Dude59

Treasury Secretary Tim Geithner today: "We have been forced to do just extraordinary things and, frankly, offensive things to help save the economy ... I am completely confident that none of those decisions ... had anything to do with the specific interest of any individual firm, much less Goldman Sachs (GS)."

He also lied on his taxes.

Treasury Yields Will Continue to Rise

I think inflation is a red herring argument here, as the bigger issue is the amount of new issuance that is going to be coming form the treasury. With around three TRILLION in issuance this year, the question is who will buy it, and how much do they want to be paid. Even without (CPI) inflation the value of the dollar can go down, and people outside the US, which currently buy more than half of our debt will want to be paid to take that risk.

Helicopter Ben Turns into Ballistic Missile

>Despite all of this the gold bugs and fear mongers continue to cry >about inflation? What is going up in price? What asset class, >product or service is showing pricing power and a shortage of >supply? Where is this inflation magically going to come from?

Things and commodities that we need to import WILL go up. Oil and other imported commodities will not stay contained very long, as the producers will want a certain value for their production. Gold and silver will remain contained as long as the COMEX supply remains. I expect you will see imported food prices rising as well.

Are Central Banks Out of Their Minds?

"Although lower house prices and losses in mortgage backed securities cannot be avoided, these measures by central banks has and will continue to temper the decline. "
Unfortunately, you are correct that the decline in house prices must continue until the average house in a region costs 3 to 4 time the average income. The second part of your thesis is flawed, as delaying the recognition of this will not improve the situation. You only have to look to Japan for an example of what happens when losses are not taken, and bailouts prevent the removal of bankrupt institutions.

We are facing a situation where we will see limited or negative global economic growth going forward. With Production (of all types) limited by energy and productivity gains, and less energy per dollar being available, and the cost increasing faster than productivity gains, the net returns will decrease.

With cost inflation increasing globally, and net returns decreasing, we cannot accept the artificial support of institutions that deserve to fail. Doing so will prevent the emergence of those institutions that might thrive in this new millennium.

The U.S. Dollar and the Limits of Irresponsibility

To add to what Gaucho stated above:

1. Fed funds will not drop below 1.5% at the bottom of this cycle. I believe thaqt this will hold, as lowering the rate is not helping lower mortgage costs, which is the primary drag on the financial system. Unfortunately many more homes will foreclose as house prices reset to the mean, which is 3 to 4 times average incomes.
2. CPI inflation will not rise above 5% for this cycle. Do YOU believe the CPI Numbers? Well, since the cost of houses will come down another 10 to 25% depending on region, I suspect that this will be counted with enough emphasis to bring the overall inflation rate down, even though it was not counted as moving inflation up previously.
3. Nominal GDP growth will not drop below 4% for this cycle. Since the CPI deflater to GDP will remain deflated, there is a good chance that this number can also be adjusted.
4. The US current account deficit will improve, albeit fitfully. This will only happen if Oil is not included.
5. Total Federal Debt will not grow faster than $600 billion per year. Since it already grew by $500 billion in the first six months of this fiscal year, I would bet that this one will fall also.

In conclusion, I feel that most of your "Limits of Irresponsibility" will fail, assuming that you look at more than the "Official Government Propaganda", whoops, I meant information.