The weakening of the dollar, the rise in oil prices, the rise of the stock market when there is still double digit unemployment, and declining economic activity would suggest that we are heading towards hyperinflation. Economists say that hyperinflation is out of control inflation, with no equilibrium (or balance) in site. Is what the Obama administration, the Federal Reserve, and the legislative branch of the government helping the situation?
Let’s take a look at Japan in the 1980’s. They had an economic bubble that sent the Nikkei to 40,000. Then the bubble burst and real estate prices dropped 80%. The Nikkei lost 80% of its value. The Japanese government tried everything to bring the economy back, and managed to do everything wrong. Interest rates went to zero in the hopes people would borrow at no cost and buy stuff. They didn’t. The government kept factories running, increasing supplies even though there was no demand. The government started public works programs building roads, fast trains and a state of the art airport built on a landfill. They increased the money supply and supported failing businesses spending trillions in yen in their attempt to support the economy. They had stimulus packages to the tune of over 100 trillion yen,. They pumped yen into the banking system and still no one wanted to borrow. Nothing worked. Japan is still in a depression, with its stock market still at one fifth of what it was at its peak. The country has a national debt of 130% of GDP because of all of the ‘fixes’ that they tried, and a debt that is not payable other than with printing more yen. The yen that is backed by nothing. And this has been going on for 29 years!
Does this sound at all familiar? Printing money, stimulus packages, and supporting companies that should go under? Spending and spending and spending and still enemployment is over 10% with no end in sight.
Let’s take a look at Japan in the 1980’s. They had an economic bubble that sent the Nikkei to 40,000. Then the bubble burst and real estate prices dropped 80%. The Nikkei lost 80% of its value. The Japanese government tried everything to bring the economy back, and managed to do everything wrong. Interest rates went to zero in the hopes people would borrow at no cost and buy stuff. They didn’t. The government kept factories running, increasing supplies even though there was no demand. The government started public works programs building roads, fast trains and a state of the art airport built on a landfill. They increased the money supply and supported failing businesses spending trillions in yen in their attempt to support the economy. They had stimulus packages to the tune of over 100 trillion yen,. They pumped yen into the banking system and still no one wanted to borrow. Nothing worked. Japan is still in a depression, with its stock market still at one fifth of what it was at its peak. The country has a national debt of 130% of GDP because of all of the ‘fixes’ that they tried, and a debt that is not payable other than with printing more yen. The yen that is backed by nothing. And this has been going on for 29 years!
Does this sound at all familiar? Printing money, stimulus packages, and supporting companies that should go under? Spending and spending and spending and still enemployment is over 10% with no end in sight.
Milton Friedman once said, “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”
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