Of course, Beijing’s not worried that the United States government will default on its bonds. Rather, the concern, now being expressed openly for the first time, is that the United States will adopt the time-honored debtor’s remedy of inflating its currency and paying back its debts in shrunken dollars.
Hindraker’s article was first posted at Powerline.
The current average price of gas in the US is $1.91. The Obama administration together with a Democrat-controlled Congress plans to increase government spending to unprecedented levels which has many, including Warren Buffet, predicting inflation. The assumption is that the US will charge taxpayers for part of the budget, borrow as much as it can from China and other countries, and create fiat money for the rest (fiat money is printed or otherwise created out of thin air).
President Obama’s popularity is still very high. I’ve lived through a period of inflation. What happens first is that the dollar will drop in buying power because there is too much money chasing too few goods. The price of gas will go up. Then the government in panic will try to control the price of gas instead of addressing the real problem of too much government spending. The result of price controls will be a severe shortage of gasoline. When these things happen, President Obama’s popularity will plummet.
Readers beware. Do you think the economy is bad now and that the stock market is as low as it can go? Forget it. The business environment has become hostile and our president is either a calculating meglomaniac, who is creating this crisis on purpose, or a economic ignoramus, who hasn’t a clue what he is doing.
Natural Gas Rigs Shutting Means Prices May Double, bloomberg.com. This article is about natural gas; oil and natural gas production are often intertwined; companies will also reduce crude production (e.g., Company Cheif: Oil project suspension to dent supply) and hence crude prices will go higher. Now a possible scenario is that rising prices due to low supply and inflation could converge and create a sudden spike in price; then the government will try price controls and that will lower production even more. Then there will be actual shortages.