I will be putting something up around possible hyperinflation this weekend. I will be quick today because I have a few thirsty friends that are dying to catch the end of happy hour.
Itulip posted a great piece today around Argentina's hyperinflation.:
Does the economy have the ability to withstand a pulling of liquidity by the Fed after viewing this chart?:
I am not sure they can afford too. Itulip makes some great points here. Volker had the opportunity to raise rates(pull liquidity) because he had the luxury of rising employment which allowed him more flexibility to inflict pain and crush inflation by raising the lending rates into the teens.
Our Fed is in a much different predicament. We need to ask ourselves: With soaring unemployment, does the Fed have the ability to inflict pain and market discipline at a time when unemployment is soaring to levels not seen since the 1930's?
When you pull liquidity you do a lot of damage to the economy because borrowing becomes much more expensive. The USA dipped into a deep early '80's recession after Volker pulled liquidity.
I am starting to question how we can ever do it today as we sit in a depression with soaring unemployment. We do not have the ability to take much more pain without imploding the economy.
As a result, you need to wonder if the alternative is to keep pumping the system with dollars which then creates a perfect backdrop for crushing inflation and potential hyperinflation!
More on this tomorrow.
Pretty boring day in the markets today. Must of been the Michael Jackson saga.
I mean come on folks, lets get our priorities in order! The death of the "king of pop" is much more important than the potential destruction of the US economy!
Don't even get me started.