Let's ask the million dollar question- Can ANYONE fix much of what's wrong?
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  Let's ask the million dollar question- Can ANYONE fix much of what's wrong?
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Author Topic: Let's ask the million dollar question- Can ANYONE fix much of what's wrong?  (Read 5008 times)
Wonkish1
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« Reply #75 on: November 01, 2011, 02:12:28 AM »


Unless, of course, inflation from the Federal Reserve devaluing the dollar wipes out the effect of rising interest rates on the debt. Inflation is currently at about 4 percent-ie really not that high.

Inflation will rise very quickly in this recovery even without any more QE. The reason is that the monetary base is much bigger than it was in 2007. When the velocity of money picks up that monetary base will leverage out. Once that happens M3 growth will skyrocket and we'll be hit with very strong headline inflation.


Fully leveraged out we're looking at a doubling of the money supply. If it takes 10 years that is 10 years is about 7% a year, 5 years is about 14%, 3 years(which is quite possible that most of the inflation will occur in a short period of time) is about 24% a year inflation.

The Fed will likely have to raise rates and try to tighten the money supply pretty quickly after some recovery putting us in a pretty precarious situation.
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