Summary: Can Obama make America like Zimbabwe? Or is this widespread warning a sign that we’ve become gullible fools? The easy acceptance of this preposterous warning suggests the latter. It’s sad that such a post is necessary. Worse, explaining these facts is unlikely to change the mind of many people believing this nonsense. This is a follow-up to Would a default by the US government help America?, and another in a series looking at the important role of propaganda in modern American politics.
Conservatives have warned that President Obama is wrecking America, perhaps deliberately. The early comparisons were mild.
“What you’re doing is buying into the notion that if we just print some more money that we don’t have and send it to different states, we’ll create jobs,” he said. “If that’s the case, why isn’t Zimbabwe a rich place?”
— Mark Sanford (R, Governor of S. Carolina), CNN, 11 March 2009
In the past year they’ve become explicit.
“Bruce, I’m not trying to turn the United States into Zimbabwe. That would be the guy in the White House, whom you seem surprisingly anxious to defend.”
— Glenn Reynolds (Law Professor at U of Tennessee), Instapundit, 19 February 2010 — Red emphasis added.
Update: Prof Reynolds was circulating the GOP narrative. For a more explicit statement, here is Peter Schiff on Glenn Beck’s Fox News show, 28 December 2009 (transcript here):
SCHIFF: You know, look, I know inflation is going to get worse in 2010. Whether it’s going to run out of control or it’s going to take until 2011 or 2012, but I know we’re going to have a major currency crisis coming soon. It’s going to dwarf the financial crisis and it’s going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.
PAYNE: And what does that mean? For people watching this show, what does that mean for the average American?
SCHIFF: It means their life is going to get a lot more difficult. It means things that they need to buy, things like food and energy, are going to be much more expensive. Ultimately, interest rates are going to rise and their entire standard of living is going to plunge. And I’m hoping the government doesn’t respond to this inflation with price controls because that’s going to make it even worse. Now, you’re going to be waiting in long lines to get basic food items or to get energy because there’s going to be shortages. People might be going to the black market.
PAYNE: You’re talking you’re talking Zimbabwe, Weimar, Germany — I mean, you’re really talking about something like that actually happening in this country.
SCHIFF: It will happen if we don’t change policies. There is still time to change. … I mean, I’m running for the United States Senate, so I can try to change that myself. But if we don’t reverse course, if we continue to stimulate, then we will end up with hyperinflation and it will be like Zimbabwe.
That intelligent and educated people make this comparison — either sincerely or as agitprop — shows the sad condition of political debate in the US. By comparison with this “Tippecanoe and Tyler too” (Wikipedia) looks like The Federalist Papers. This fear of becoming like Zimbabwe has taken root among conservatives, frequently appearing in comments on this website and others. For one sample see this Google search.
Let’s count the ways this comparison fails.
- Obama’s economic policies closely follow those of President Bush.
- The expansion of the money supply took place under President Bush; it’s been flat under Obama.
- Conventional economic theory says that expanding the money supply during a depressionary shock is the correct action.
- There are no significant similarities between Zimbabwe and the USA.
- There are no significant policy similarities between Zimbabwe and the USA.
Below you’ll see a brief analysis of each point. Anyone making this comparison needs to read this: Where to go to learn about economics, and help you understand what’s happening to America and the world.
Update: As noted in the comments, this comparison serves to incite fear much as the equally absurd Bush=Hitler did among liberals.
(1) Obama’s economic policies closely follow those of President Bush.
The recession started in December 2007. In response the Bush Administration and Congress passed…
- Economic Stimulus Act (February 2008) — Gave money to households and businesses (not just rebates and rate cuts), expanded the mortgage lending activities of the Federal Housing Administration, Fannie Mae and Freddie Mac (virtual nationalization of the mortgage lending industry, with the government now the nation’s top subprime lender)
- Emergency Economic Stabilization Act (October 2008) — A massive bailout of the banking system, which is now condemned by the Tea Party Movement.
President Obama’s economic policies continued those of Bush. The bank bailouts continued, without any meaningful reform of bank regulation. As did the stimulus programs. In February 2009, with the recession in its 15th month (by which point most recessions had ended) and the global economy rapidly contracting, Obama signed the American Recovery and Reinvestment Act — bigger and broader than the February 2008 package.
The timing shows the political basis of these warnings about Zimbabwe-ifaction. During 2008 many conservatives mocked those economists who warned that we were in a severe downturn. Such as Glenn Reynolds, with his repetition of “Dude, where’s my recession?” (for examples see these links on Google; for analysis see this and this). Bad news for his loyal readers who failed to prepare. With Obama in the White House, the President gets tagged with every bit of bad economic data. Using Instapundit as an example:
- “ER, SO IS THIS THE HOPE? OR THE CHANGE? Deficit To Hit All-Time High.” (1 February 2010, link)
- “CHANGE: December home sales down nearly 17%: Home sales plunge nearly 17% in December after tax credit deadline extended.” (25 January 2010, link)
(2) The expansion of the money supply took place under President Bush; it’s been flat under Obama.
In February 2009 — after Obama’s inauguration — M2, the broadest measure of the US money supply, was $8.29 trillion. In January 2010 it was $8.45 (not seasonally adjusted; source: Federal Reserve). The same is true for M1, the adjusted monetary base, and the Federal Reserve’s balance sheet. The massive expansion took place in the second half of 2008, during the Bush Administration.
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(3) Conventional economic theory says that expanding the money supply during a depressionary shock is the correct action
By late 2008 the shock to the global economy was as large as that of the early Great Depression. For more about this see…
- ”A Tale of Two Depressions“, Barry Eichengreen and Kevin H. O’Rourke, VOX, 1 September 2009
- “The Labor Market during the Great Depression and the Current Recession“, Linda Levine, Congressional Research Service, 19 June 2009 — The similarities are even stronger now, 8 months later.
During severe economic downturns people increase their savings. The want cash and its equivalents assets (e.g., bank deposits, money market funds, treasuries). Almost all economists believe that the Federal Reserve’s failure to accommodate this desire for cash contributed greatly to the Great Depression. An analogy is an emergency room doctor failing to give oxygen to a patient. This time the Federal Reserve did better, a major reason this shock did not create a depression.
(4) There are no significant similarities between Zimbabwe and the USA
Zimbabwe is a third world state that was never really a nation. The #2 worst failed state on the 2009 Fund for Peace-Foreign Policy Magazine list (Somalia is #1). It has almost nothing in common with the condition of the USA.
- Small, aprox 12 million people. vs. our 310 million.
- Poor, GDP aprox $100/person vs. our $48 thousand/person
- New, government recognized in 1980 vs. our 1788 (one of the oldest government and oldest democracies in the world)
Zimbabwe’s hyperinflation is extraordinary, the second largest hyperinflation on record as shown by this table from “On the Measurement of Zimbabwe’s Hyperinflation“, Steve H. Hanke and Alex K. F. Kwok, Cato Journal, Spring/Summer 2009):
(5) There are no significant policy similarities between Zimbabwe and the USA.
This is too obvious to deserve discussion. Wikipedia has a clear description of the Zimbabwe hyperinflation. As always with Wikipedia, the links are the most useful part.
(6a) For more information on the FM website
To read other articles about these things, see the FM reference page on the right side menu bar, including About the FM website page. Of esp relevance to this topic:
- About Financial crisis – what’s happening? how will this end?
- About Information & disinformation, the new media & the old
Posts about Solutions:
- A happy ending to the current economic recession, 12 February 2008 – The political actions which might end this downturn, and their long-term implications.
- Slow steps to nationalizing the US financial sector, 7 April 2008 — How this will change our society.
- A solution to our financial crisis, 25 September 2008
- A quick guide to the “Emergency Economic Stabilization Act of 2008″, 29 September 2008
- The last opportunity for effective action before disaster strikes, 3 October 2008 — How to stabilize the financial system.
- Effective treatment for this crisis will come with “The Master Settlement of 2009″, 5 October 2008
- Dr. Bush, stabilize the economy – stat!, 7 October 2008
- The new President will need new solutions for the economic crisis, 9 October 2008
- New recommendations to solve our financial crisis (and I admit that I was wrong), 23 October 2008
- A look ahead to the end of this financial crisis, 30 October 2008
- Expect little or nothing from meetings like the G20 – or the Obama Administration, 18 November 2008
- Everything you need to know about government stimulus programs (read this – it’s about your money), 30 January 2009
- Bush’s bailout plan is now Obama’s. His quiet eloquence guides the sheep into the pen, 30 March 2009
- Economists discuss the impact of the stimulus on our recession, 7 October 2009
- Explaining the government’s response to the financial crisis, 3 December 2009
- A lesson from the Weimar Republic about balancing the budget, 10 February 2010
(6b) Afterword
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 word max), civil and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
Also — you can now subscribe, receiving posts by email — see the box on the upper right.
I think the comparison to Zimbabwe is due to Obama’s race. Right wing agitprop often includes a racial racist element. The more apt comparison would be the Wiemar Republic (relatively speaking, but at least it was an industrialized Western economy. Interestingly, I seem to recall that when Bush was president the memory of Wiemar was often evoked…
http://en.wikipedia.org/wiki/Inflation_in_the_Weimar_Republic
ALL theater by the “Repub Party”. All about POWER. More evidence of the simple lack of realistic intent to Govern. Sad. Predictable.
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FM reply: Both left and right have those who advocate a moral obligation to lie when necessary to gain power. AKA the “Noble Lie.” Wikipedia has several excellent examples.
It is actually US government policy to turn the US into Zimbabwe, and it has been a slippery slope since at least Reagan.
* They rarely see a merger they don’t like.
* They do nothing about monopolists and oligarchs.
Bush administration killed the MS trial, approved Delta NW merger. Obama administration approves drug company mergers. Clinton, Bush and Obama all promoted the largest banks & mergers.
I think a graduated corporate income tax that eats into the profits of the largest corporations would be best. The biggest changes that have benefited the wealthy are not the individual income tax cuts, but the corporate tax cuts, and the inheritance tax cuts. Without a graduated corporate income tax we could have continuous bailouts.
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FM reply: I know little about Zimbabwe, but doubt that its people worry about excessively large multinationals. But US policy has been to cartelize the nation since the New Deal. The waves of bank failures in the early 1990s and today are part of that process (a feature, not a bug), “reforming” one of the few remaining industries with strong regional companies.
“the inheritance tax cuts.”
The inheritance taxes were, by design, almost totally ineffective at breaking up concentrations of large wealth. So the cuts had little impact on wealth distribution or government reventue.
So they elected McSame after all.
Leftists are in power in the US, but blaming others is easier than to govern. Heh!
There is no comparasion among Bush administration and its policies, President Obama is entirely a different who has his own vision for a better USA. comparing obama with bush is infact insult of best ever US president.
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FM reply: The facts say otherwise, as I (and many others) have described in detail.
* Obama’s national security team: I hope you didn’t really believe in change?, 26 November 2008
* Obama supporters mugged by reality (and learn not to believe in change!), 9 December 2008
* Change you should not have believed in, 10 February 2009
* Quote of the Day, 20 May 2009 — Connect the dots between Bush and Obama to see the nice picture.
* Stratfor looks at Obama’s foreign policy, sees Bush’s foreign policy, 30 August 2009
* Motto for the Obama administration: “The more things change, …”, 5 September 2009
* Change, the promise and the reality, 11 October 2009
The reference to Zimbabwe should be viewed as comparative and dramatic license rather than a potential destination. It’s tail end extreme as were the references to Bush being Hitler during his entire Presidency. The label is meant to define Obama but also to put in perspective that we’re in real financial trouble. When I explain the value of education to my children I could show them life as a non-college graduate or life as a homeless person. Both are viable alternatives but the extreme makes the stronger illustrative point. Senator Bayh has it correct, partisanship prevails which means the situation analysis will get more extreme and more elementary to raise the ire of the rabble – on both sides.
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FM reply: I disagree. Reynolds — an attorney and skilled writer — probably makes comparison with the deliberate intention of evoking fear among his loyal readers. Saying “Obama will make America like Spain” might be accurate, but does not produce the intended effect. Much the same as many used the Bush = Hitler comparisons. These tools get results, supported by the complacency with which they’re greeted by people such as yourself. They poison our political discourse. We the result in Washington: gridlock, the inability to deal with America’s pressing domestic and foreign problems.
American will have take a big step to maturity when liberals condemn influential liberals saying “Bush = Hilter”, and conservatives condemn Reynolds and others for saying Obama tries to make America like Zimbabwe.
Mr. Obama lacks the physical courage of Mr. Mugabe, so it is an unfair comparison.
Zimbabwe has a head start of a few decades, but Mr. Obama clearly has his sights set for something that shines inside his own mind far more brightly than any reality — just as Mugabe had his sights set on a glittering goal.
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FM replies: Do you have any basis for these smears, or do you just make them up? As stated, they are schoolyard insults.
Link to graph showing the disparity of incomes approaching 1920’s level. 1% of the population receives 70% of all income. “Wealth Disparities in U.S. Approaching 1920s Levels“, Seeking Alpha, 21 February 2010.
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FM reply: And your point is? Was America like Zimbabwe in the 1920’s?
FM, you’re absolutely correct that printing money in a pre-Depression recession is the right policy. But it’s also true that too much money-printing is exactly what causes hyperinflation.
However, as long as there are over a million US houses whose nominal market value is less than their current mortgages, the US doesn’t need to fear hyperinflation, and should have little fear for inflation — probably the least costly way to help the economy adjust to the over-investment in house construction. If the printing presses are still running after house prices recover, than inflation fears will be more close to realization.
On Rhodesia – Zimbabwe — When whites ruled the racist aparthied Rhodesia, it was a huge agricultural exporter and Rhodesian blacks, far poorer than whites, were nevertheless far better off than blacks in most other countries. I believe the average was higher than in South Africa, but it might have been only close. Mugabe follows the anti-colonial, anti-capitalism, Marxist idea of using gov’t to redistribute from the successful producers, to those who haven’t been so successful, especially from his own tribe and his chosen supporters. In his successful regime change and name change to Zimbabwe, he began implementing anti-capitalist policies, which have clearly bankrupted and hyperinflated his country’s economy.
Obama’s sympathy for far left anti-rich rhetoric, especially in opposition to the tax cuts (for the rich!), leaves him following a path of very mild increases of taxes on the rich producers. Punishing the successful for their success, and rewarding the lazy/ unproductive/ unlucky/ irresponsible for their bad luck, bad habits, bad results — such sticks and carrots will certainly lead to less success and more failure. I think Glenn is justified in using Zimbabwe as a negative extreme example since it is a current state (Weimar is not), and as Rhodesia it was successful, in the lifetimes of most American voters (were they to look at history).
Had Argentina accepted policies as bad as Mugabe imposed, it would likely be more often used– Glenn and others on the right also often criticize Chavez, for similar failed policies. But America is more like Rhodesia than like Venezuala, in that the US doesn’t depend on export of raw materials (which looks like an economic curse, more than a blessing. No need for taxes; no need for democracy – ‘No representation without taxation’.)
The anti-gov’t Tea Party’s are taxpaying America’s response to avoid the hyperinflation fate, and will likely be successful.
You’re taking Glenn’s “Dude, where’s my recession” a bit out of context — since the successful Bush tax cuts of 2003, the NY Times & most leftists had consistently bad mouthed the US economy, and published pessimistic reports about the near-recession or likely bad economy, in 2004, 2005, 2006; while there was positive economic growth in all quarters. I would even argue that the anti-tax cut MSM helped cause the depth of the crisis by not recognizing and celebrating the excellent 2005-2006 Bush/ Republican economy — and calling for gov’t spending cuts then, rather than calling for more spending.
You also gloss over the 2006 Dem election victory in Congress — Bush’s last two years were with a Democratic Congress. And Congress makes the budgets, so the Dems have been spending wildly since taking control in 2007. This is similar to the good economy Clinton years of 1995-2000, when Clinton was faced with a Rep. dominated Congress that opposed Clinton directed big spending.
Finally, you seem unable to realize that Bush’s big-spending was NOT so popular with a majority of conservatives. Most liked his desire for victory in Iraq and against terror, many very much liked his pro-life policies, almost all liked his tax cuts, but many, even probably most, didn’t like his big spending. The problem was, and is — the others guys would spend EVEN MORE.
Big spending Reps or HUGE GROSS spending Dems?
I voted McCain, knowing he was a Big Spender. But with Tea Parties, now I’m glad Obama won — because he doesn’t want to lose in Afghanistan, and he doesn’t want to be the President that let Iran get a nuke (tho he probably will be); and the domination of US gov’t by Big Spending Dems means the small-gov’t registered reps can do some primary challenges to get small gov’t candidates.
Also, and here’s the electoral earthquake coming thanks to Obama winning — it’s going to be OK for blacks in America to be conservative, and even vote Rep. There are quite a few blacks going thru the Tea Parties and who will be challengers in primaries, see Issac Hayes vs. Jesse Jackson Jr. in Chicago. When more than 20 or 30% of the blacks get off the Dem voting plantation, Dems will have huge problems getting elected. (I estimate over 10% of black voters will vote Rep in 2010, after 95% voted Obama-Dem in 2008. The number voting Rep will intermittently rise after that.)
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FM reply: Tom, your economic theory and history are consistently faulty. After so many comments which I have dutifully correct, this long stream of nonsense is beyond my interest to deal with. Let’s take a look at your past comments, to see if your present one should be taken seriously. Remember that the US recsession started in December 2007; the global crisis in September 20008.
* “Oil is going to be priced in Euros soon” (6 June 2008)
* “I expect a recessionary-type reduction in real wages, yet with positive, slow growth.” (13 June 2008; real wages have not dropped in the US since 1970 (source), probably not since the 1930s)
* “…pessimism about the future is translated by TV into a NOW — we ARE in a recession. And a majority of voters believe this defective TV message” (17 June 2008)
* “And even after the huge housing bubble pop, and despite the oil increase, the US economy stubbornly refuses to go into the recession the anti-market/pro-gov’t elite are rooting for” 29 July 2008
* “My freely given opinion, perhaps worth double the price, doubts that oil will drop to $100/barrel before the election, nor afterword. Because the USD will continue to slowly or quickly devalue to reduce the bigger housing price crisis.” (26 August 2008, since when the USD is up 10%. Oil was aprox $67 at the Nov 2008 election, and is aprox $80 now).
* “{FM’s} warnings of Nov. 2007 haven’t materialized into a crisis yet” (28 August 2008)
* “If the coming recession is like the positive GDP growth ‘recession’ starting in Q1 … then it won’t be so sharp, nor such a huge problem. … that will likely mean 18 more months (from Sep 2008) of low GDP growth, and slower income growth — possibly the ‘new’ recession” (written in month 9 of the recession, 6 Sept 2008)
* “‘Where’s my recession’? is a valid issue.” (23 Sept 2008)
* “we now have a recession, still not a crisis” (28 Sept 2008)
* “But the near-recession we’ve been in…” (3 Oct 2008)
* “While this site has long been arguing about the huge scale of the problem, there has been real GDP growth rather than ‘recession’ in the last year” (9 Oct 2008)
* “I’d guess the fear that many experts say should be ignored, inflation, would be a more likely candidate for an ‘unexpected’ event.” (on the eve of the largest deflationary bust since the 1930s, 16 Oct 2008)
* “My current solution: the gov’t should lower taxes, AND lower borrowing (from the Chinese or anybody), but increase spending. By literally printing money. The gov’t should give everybody $5000 or $10 000 of free spending money.” (8 Dec 2008)
* “We need more cash to increase aggregate demand. Bernake should really just print it — not tax, not borrow, just print” (4 Dec 2008)
* “I believe we are in a depression,” (28 Jan 2009)
* “FM says ‘There is not enough money to bailout everybody.’ The Fed can print more, and doing so is better than the triage” (26 Jan 2009)
This is just a brief look at your forecasts and analysis. This does not include your love of bailouts (e.g., here), ignorance about statistics (here), inability to understand the causes and appropriate treatment of this recession, and — most important — love of funding the government through borrowing — cutting taxes in good times and bad:
If the US government eventually does have a massive financial crisis, conservatives like Tom Grey will be among the most guilty of leading America to ruin. Reading Grey’s mad recommendation to always cut taxes reminds me of a famous comment by Blackstone (the Founders did not follow his advice):
Personally, I have never heard anyone say that USA is anything like Zimbabwe or any other country. Seems to me, it is just hyperbole by activists. I read a lot of news in the morning, but don’t take this kind of stuff seriously.
I guess my question is, is the state of the conservative argument to be remembered as those coughed up by Glenn Beck, Glen Reynolds, Sarah Palin, and Andrew Breibart? History is going to be cruel to the conservatives. I think it would be nicer to be remembered by Mark Steyn and John Derbyshire.
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FM reply: The measure of propaganda’s success is how many in the target audience “take it seriously.” In few things are our own thoughts and behaviors reliable guide to their broad social effect.
What past prez is closest to O’Bama? Jimmie Carter comes to mind mostly in not seeing the consequences of his actions and thinking his views represent everyone’s, and that his morality should be everyone’s. Obama clearly tries to undermine the Constitution in order to make his ideas law, in this respect he most is like Huey Long (he never made it to the White House, but had he not been assassinated he very well might have)
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FM reply: Do you have any evidence for your assertions? Or do you just make these smears up? The Huey Long comparison is esp weird.
In opening a lawyer is permitted to state the “facts” he reasonably expects to be admitted into evidence and the reasonable inferences that can be drawn from such “facts”. In closing a lawyer is permitted to argue the “facts” actually admitted into evidence and the reasonable inferences that can be drawn from such “facts”.
Many excellent lawyers claim that they can win any case during opening statement. They also claim they will accept the burden of proof/persuasion, if they can open first. In other words, even if they represent the defendant in a civil or criminal case, they want to open first.
As a reuslt lawyers spend an incrediable amount of time crafting their opening statements to cleverly appeal to the confirmatory biases of the jury. There is nothing wrong with this, except some lawyers cynically stretch the meaning of “reasonable” inferences beyond imagination.
Not surprisingly Glenn Reynolds, as a lawyer, uses this approach in his blog. The success of his approach is readily apparent in Comment No. 9. There is nothing anyone can do to disabuse No. 9 of his confirmatory bias that Obama is a bad president.
I comment here not to pick a fight with No. 9, as I acknowledge that not every confirmatory bias is incorrect. I comment merely to point out two things about advocacy that every good trial lawyer knows: (1) that the hardest mind to change is one that is already made up; and (2) that the hardest mind for a juror to change during deliberations is his own.
Mr. Obama’s campaign was financed by public sector unions, trial lawyers, overseas contributors of unknown provenance, wealthy wall streeters, academics, journalists, and media moghuls. He is trying to pay them all back, but it will take some time.
Mr. Obama is expanding the public sector and public spending and public deficits at a record pace. This will help most of his friends and supporters. He will have to disallow any tort reform so as to give his friends in tort law a hand up.
The overburdened small business private sector tends to provide the most job growth, but unfortunately it did not support Mr. Obama very well. Consequently, it is near the breaking point, with no relief in sight from the current US government.
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FM reply: And who supports the Republicans? Angels? Manna from Heaven?
As I’ve said before, racism is the subtext for the loony bin teabagger right wing these days. The only similarity that matters to those glenbeckian zealots is that the US, like Zimbabwe, has a black president.
According to the Zimbabwe embassy to Sweden, becoming more like Zimbabwe might be a good thing. Eg:
and
Now what could be nicer than that?
A nation with excellent agriculture , established education and healthcare for all . A popular , charismatic leader and his wife , a lady whom everyone admires and loves , calling her the Mother of the Nation .
But powerful lobbyists start to ensnare the idealistic young leader . His saintly wife dies , and he falls into decadent ways . The national debt soars and the IMF prescribe severe cuts in public services . Drought begins to cripple agriculture . Disallusioned , hardened war veterans , finding no land fit for heroes , start to take what they want with violence ; the President fears them and can only back their demands . The President blames immigrants from the 19th c . After all , do they not have white-painted houses and swimming pools , while the true blood of the nation lives in hovels ? The drought tightens its grip . The war veterans are crazed by PTSD and have no idea how to farm . The President and his cronies remain rich ; they always have US$ to spend . Finally , to prevent interference from their neighbours , they allow a malleable opposition candidate to emerge ; the masses think their problems will be solved , the blessed rain starts to fall , the journalists go home , the Chinese move in ,
FM: “The expansion of the money supply took place under President Bush; it’s been flat under Obama.”
True, but is it beside the point? Who cares about M1, doesn’t the increase in the deficit, and the purchase of mortgage backed securities, effectively increase the money supply, just not in ways one can see?
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FM reply: This is not correct. In fact, it’s backwards.
* The government deficit does not by itself increase the money supply.
* Increasing the money supply (of which M1 is a measure) will produce inflation once the economy returns to normal (high levels of employment and capacity utilization).
* If the Fed monitizes the deficit, then the money supply increases. Which is why I noted that the Federal Reserve balance sheet has been stable (little monitization) during the Obama Administation.
* The deficit has been financed by investors seeking safe assets, plus an increased savings rate by US households.
* Federal Reserve buying mortgages does not increase the money supply, any more than does your selling a car and buying a pool. The Fed has shifted its portfolio from treasuries to mortgages and junk.
* Treasury and Fed activities are among the most transparent of the US government.
You make good points. But Zimbabwe comparisons are a bit of a red herring since you are right: it is a rather small country in the global scale of things whereas the US is, economically at least, the Big Dog.
Some articles about this that make rather strong arguments for the US being more or less a ‘failed state’ or much closer to potential melt-down than your chipper analysis above would tend to suggest:
* “Is the United States a Failing State?“, Barry Weisberg, Centre for Research on Globlaization, 23 February 2010
* “Debt Dynamite Dominoes: The Coming Financial Catastrophe – Assessing the Illusion of Recovery“, Andrew Gavin Marshall, Centre for Research on Globlaization, 21 February 2010
I find the second especially good. Essentially it argues (correctly I think) that the world is increasingly be run by an international elite class, whose past track record indicates that widespread poverty and death are not anathema to their sense of what’s perfectly okay.
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FM reply: I see the exact opposite. That Americans could call the US as a failed State, like Somalia or Zimbabwe, shows the parochial — even deslusionally insular — outlook of the very rich and secure. Which we are, compared to most of the world’s people. The rich man gets a hangnail or toothache, and considers himself among the world’s most unfortunate. Meanwhile people are starving, are enslaved, have no hope for anything beyone mere survival. This level of nonsense is typical of the Centre for Research on Globlaization.
This is comment # 15,780. The last comment, except for one’s I’ll add. Comments are off.
“Inflation Predictions”, Paul Kurgman, New York Times, 15 December 2011 — Conclusions:
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