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June 01, 2009

Here's Something Else That Is Not Good

The dollar is in the toilet. Some are calling it "the next crisis" and I'd agree. Of course, we can all take comfort in the fact that the Most Smartest Treasury Department Ever, led by Noted Tax Cheat Timmeh Geithner, is confuzzled by what's going on

WASHINGTON (Reuters) - The Federal Reserve is studying significant moves in the U.S. government bond market last week that could have big implications for the central bank's strategy to combat the country's recession.

But the Fed is not really sure what is driving the sharp rise in long-dated bond yields, and especially a widening gap between short and long term yields.

Do rising U.S. Treasury yields and a steepening yield curve suggest an economic recovery is more certain, meaning less need for safe haven government bonds and a healthy demand for credit? If so, there might be less need for the Fed to expand the money supply by buying more U.S. Treasuries.

Or does the steepening yield curve mean investors are worried about the deterioration in the U.S. fiscal outlook, or the potential for a collapse in the U.S. dollar as the Fed floods the world with newly minted currency as part of its quantitative easing program. This might be an argument to augment to step up asset purchases.

Ever get the feeling that Treasury relies more on their Magic 8 ball than anything else?

There's this bold and innovative new theory out there that says when you insanely increase the supply of something its value goes down. Pretty cutting edge, eh?

And when you spend far far more than you can possibly take in the 'easy' way out of it is for you to print lots more money and inflate your way back.

Everything old is new again

Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the whole sale price index increased 0.9%. In other words, our economic system is screwed, blued and tattooed! We just have to face the fact that there is simply no way to fight inflation in a capitally-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That's why, tonight, I want you to try to look for in inflation, an entirely new word: Inflation is our friend.

For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean - most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn't you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That's why I will present to Congress the "Inflation Maintenance Program", whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, "Won't that cost a lot of money? Won't that increase the deficit?" Sure it will! But so what? We'll just print more money! We have the papers, we have the mints.. I can just call up the Bureau of Engraving and say, "Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!" Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire!

In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the 80's should be "Let's Party!"

Can anyone tell me there's a serious difference between this and Treasury's policy?

Posted by Mr. Bingley at June 1, 2009 07:32 AM

Comments

Posted by: Gary from Jersey at June 1, 2009 04:16 PM