The Consequences Have Started to Arrive

Our government risks morphing what would have been a severe deflationary recession into an inflationary recession/depression in the longer term. Their decision to choose the inflationary route is based on the fact that inflation bails out those in debt. Make no mistake, for a country with $11.4 trillion in debt and a 2009 deficit equal to 13% of GDP, inflation is perceived as the only way out. However, inflation can never bail out anything or anyone, it only helps the very rich maintain their purchasing power while robbing it from the rest of the country. It will also be at the great expense of those who have made the mistake of holding their savings in dollar denominated fixed income instruments and who have not protected themselves by owning hard assets.

The Fed's policies are leading towards inflation and devaluation of the dollar. In inflationary times, debtors pay back creditors with cheaper dollars. Inflation is good if you owe money but, if you are frugal and debt free, you are punished if you have saved your dollars for a rainy day.