Glen L.

How Will the U.S. Recover from the Debt Crisis?

I agree with the view that the US will "recover" from the debt crisis by defaulting on the entitlement programs, primarily Social Security and Medicare which will see gradual, piecemeal reductions in benefits. Congress will attempt to negate the "third rail" by targeting minority sectors within the geezer population for reduced benefits, never enough to seriously threaten their incumbency in the next election.

I also think the US will take extraordinary measures to save the dollar and continue to pay the interest on the foreign debt. This means rising interest rates, much higher taxes, and a true depression in the not distant future. The alternative -- printing money to pay -- is the road to Zimbabwe. I don't believe the Fed will allow that to happen.

The longer range forecast is for the collapse of the fiat dollar anyway, a return to the gold standard, the abolition of the Fed, and the end of the American empire. We can only hope.

The Economy on Dope: Investors Fear Inflation, Embrace Gold

To the author: a generally good article, except for "(f)ull employment ignites inflation, whereas aggressively destroying price level increases cools the economy at best, and fosters recession - at worst." You will never fully grasp the problem until you understand that inflation is ever and always caused only by the government debasing the money supply, whether by debasing the metal in coins in ancient times, printing fiat money in recent times, or creating money by keystrokes in modern times.

To Steve Faseler: I'm 100% with you, man, as I too have educated myself in Austrian school economics, the school that Bernanke, Krugman, Paulsen, etc. all hate, because it correctly points the finger of blame at the government that they all worship. And I'm here on SA every day trying to educate investors as best I can. I can tell you that, for the most part, the response has been positive. That in itself is reason for hope, even though all the economic and political news is completely dispiriting.

Today's Commodity Prices Forecast Tomorrow's Inflation

MGA_1 is closest to correct here, I think. There is no real deflation now, other than price deflation in certain sectors due to falling demand. To have real, sustained deflation a la the Depression you need deflation of the money supply. Look at the Fed's M1 chart and you will see that the US money supply has doubled since September. That portends massive price inflation starting probably by this fall. If price inflation reaches 100% per annum we'll be in hyperinflation territory, something the US has never known. And if that happens markets will be in chaos, the dollar will likely collapse, and gold will make more sense than practically any other commodity.

Wheeeee! Ain't central banking economies fun?!