U.S. bailout package will spark inflation and shift the burden to foreign investors

[w¡n9Nµ7 §£@¥€r 123]

TORONTO, Jan. 23 - To pay for its multi-trillion dollar bailout and stimulus packages, the Obama administration will print money at an unprecedented rate, a course that will drive up inflation and drive down the greenback while shifting a large part of the financial burden onto foreign investors, finds a new report from CIBC World Markets.

The report predicts that like Argentina in the late 1980s and Zimbabwe today, the U.S. government will simply create more money to fund its plans. "If the central bank prints it, someone will spend it," says Jeff Rubin, chief economist and chief strategist at CIBC World Markets. "Already U.S. money supply is growing at a nearly 20 per cent rate in the last three months and the printing presses are just warming up. And there's no shortage of more troubled assets to monetize along with $1.5 trillion-plus federal deficits to keep money supply growth chugging along in the future.

"As it buys up spread product, the Fed will leave Treasuries to be mopped up by foreigners. Since outsiders, like the People's Bank of China, now own over 50 per cent of America's debt, there has never been a better time to reflate. Why default on your taxpayers when you can default on someone else's? A 10-year Treasury bond will, of course, mature at par, but who's to say the greenback won't sink 40 per cent against the Yuan over its term like it did against the Yen between 1971 and 1981?"

http://www.cnw.ca/fr/releases/archive/Janu...9/23/c2094.html

[Peikko 1,575]

I have to say, I don't much like the 'print and spend' solution. Seems to me this is another attempt to paper over the cracks because the cracks are deeper than expected. Sadly, I don't think anyone has a palatable solution right now.

[luckytxn 2,265]

Wow. Madame Cleo and I agree about something. Hope the sun rises tomorrow.

Usually and historically printing and putting into circulation a lot of money causes inflation to spiral and then interest rates has to rise to throttle that. Unemployment usually ensues. There are a host of other problems that come with it too. Most are seeing our government as helping but this is actually hurting us in the long run.

Of course we know the additional bailout and stimulus is going to go higher after the two parties get their greedy hands on it. I will just pray that the damage is not too bad.

[dalegg 143]

Usually and historically printing and putting into circulation a lot of money causes inflation to spiral and then interest rates has to rise to throttle that. Unemployment usually ensues. There are a host of other problems that come with it too. Most are seeing our government as helping but this is actually hurting us in the long run.

What I don't understand is how they could so quickly go down this road. Just a few months ago the Bush Administration was heavily criticized during the campaign for creating debt at historical rates. The low unemployment and relatively good economic conditions of most of the last 8 years were always called hallow because of the deficit that went along with it. High debt=lower dollar value=bad economy=low employment& bad future. I remember this argument!

So, if a high deficit and trillions of dollars of debt are bad in Bush's day regardless of apparant economic conditions, then why will it be good in Obama's days? Is the argument now suddenly null and void because the problem is worse?

You cannot put out a fire with Gasoline- unless its a really big fire?

[luckytxn 2,265]

It is not ok supposedly. The one time it is ok to run a Fed deficit historically is time of war. We were in a supposed war but we all know the budget deficit was way more than war costs. We had a big increase of Government spending. Coupled with big tax cuts. I hated it and saw disaster but the economy kept humming along until last year. Of course the economy taking a huge stumble was from many causes.

I am just guessing here but Obama and his cohorts may be doing what seemed to work in the past. To do nothing now would seem detrimental to the people. Everyone is used now to the Government having a hand in our economy and bailing us out. Not many see the historical perspective anymore.

[SAT 9,609]

TORONTO, Jan. 23 - To pay for its multi-trillion dollar bailout and stimulus packages, the Obama administration will print money at an unprecedented rate, a course that will drive up inflation and drive down the greenback while shifting a large part of the financial burden onto foreign investors, finds a new report from CIBC World Markets.

The report predicts that like Argentina in the late 1980s and Zimbabwe today, the U.S. government will simply create more money to fund its plans. "If the central bank prints it, someone will spend it," says Jeff Rubin, chief economist and chief strategist at CIBC World Markets. "Already U.S. money supply is growing at a nearly 20 per cent rate in the last three months and the printing presses are just warming up. And there's no shortage of more troubled assets to monetize along with $1.5 trillion-plus federal deficits to keep money supply growth chugging along in the future.

"As it buys up spread product, the Fed will leave Treasuries to be mopped up by foreigners. Since outsiders, like the People's Bank of China, now own over 50 per cent of America's debt, there has never been a better time to reflate. Why default on your taxpayers when you can default on someone else's? A 10-year Treasury bond will, of course, mature at par, but who's to say the greenback won't sink 40 per cent against the Yuan over its term like it did against the Yen between 1971 and 1981?"

http://www.cnw.ca/fr/releases/archive/Janu...9/23/c2094.html

In traditional theory, a lower dollar value makes imports more expensive, and makes US exports less expensive.

If we live in a world of basic economics. The demand for imports will lessen, ergo curtailing the trade deficit in part.

In fact, I dunno if that is in fact what is happening.........

[geezer 1]

I think the real unspoken fear is of Deflation and insuing Depression.

It appears that many of the largest economies in the world are bankrupt.

There is no bankruptcy court a nation can go to to bail its self out. The only thing they can do launch stimulus packages, print money and pray that deflation and depression dont hit big time.

[SAT 9,609]

I think the real unspoken fear is of Deflation and insuing Depression.

It appears that many of the largest economies in the world are bankrupt.

There is no bankruptcy court a nation can go to to bail its self out. The only thing they can do launch stimulus packages, print money and pray that deflation and depression dont hit big time.

They can go to the IMF.......but at this rate, the IMF will be broke in 32 minutes..........

[geezer 1]

.

They can go to the IMF.......but at this rate, the IMF will be broke in 32 minutes..........

The IMF is just a bank funded by governments, of which BTW the us is the largest contributor.

[SAT 9,609]

I think the real unspoken fear is of Deflation and insuing Depression.

It appears that many of the largest economies in the world are bankrupt.

There is no bankruptcy court a nation can go to to bail its self out. The only thing they can do launch stimulus packages, print money and pray that deflation and depression dont hit big time.

They can go to the IMF.......but at this rate, the IMF will be broke in 32 minutes..........

Aren't they supposed to have a fund? for gov'ts in need to tap into? in times of need? temporarily?

Tho I dunno how much cashola is in this fund. But they had to give iceland credit already.

As much as they are hated, the IMF has helped many nations thru it's crisis.

But this time, it is a scale never seen before in IMF history.

And who the hell is behind the IMF anyway? is it Taiwan?

[SAT 9,609]

I think the real unspoken fear is of Deflation and insuing Depression.

It appears that many of the largest economies in the world are bankrupt.

There is no bankruptcy court a nation can go to to bail its self out. The only thing they can do launch stimulus packages, print money and pray that deflation and depression dont hit big time.

They can go to the IMF.......but at this rate, the IMF will be broke in 32 minutes..........

Very interesting.........one of the founders of the IMF is suspected in 1950 of being a spy for Russia.....

and confirmed in 1991. Long dead......Harry Dexter White.......

[geezer 1]

"Aren't they supposed to have a fund? for gov'ts in need to tap into? in times of need? temporarily?

Tho I dunno how much cashola is in this fund. But they had to give iceland credit already."

The IMF will be no help to the government of the USA or the other big counties. It gets its money from these countries. You can not get money from the same counrty you are trying to help.

As I say Deflation and Depression is the real unspoken fear. Tt appears the chances of this are still pretty low, but its becoming more and more possible..

Edited January 25, 2009 by geezer

[SAT 9,609]

"Aren't they supposed to have a fund? for gov'ts in need to tap into? in times of need? temporarily?

Tho I dunno how much cashola is in this fund. But they had to give iceland credit already."

The IMF will be no help to the government of the USA or the other big counties. It gets its money from these countries. You can not get money from the same counrty you are trying to help.

As I say Deflation and Depression is the real unspoken fear. Tt appears the chances of this are still pretty low, but its becoming more and more possible..

I know the IMF can't help us, it is however, helping the smaller economies. Like Iceland.

Like you said, it gets most of its money from the larger gov'ts. I would like to know how much of this money is going to end up back in our economy.

And why do we contribute so much to the IMF? it's in the dozens of billions........

[luckytxn 2,265]

Actually Geezer there is other things that can be done but they are very painful. It will be best in the long run though to not try to make the downturn so painful. The printing of more money and what the government is planning on doing is supposed to be the wrong thing to do.

[SAT 9,609]

I think the real unspoken fear is of Deflation and insuing Depression.

It appears that many of the largest economies in the world are bankrupt.

There is no bankruptcy court a nation can go to to bail its self out. The only thing they can do launch stimulus packages, print money and pray that deflation and depression dont hit big time.

I forgot to mention that I don't think that many of the worlds largest economies are bankrupt.

May be France and Germany bordering it.......that's about it.