Thursday, November 11, 2010

Time Magazine Trying To Pin The Looming Hyperinflation Crisis On Sarah Palin And The Tea Party. Read It To Believe It

Time Magazine’s “Curious Capitalist” is aware of the looming hyperinflation disaster, and has found someone to pin the blame on – Sarah Palin and the Tea Party. Seriously. Cause remember, Obama "inherited" this mess we're in, and everything is the Tea Party and GOP's problem and fault. The people on the left love blaming others don't they? Picture of hyperinflation below.

Sarah Palin is concerned that Federal Reserve Chairman Ben Bernanke may cause inflation to shoot up and stay there. But could the greatest potential culprit of wealth-destroying, Germany-1930s-type hyper-inflation be, not the central bank, but Palin and the Tea Party? That in part is the conclusion of some recent research by Indiana University professor Eric Leeper and Wall Street economist Troy Davig of Barclays Capital. In a recent paper, called Temporarily Unstable Government Debt and Inflation, which can be downloaded from this website, Leeper has a chart that he unofficially calls the Tea Party shock graph, on page 25. Before the Tea Party, inflation is rising slowly. But in the first year the Tea Party or a group with similar views wins the Presidency or takes over Congress, whamm-o. Inflation doubles, and keeps going up. He wrote the paper in October, so he puts the potential date of Tea Party takeover as 2019, but after this election Leeper concedes Tea Party induced hyper-inflation could come much sooner than that. So is Palin riding the Hyper-Inflation Express? Maybe. Here’s why:

Ever since the financial crisis, some, Tea Partiers in particular, have been predicting that the country may have an upcoming massive bout of inflation. And why not. Many of the things we have been through seem like the type of stuff that should make our currency dive and prices go up. First of all, there was the failure of our banking system. That’s got to take some wind out of the value of your currency. Then you have the government’s response to it. Bailouts and massive stimulus. Again, government spending is generally thought to produce inflation. Add in near zero interest rates, and prices should be shooting through the roof. Gold, believed to be an inflation hedge, is soaring. Indeed, some people seem so certain that inflation is on the rise that they are buying inflation-protected Treasuries with a negative yield. That means if inflation doesn’t rise, the people buying those bonds will have to pay interest to be a lender to the government. Normally it’s the other way around. Screwy.

Check out Ed Morrissey‘s fine refutation of the claims of the curious capitalist.

Perhaps at some point, Mr. Curious (or Mr. Capitalist) can explain why we had runaway inflation in the 1970s even with a low debt-to-GDP ratio and a predilection for higher taxes. Curiously, when we started cutting taxes in the 1980s, that inflation disappeared, and remained under control during a long period of low tax rates, especially in the 1980s and in the last decade as well. Those years of low taxes, low inflation, and consistently high real growth in GDP would tend to argue that tax cuts don’t create inflation but actual growth — as well as confidence in both the economy and the currency.

Not only does Mr. Curious fail to take that into account, he also fails to use accurate accounting of our debt. With a projected GDP growth rate this year of 2.5%, we can estimate the final GDP for 2010 at around $14.48 trillion, rounding up a little generously. According to the Treasury’s own debt calculations, our national debt stands at $13.73 trillion as of November 9th, which would put our debt-to-GDP ratio at 94.8% of our GDP even if we didn’t add a single dollar from now until the end of the year. By this measure, the ratio was 55.9% in 2001, and 65.6% by the end of 2007. In 1995, it was 67.3%. The rate now is significantly worse than any time in the last 60 years...

Read the whole thing. Not that some on the left won’t let facts and history stand in the way of seizing onto this report as proof that Palin and the Tea Party are the root of all economic evil in these United States.

Doug Brady at Conservatives for Palin adds:

If Time is intent on following in the steps of Newsweek, they’re certainly going about it the right way.


h/t The Lonely Conservative

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