans heard plenty of talk about ten years of underperformance during the Clinton years, which as you remember was perhaps one of the darkest economic times in our nation’s history. Oh wait…

        • Randy says:

          Yup, the Laffer Curve that really doesn’t tell us anything we didn’t already know, and is effectively useless as an economic tool of any sort.

          • Big Dog says:

            Explain why when taxes are cut the revenue into the Treasury increase.

            • Randy says:

              It didn’t during the Bush years with the Bush tax cuts. Arthur Laffer himself can’t say that the Bush tax cuts paid for themselves.

              http://www.time.com/time/magazine/article/0,9171,1692027,00.html

            • Big Dog says:

              Well how about this:

              Ten Myths About the Bush Tax Cuts—and the Facts

              Myth #1: Tax revenues remain low.
              Fact: Tax revenues are above the historical average, even after the tax cuts.

              Myth #2: The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.
              Fact: Nearly all of the 2006 budget deficit resulted from additional spending above the baseline.

              Myth #3: Supply-side economics assumes that all tax cuts immediately pay for themselves.
              Fact: It assumes replenishment of some but not necessarily all lost revenues.

              Myth #4: Capital gains tax cuts do not pay for themselves.
              Fact: Capital gains tax revenues doubled following the 2003 tax cut.

              Myth #5: The Bush tax cuts are to blame for the projected long-term budget deficits.
              Fact: Projections show that entitlement costs will dwarf the projected large revenue increases.

              Myth #6: Raising tax rates is the best way to raise revenue.
              Fact: Tax revenues correlate with economic growth, not tax rates.

              Myth #7: Reversing the upper-income tax cuts would raise substantial revenues.
              Fact: The low-income tax cuts reduced revenues the most.

              Myth #8: Tax cuts help the economy by “putting money in people’s pockets.”
              Fact: Pro-growth tax cuts support incentives for productive behavior.

              Myth #9: The Bush tax cuts have not helped the economy.
              Fact: The economy responded strongly to the 2003 tax cuts.

              Myth #10: The Bush tax cuts were tilted toward the rich.
              Fact: The rich are now shouldering even more of the income tax burden.

            • Darrel says:

              All very carefully worded and slippery. Number ten is the sneakiest. Their “fact” doesn’t address their “myth.” Both can obviously be true at the same time.

              And of course Bush’s tax cuts were tiled toward the rich.

              ***
              Tax Cuts Offer Most for Very Rich, Study Says

              By EDMUND L. ANDREWS
              Published: January 8, 2007

              WASHINGTON, Jan. 7 — “Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

              The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline.

              Based on an exhaustive analysis of tax records and census data, the study reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top — especially the top 1 percent of income earners.”

              Link

        • Big Dog says:

          The funny thing Adam, is that you think only the economists who aree with you and Obambi are right. There are plenty who do not agree. Or is this science settled as well?

    • Blake says:

      Everyone has an opinion- I pulled all my money out of the market when it went from 14,000 to 13,000- despite Bernanke saying everything was OK- if I had listened to him, I woiuld have lost 40% of my investments, instead of 10%- glad I didn’t listen- have been a carpenter and builder and woodworker for 35 years, and I have seen bubbles before- they are inevitable, but thid=s time they were aggravated by Frank, Dodd, Schumer, et al , who loosened the regs, so while the period of overbuilding was longer, so will be our recovery, and that would be without the aggravation and hindrance of the alleged “stimulus”.
      And I never listen to Krugman- that guy doesn’t know squat.

      • Randy says:

        He (Krugman) clearly knows more than Big Dog’s authority on the matter, Arthur Laffer.

        Are you conceding that you were wrong about Krugman missing the housing bubble by not responding or providing a link refuting my comment? I am asking because I genuinely would like to know where you got the idea that “Krugman missed the housing bubble”, as you specifically said it.

        • Blake says:

          As regards Krugman, even a blind pig gets an acorn every once in awhile- for him it was a lucky guess. I knew in 2004, but no one listens to the man who actually builds the homes, and can look around- I have seen several of these bubbles, and they are usually a natural part of the free market, but this time they had the libbies in Congress to aggravate the situation by changing the lending rules, or this would never have been near as bad as it is.
          The problem with housing is a bell curve- and all investors, whether individual or group, want to get in on the trend on the beginning of the curve, and ride it to the top, but there are always some who get in at the top and ride it down, and a lot of people misread the curve, because of 1)- they never studied either economics in general, or housing in particular, and-2)- they were unaware of the Dems loosening the rules regarding lending, or the scheme for bundling securities, both of which contributed to what we have more than any other thing.

        • Blake says:

          Actually, as Krugman himself said, economists disagree- I am, despite Laffer getting it wrong in that video clip, more inclined to go with Laffer over the long run than Krugman. You can go with whoever you wish.

        • Blake says:

          Oh, and as for “not responding or providing a link,” I have other things to do in real life, and you are not as important, so you need to be patient and wait your turn.

  2. Blake says:

    Inflation is down the line, but first we will have to suffer through DEflation- the money hasn’t enough velocity in our economy, so even if the supply of money increases, it must keep moving, and it won’t, so deflation first.
    The more government borrows, the worse it is for the private sector. The economy will be in a prolonged period of underperformance for about ten years, otherwise known as Hussein is screwed, because we are not going to pull out of this soon- it’s going to take a lot of time.
    Unfortunately, as Hussein is screwed, we are doubly so- he lives in the WH, on our largesse- we have to scramble for whatever crumbs will be left.