Obama's Inflation Will Cripple The World In 2010

[TennesseeTuxedo]

Coming Next Year: Obama's Inflation (http://thehill.com/dick-morris/coming-next-year-obamas-inflation-2009-03-03.html)

The main meme is that this pain is entirely preventable but Obama has declared war on the middle class, small businesses and investors.

[Polemicvol]

Prices don't rise (inflation) during a severe recession, or during a depression. Prices actually drop. Just like our economy cratered by dropping 6% during Bush's last few months in office, a record drop in our economy, since records have been kept.

I don't think the American people are listening to anything the Radcons say about our economy, as they fully realize that this economic disaster was created by Republican Radcon ideologues.:nana:

[Blacksheepvol]

Actually, that isn't true... prices rose during the depression because fewer people were able to buy some goods, so the fixed costs were spread among fewer buyers, leading to much higher prices.

[Polemicvol]

No, Blackie, you are incorrect.

Prices fell during the Depression, by over 30%, in the period from 1929 to 1932, as GDP fell by 25%. A Depression is defined by lower prices, created by a contraction of the economy due to reduced economic activity.

Why did prices decline during the Depression? Because unemployment increased from 3% to 25%, so there was vastly reduced purchasing power in the economy, people weren't working and didn't have income to purchase products, so the price of goods dropped drastically.

Blackie, were did you get the impression that prices rose during the Great Depression? Somebody's peddling some really inaccurate economic information there.

Here is some basic accurate economic information on the Great Depression (http://eh.net/encyclopedia/article/Steindl.GD.Recovery)and the worldwide contraction of the money supply and the resulting crash in prices.

[TennesseeTuxedo]

The money supply consists of a number of elements. Cash is one of the elements and cash in circulation went up 80%. Credit or lines of credit is another. There are yet other forms.

For a variety of reasons (disastrous rise in price of oil, crash in home prices, even more productivity improvement in all sectors of our economy, and so forth) we suffered a severe reduction in the money supply. The loss is in excess of $6 trillion.

At some point deflation plus more cash should create a new equilibrium. Inflation can occur afterwards simply through creation of more wealth to be pledged as credit.

http://upload.wikimedia.org/wikipedia/en/5/51/Currency_component_of_the_US_money_supply_1959-2007.gif

Notice a sudden increase in the money supply?

http://1.bp.blogspot.com/_3bGnkNeoPxk/SYEBtdpkM3I/AAAAAAAACWk/lgQO6nOmkWk/s400/BASE_Max_630_378.png

[Polemicvol]

Federal Reserve District, the one located in St Louis. There are 12 Federal Reserve Districts, we have to look at all of them for accurate details on the money supply.

Here is a table (http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt)of US Federal Reserve measures of our supply of Money, since 1959. As you scroll through the data, you can see there is no huge dramatic spike in the nation's money supply like you have stated. There has been an increase, but that's to be expected with Bush's infusion of cash into the banking system (the bailout) last fall.

Here's a more detailed accounting from The Fed (http://www.federalreserve.gov/releases/h6/Current/), as of 2/26/09. Scroll down to the end and look as the jump in cash held by the Federal Reserve Banks this past fall. Bailout cash, as I mentioned above.