Dick Morris
March 3, 2009|

In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled.  

You do not have to have a degree in economics to understand that when governments turn on their printing presses and massively increase their nation’s money supply – their money becomes deflated in value, to the tune of the percentage of the currency’s increase. 

A tidal wave of inflation will strike this nation sometime during late 2010 or early 2011 when the economy begins to expand again, “just in time” for the mid-term elections.  The Democratic Congress and President Obama will move heaven and earth to make things happen, so that they can hold on to their No Checks and No Balances grip on the US Government.  (Count on it!)

What will massive inflation do? It will strip out the value of everything that every responsible man, woman, and company has set aside in savings, placed in government bonds, or otherwise has squirreled away.  When this hyper-Inflation tidal wave strikes all that money by design will lose a staggering 66% of value. Or in other terms every dollar you have will become worth a piddley-ante .33 cents.  This is not by error, but by design.   

Gold has been sold to the public as being recession proof and inflation proof, I can tell you based on memory that this is not at all so.  The last time Gold really hit the roof was in the mid 1970’s.  The question that should be asked is how has gold done in intervening 35 years between then and now? It went down, way down from its great high to the place that gold mines were being shut down all over the place as it was no longer profitable to mine gold.  And then gold was mediocre for a very long time.  

Just as their was an oil bubble, a housing bubble, and all the other related bubbles, there is now a Gold bubble.  And when that bubble pops the price of God will precipitously fall, just like the oil and housing market did.  The problem with metals is you can not eat them.  You can not pay your mortgage, or make car payments with Gold.  You can not make insurance or healthcare payments with Gold, buy gasoline or use it in the grocery store.  The point is when gold’s price drops and demand flounders, metals lose all liquidity.  It would be wise to jettison your gold while it is high at near peak, then to ride the price back down and find you can not sell it.

What will hold its value? – You might laugh at what we are going to say here, but housing and investment property, raw goods and minerals that can be piled up, oil, natural gas, and gasoline will all greatly increase in value in a runaway inflationary market.  Corn, wheat, rice, soybeans, cattle, pigs, chickens will all dramatically rise.

The coming inflation is coming to be the “cure” for the housing bust, and the subsequent 30 % or so drop in housing and property values that started all this mess.   The result of this is that all the people with “underwater” mortgages, the sea will suddenly part and their real estate will skyrocket 40, 50, or 60 %.  Resulting in homeowners, business people and investors to again profitably begin to buy and sell their properties, effectively ending the housing crisis.   

This great wave of inflation will have a great effect on stocks, retirement funds, IRAs and other stock based equities that have suffered staggering losses, greatly inflating their value making them profitable one again.

It is not our purpose here to speak here of investment plans and strategies.  We are just expressing that which we see and hear, as a warning to fellow believers. 

Once again speaking to the poorest of believers here; dry food goods and canned goods will keep for quite some time (Years) and in a the coming world-wide overheated inflation, any stored away food that has been bought while the prices are low, is a wise and sound strategy to keep bread on the table for one’s family and household, in such tumultuous times.    

Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-82, and perhaps since the Great Depression.

So where is the money? If it isn’t being spent, where is it?

It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway — not the one in the dealer’s lot. Businesspeople are buying T-bills, investing the money and saving it. They aren’t spending, either.  (Understand that with what Obama is doing that all these debts and loans will lose 66% of their value as wages and prices rise in this tidal wave of hyper-inflation. Know that businesses are ready and waiting for this to happen, and going to ride out this wave and profit from it for all it’s worth.  It’s the Obama tax policy that has these people shaking in their boots.  If your are anywhere near the 250,000 mark Obama has created as his “Millionaire tax”, when this inflation strikes, you will blow past that 250,000 mark and suddenly be paying taxes on a level like you have never seen, as the Bush tax cuts run out, and Obama’s tax increases kick in at the same time. Against who? All the rich that this coming hyper-inflation will create.  You will be hit full-blast taxation as you are coming and going on all your inflated earnings, inflated profits, inflated houses and properties.)

But one day this recession — despite Obama’s best efforts — will end and things will begin to look up again. Then we can expect all of this money to come out of its parking space and get back on the highway of commerce.  All at once. The inevitable result will be double-digit hyperinflation.

Since this spending and borrowing splurge is not confined to Washington DC, but is being mimicked in countries all over the world, the inflation will not strike just this country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II), it will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics text books. (At that time the debt for the Trillions paid out in the Stimulus packages will come due. [I have read of the true figures being between 13 and 39 trillion] All that money that has been wasted on political paybacks and given to political special interests, is going to be paid for in full -- on the backs of the poor that live hand to mouth, and middle class. Creating in that time even greater needs and greater financial uncertainty – all once again created by design in this scheme to create circumstances that there will be public outcry for the continuation of Obama’s  grand socialist power grab)  There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.

The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obama’s excessive spending and trillion-dollar-plus deficits. This spending, of questionable utility in overcoming the current recession/depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.

Proof that his spending will have little impact on the depression is the vast increase in money supply with no commensurate improvement in the economy. Providing money, via spending hikes or tax cuts, does not guarantee that the money will be spent. Tax cuts can be saved and spending increases, while surely spent once (on the initial project), can rapidly lose their multiplier effect as wage-earners on the government payroll bank their money just like those who get tax cuts will do. Getting out of this economic mess depends on consumer and business confidence, a faith that Obama is eroding with his looming tax increases as rapidly as he tries to kindle it with his excessive spending.

None of this should come as any news to Obama. He likely knows all this.
But he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession. He puts ideology first and the economy a distant second.

The stock market has figured out his priorities and is responding accordingly. One can only hope that voters also eventually realize what is going on. (That is why all investors are cashing in their chips now despite their staggering losses, when the market bottoms out there will be “a buy” for all we described above, like you have never seen. This pent up rage to invest and get in on the bottom floor has all these types salivating and dreaming of watch their investment vehicles increase exponentially by the hour. 

But these also know that the Obama tax man waiteth for all this activity – and that has them filled with fear as they will no longer be capitalist entrepreneurs but slaves to feed and keep Obama’s giant socialist machine running.