BERNANKE CALLS FOR INFLATION - BUT JUST ENOUGH, GOLDILOCKS

The Fed is calling for an increase in inflation to a mandated two percent. But why? How do the pointy heads at the Fed think that inflation will benefit the economy?

Let's step into the way back machine, to the last great depression:



Doesn't that sound just like "trickle down economics" in reverse. If the progressives constantly scream that the conservative version of this same thing, only using private monies instead of public monies, doesn't work then how come they're so convinced it'll work this time?

So, here's the thing. The last Quantitative Easing (money printing for those of us that like clear speech) that the Fed did had no real impact on the economy as a whole. Most of the billions and billions (thanks, Dr. Sagan) that the taxpayers so graciously borrowed went into the coffers of the banks or was used to buy back stock by the giant corporations that had access to it. Very little of it filtered its way out into the private sector unless you count the obscene salaries the bankers paid themselves for destroying the country. I guess they probably used some of that to hire illegals to keep their lawns tidy, but then most of that was sent back to Mexico.

Bernanke is walking a tightrope with this. If the inflation rate gets much over the two percent mark the country won't be able to service the debt and it'll default. However, if we were to go into deflation people will not spend money as quickly because they know prices will be cheaper down the road.

The main question I have is this; do any of these guys ever go to the grocery store or buy gas? My cost of living is accelerating at much faster than two percent and I'm thinking that everybody else is probably seeing the same thing. So what's the deal? Why does the government constantly act as though inflation is non-existent?

Just acting as the devils advocate here I have to wonder; could it be because all those social programs that the left are so wild about are tied to inflation? And could that be the reason Social Security recipients aren't getting a raise? How does artificially depressing the real rate of inflation affect other areas of the federal budget?

That's why the plan to "increase" inflation to two percent won't work and could possibly cause more damage than good. If the Fed creates more money the value of the dollar will collapse even further. It's already in a free fall. So all of us here in America that are already having trouble making ends meet will find it increasingly difficult to spend money on anything but the essentials. That will not cause any sort of trickle up effect as the fed is hoping for.

Worse, as the dollar continues to decline and and investors run from it we'll find it increasingly hard to raise the money to pay the debt and keep the government afloat. I know that inflation, by cheapening the dollar also lightens the debt load but two percent isn't anywhere near enough to do it.

This is an end game, Hail Mary pass scenario. The Fed has shot just about all their bullets now. The markets will go up with this plan because the Wall Street guys are looking for another bailout which is exactly what more quantitative easing will give them. Bond prices continue to fall as the thirty year auction barely sold anything. The world sees us as a bad risk and is refusing to buy any long term debt and very little short term. So what the market does or doesn't do, in the bigger picture, is somewhat meaningless.

So buckle up boys and girls, the last part of the ride is about to begin. And this is the scariest part of all, the one where we go over the cliff.