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VodkaPundit

Another Cold Splash of Reality

April 2nd, 2011 - 12:36 pm

I’m not the only one worried about inflation. Key bit from today’s IBT editorial:

John Williams, of the useful and iconoclastic Shadow Government Statistics website, measures prices the old-fashioned way. He employs the methodology used before 1992, when Labor Department changes started producing milder readings.

By his measure, inflation is close to 10%, tracking price increases for commodities, energy, food, precious metals and health care, among other items.

Right now it seems like the only thing keeping inflation in check is the weak job market — and don’t tell me that last month’s jobs report, with 20% underemployment, shows some kind of underlying strength in our economy. Something has got to give, and it’s either going to be a another nasty bout of stagflation — “but the Keynesians say that’s impossible!” — or worse.

If the Fed keeps rates near zero and/or launches the good ship QE3, then I’m not sure how we avoid 1979 redux — in the best-case scenario. If the Fed jacks up rates to protect the dollar, then the economy tanks right before Washington hits a cash crisis as our debt service payments spiral up.

We’ve spent ourselves into oblivion, thanks to “respectable” economists like Paul Krugman. These neo-Keynesians gave moral and political cover to our political masters to do exactly what they love to do — pay off their constituents with other people’s money. “Paul Krugman” should become a grave insult, on par with “Benedict Arnold.”

This monster in Washington must be choked off, and quickly. Time and options are damn near run out.

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