[R-G] [BillTottenWeblog] Get ready for Obama's coming hyperinflation

[Bill Totten]

San Francisco Examiner editorial (April 29 2009)


Santayana's maxim - those who refuse to learn from history are doomed to
repeat it - has grown threadbare from heavy use. But it unavoidably
comes to mind this week, as President Barack Obama and his fellow
Democrats on Capitol Hill blithely put the final touches on the chief
executive's proposed 2010 federal budget.

With an unprecedented deficit that's approaching $2 trillion, this
budget proposal is a surefire prescription for hyperinflation. So every
senator and representative who votes for this monster $3.6 trillion
budget will be endorsing a spending spree that could very well turn
America into the next Weimar Republic. For those too young to remember,
that was the period in Germany in the years between the two world wars
when people needed wheelbarrows full of money to buy a loaf of bread.

In a 1993 interview, Harvard University law professor Friedrich Kessler
offered a chilling portrait of the Weimar Republic: "It was horrible.
Horrible! Like lightning it struck. No one was prepared. The shelves in
the grocery store were empty. You could buy nothing with your paper money."

Thanks to the expanding profligacy on Capitol Hill, a version of such
economic hell will likely happen here, according to two prominent
economists. Johns Hopkins University professor Steve Hanke notes that
the Federal Reserve's balance sheet "has more than doubled in size since
August. Unless the Fed shrinks its balance sheet", he warns, "...
inflation will roar back with a vengeance".

The printing presses have been running nonstop since Congress approved
the Troubled Asset Relief Program and the $787 billion bailout of
insolvent firms that went wobbly after abusing "easy credit". Yet with
interest rates now close to zero, Hanke points out that the Fed is
merely "prescribing more of the same".

In their groundbreaking Monetary History of the United States (1971),
Anna Schwartz and the late Nobel Prize winner Milton Friedman found that
then (as now) a huge influx of foreign capital accompanied the early
stages of Weimar hyperinflation. Schwartz, who today believes the
"systemic risk" cited as justification to recapitalize failed financial
institutions was just an excuse to save bankers' hides, agrees that
massive inflation is "unavoidable".

There have been other, more recent, bouts of hyperinflation. After years
of deficits, the former Yugoslavia tried to print its way out of a
similar predicament, then imposed price controls to counter the
inevitable fifteen to 25 percent annual inflation rate. Economic
collapse quickly followed the worst hyperinflation in history. On
November 12 1993, one million dinars could be traded for one German
deutsche mark; by January 4 1994, the exchange rate was six trillion to one.

With Obama's reckless 2010 budget - which was passed without a single
Republican vote - Democrats are playing with inflationary fire.

http://www.sfexaminer.com/opinion/Examiner-Editorial-Get-ready-for-Obamas-coming-hyperinflation-44030232.html


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