Right Wing Finance

If you follow the financial news much, you’ll get the idea that high inflation is the next great panic. If you listen to the likes of Glenn Beck, you’ll hear that Weimar Germany style hyper-inflation is on the horizon. I don’t buy it, and here’s why.

Intuition.

My intuition and experience tell me that the thing most people worry about, never comes to pass. I also believe that history does not repeat itself, but it does rhyme. I feel that everyone has their eye on high inflation, so the next economic calamity is likely something no one is talking about.

Inflation, defined.

The Economics Glossary defines Inflation as:

” Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.”

And we’ve all heard that “Inflation is too many dollars chasing too few goods.” So it stands to reason that people would be concerned about inflation given the massive amounts of money being injected into the monetary system by the Federal Reserve and Obama’s “Stimulus” spending.

Why I don’t think hyper Inflation is likely.

Basically, I see the next few years being a function of two economic factors: increased money supply, and Obama’s economic policies.

Obama and the Democrat controlled Congress are spending the country into oblivion. If left unchecked, this spending would bankrupt the country. The United States would not be able to effect a positive real GDP because everything produced would go to paying interest on the deficit, and bailouts with nothing left over for defense or their coveted social programs.

Their are 2 ways to gain control of the massive Obama deficits (since they are unwilling to slow the growth of government or cut spending):

1. Raise taxes,
2. Grow the economy.

Economic growth is not on the Democrat agenda, since that involves supply side economics, free markets and little direct government control. The Democrat answer is therefore to raise taxes.

Economic stagnation or stagflation.

The likely outcome will be either stagnation or – worse yet – stagflation. The Democrats will say it’s only on the “rich” that will pay higher taxes, but this will have a trickle down effect since the same “rich” people are the ones who create jobs.

Corporations facing higher taxes, will outsource more jobs over seas to tax friendlier locales.
Small business entrepreneurs will higher less, or even be forced to close up shop.

And those are just the results of a direct increase in income tax.

Once we factor in the Energy Tax , Socialized Healthcare costs , and a National sales tax we’re looking at an increase is costs – an effective tax, if not a specific tax – on the lower and middle class as well.

All of these tax and price increases will effectively suck any excess money out of the system, and out of the pockets of American consumers. This will result in slow to no growth of jobs and GDP.

Taxes will skyrocket, and unemployment will remain high, thus choking off any real economic growth.

Obama’s war on Prosperity will hobble any economic recovery, and without a strong economy, inflation is not likely.

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