A friend asked me if I were surprised by Bernanke’s statement that the Fed would not end or even slow down it $85 billion per month bond purchases. Here is my reply:
Not at all. Bernanke knows that he has a Hobson’s Choice or, as Hayek said, a tiger by the tail. If he keeps printing money, we risk hyperinflation. But if he slows down printing money, we get a recession. The Fed will always choose to risk hyperinflation, because hyperinflation is not apparent until it is too late. Thus, we get the inane statements that there is no sign of inflation. Plus, there are no honorable central bankers anymore. Paul Volcker was the last of a dying breed. Here’s my dictum: “If you can print money, you will print money.” The politicians will not appoint a central bank chairman that might do otherwise. The political pressure to print money in order to buy the bonds of governments running massive deficits and keep the bubble economy inflated will always outweigh the political pressure to take our medicine and allow the recession to cleanse the economy of malinvestment. My advice, prepare as best you can for hyperinflation. Patrick Barron
