You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably result in discontinuities of quantitative data, so it's a mistake to apply the trend which obtained up to the discontinuity to the new discontinuity.<p>To take an oft-used metaphor, suppose the economy is a car or truck and money supply is one part of the steering system. If you notice you're heading for a crash, well you're going to spin the wheel hard or slam on the brakes - there's your discontinuity. The path of the car, on the other hand (which is GDP), will change more slowly. And once you've observed that the new course takes you out of immediate danger, you can then moderate the control system which you had drastically changed. In other words, slamming on the brakes (or accelerating out of danger, or swerving - adjust your metaphor to taste) does not <i>in itself</i> damage the car, but aims to substantially alter its vector.<p>In the bigger picture, addressing the question of whether the US economy will be in the toilet or at least near to it for years to come, of course it will. Just as the unpleasant effects of a hangover can often go on longer than the drinking party which induced it, so it will take time to unwind and recover from the serious structural imbalances of recent years. Obviously, I have a more sanguine view of this process than you do, as I believe it will still be possible for opportunity and growth to take place in the US. If you find my view dangerously laid-back, I guess the appropriate thing for you would be to invest heavily in defense contractors and raw materials.
As an interesting (as in "odd") exercise, go to the root node of the blog (<a href="http://angloaustria.blogspot.com/" rel="nofollow">http://angloaustria.blogspot.com/</a>) and notice the phrase "Curse of Maturin Towers".<p>After asking yourself "WTF does that mean?", do a Google search for the aforementioned phrase (<a href="http://www.google.com/#hl=en&q=Curse+of+Maturin+Towers" rel="nofollow">http://www.google.com/#hl=en&q=Curse+of+Maturin+Towers</a>); hmm, no useful results (that is, we could not find a definition).<p>Now do a Google search for "Maturin Towers" as an exact phrase (<a href="http://www.google.com/#hl=en&q=Maturin+Towers" rel="nofollow">http://www.google.com/#hl=en&q=Maturin+Towers</a>) and notice we have 300+ hits for a rather odd exact phrase; all of which point to, or are directly related to, the AngloAustria blog (<a href="http://angloaustria.blogspot.com/" rel="nofollow">http://angloaustria.blogspot.com/</a>).<p>Could this be an well crafted SEO blog designed to tell people what they want to hear?
This "flying up impossibly at the last minute" is a feature of graphs of national debt (<a href="http://images.google.com/images?q=national+debt" rel="nofollow">http://images.google.com/images?q=national+debt</a>), but it's also a feature of graphs of US furniture sales.<p>I'm not saying the US dollar is fine. I'm just tired of people using this kind of graph to try to make a point.
I am sure we'll see increased inflation, will it go as high as it did in the 70s-80s maybe. But this article is claiming the sky is falling. Oooh look scary charts, never mind what velocity of money is or how it works, or that the Fed can increase AND decrease the money supply, just look at those scary charts!
I am not saying inflation should not be a serious concern, however the article fails to mention that the Fed changed the rules so they can now pay interest on these reserves. That's a massive change in law and policy and is the Fed's primary answer to articles like this one, so it's weird the author completely misses that point.<p>Here's what FRB NY's Dudley said this week - from Reuters article:<p>"Dudley argued that the Fed's large and growing balance sheet is nothing that prevents the Fed from controlling inflation once the economy corrects. 'It is not the case that our expanded balance sheet will inevitably prove inflationary,' he said.<p>Specifically, Dudley said the Fed's new ability to pay interest on excess reserves is a critical tool it uses to keep banks from lending these reserves and thereby creating new credit and boosting inflation. 'Thus, through the IOER rate (interest on excess reserves), the Federal Reserve can effectively retain control of monetary policy,' he said, noting that the Fed can increase the IOER rate if banks begin to find it more profitable to lend these reserves."<p><a href="http://www.forbes.com/feeds/afx/2009/07/29/afx6714000.html" rel="nofollow">http://www.forbes.com/feeds/afx/2009/07/29/afx6714000.html</a>
The Fed now pays interest on reserves (new as of last fall). When the Fed wants to pull that money out, it can (1) raise the interest rate on reserves, thus encouraging banks to hold the reserves and (2) sell the assets it bought to raise the monetary base.<p>Looking at, for example, the current yield on treasuries shows very little inflation expectations.
I looked through your submissions and the other pages on that blog for a bit, interesting collection.<p>Stuff that matters indeed.<p>In the interest of full disclosure, do you still hold dollars or have you completely converted to gold now ?
i think the point here is that for the first time in quite a while the dollar has a legitimate _chance_ at hitting a doomsday scenario. whether or not that happens remains to be seen, but the odds are greater than they have been historically.<p>keep in mind that during the depression we were on the gold standard, thus there was none of the inflationary/deflationary risk of a fiat currency..
I just hear it everywhere. I'm sure the whole world has too much at stake if US Dollar loses its value. The economy might stagflate for a while, but I believe it will eventually recover. After all, USA is the largest economy in the world.
The OP made a point of mentioning the potential effects of fractional reserve banking, but apparently "forgot" to mention that the Fed can raise reserve requirements any time it wants to reduce the effects the OP is concerned about.