I reserve my position among those economists who believe that the Recession will not end without consumer spending growth. I differ from economists in the main with the belief that any expanded consumer spending comes solely from Inflation. What this entails is an actual drop in physical product, though with a higher Price Tag placed upon that product. This Condition does not bode well for higher Business Profits or higher Employment. It also foretells a real reduction in the standard of living, as static Incomes are forced from the consumption markets. It is also a bad Sign for the Commodities markets, though this is the arena where One will find most of the Inflation produced; as entrenched rich industries can conjointly refuse to produce without collusion of obvious notice. The later will be an additional distortion of market forces to save their own Profits, but will result in much greater losses for Consumer Product markets.
Special Interests remain firmly in control of government policy, and will cancel any attempts to bring fiscal responsibility into the matrix. This will lead to the next financial crisis, where Treasuries will find no market except for the Federal Reserve, whose balance sheets are already deeply in the Red, and which will not recover in any sensible period of time; a condition which is essentially equivalent to printing currency to pay for government operations. Bernanke, Congress, and economists believe that this is accomplished fiscal policy which is sustainable for long periods. I am afraid it is not. Only Time will tell Us if the new super Accounting will be effective.
Two Scenarios seem possible to myself. The first Scene will witness a revolving 10-14% Inflation rate annually for a long period, the other will see a complete collapse of the Bond markets where the Treasury will go to actually printing Currency rather than pay Interest rates on Treasuries in the high Teens. I could be having Nightmares, though, which are starting to appear in the daylight. The only thing which really bothers me is the potentiality for the federal government to continue the increase in deficit spending; that increase periodically shifting upwards simply due the inflationary nature of the growth in the numbers of Treasuries. We are in a Time where there is a looming Shift in the nature of the Game; One where all the Rules are altered by the current action in Play. I cannot see the consequences, and I know that economists, politicians, and administrators are more short-sighted than I. It reminds of the Roman Republic of old, and without the replacement of the current fiscal leadership, We will have the Imperial Guard again nominating their own Emperors. lgl