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Scary Economic Forecast of the Day

John on February 24, 2010 at 8:51 am

From the American Thinker:

Ben Bernanke promised to end Quantitative Easing (the printing of money to stimulate the economy and fund the deficits) by the end of March…

Bernanke has two options, neither of them good. He can do what he promised and stop QE. Or he can renege on his promise. Either alternative has radically negative consequences for the country, Bernanke’s role in history, and Obama’s presidency…

Without QE, the government will be unable to honor its obligations. Non-payment of Social Security or Medicare or federal payroll or welfare checks or retirement checks, or military payroll, etc., etc., would show up almost immediately. That would jeopardize foreign (and domestic) purchases of additional federal debt, exacerbating the problem.

Bernanke’s second option enables the government to continue operating irresponsibly until market forces eventually stop the profligate behavior. Market discipline would likely be imposed in the form of a collapse of the dollar or raging inflation (or both).

I’m not a fan of gloom and doom, but I wonder what the third alternative is. How do we avoid the consequences of printing money without end leading to a death spiral for the dollar? Alternatively, how do we avoid the brick wall of failing to meet our obligations if we don’t print more money? Can we continue to borrow our way out of this corner?

VS has a lot of smart, well-educated readers (both on the left and right). Putting the politics aside just a bit, what do you think is realistically going to happen here?

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Category: Energy & Economy |

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