State of Innovation

QE2 Equals Hyper Inflation

QE2 is geek speak for quantitative easing two.  This means that the Federal Reserve is going to purposely debase our currency.  Hyper inflation will be the inevitable result.  It may take up to two years for the inflation to show up everywhere, but it is already showing up in commodities and the declining value of the dollar.  When Ben Bernanke, Tim Geithner, and the Obama administration say they never say inflation coming, you will know that they are lying.  They have been warned about this numerous times, for instance see the interview of Peter Schiff .

Bernanke believes that inflation will help the unemployment situation and exports.  The idea that inflation causes increases in employment is based on the discredited Phillips Curve.  Inflation reduces the return for producing goods and services, by increasing the input costs and making a discounted cash flow analysis of any investment extremely expensive.  Because of this, people flee productive enterprises and invest in hard assets and real estate.  Neither of these increase the goods and services available to people.  As a result, there will be fewer businesses that produce goods and services and these are the major businesses that hire people.

QE2 will hurt American innovation because a discounted cash flow analysis of any inventive activities will show that it is almost impossible to make any R&D payoff if it takes longer than five years to commercialize.  This will further hamper American competitiveness.

Bernanke also believes that debasing our currency will increase exports.  This will not occur because people will be discouraged from investing in businesses that produce goods and services.  As a result, we will have less to export.  However, it will lower the value of every American’s paycheck.

QE2 will also be another subsidy for the big Wall Street banks.  Bernanke will purchase Treasuries from Wall Street banks at inflated prices.  If the banks were forced to hold these treasuries for a couple of years, their value would fall precipitously as the reality of hyper inflation because clear to everyone.  I believe that QE2 is a purposeful bailout of Wall Street.  The Wall Street – Washington evil axis is fleecing America without shame.

October 17, 2010 - Posted by dbhalling | -Economics, Innovation