March 23, 2009 – The page-1 article in the last letter was “On the Cusp of Hyperinflation”. If you doubted that the dollar was headed for hyperinflation after reading the last letter, all doubts should have been dispelled after the Fed’s announcement on Wednesday that it would buy $1.2 trillion of government bonds and agency debt.
To repeat the key point from the last letter, hyperinflation does not arise from banks lending too much money. It invariably occurs for only one reason – too much government spending. It results when the central bank turns government debt into currency, which is exactly what the Fed said it is doing.
How bad is it out there that the Fed would take this big gamble to risk hyperinflating the dollar to try saving insolvent banks? What does Bernanke see that he would expand the Federal Reserve’s balance sheet by another $1.2 trillion? What is he not telling us? Obviously, he is not telling the whole truth.