As most everyone knows, the previous peak of inflation and Dollar crisis, with gold reaching almost $1000 an ounce, happened at the end of the 1970s.
What is different between now and that time 30 years ago:
Gold had risen from around $100 to almost $1000 in about 10 years, inflation (as measured by the Government) was running at 10%+. At that time, the Fed had the insight that they needed to target the supply of money to bring inflation under control. Interest rates rose to 18%, long-term Treasuries yielded almost 13% and inflation subsided.
Now that the world is again losing faith, as evidenced by the rise of commodity prices, the rise of Gold to new record highs and the Dollar falling to record lows against all other major currencies, the Fed is printing a few trillion Dollars.
In 1980, the official federal debt amounted to 908 billion which was equal to 33% of GDP.
Today, the debt is about 14 trillion, which amounts to 100% of GDP.
If the government would have to apply the same bookkeeping that is required of any private entity, the obligation likely would top 60 trillion !
While Ben believes that printing money cures unemployment and lowers long term interest rates, and that he is basically able to avert any future financial calamity with all the powerful tools at his disposal, it will all come crashing down when that little boy takes a look at all this and says: "but the emperor has no clothes !"
PS - Just a little perspective: 14 trillion amounts to about $50,000 for each man, woman and child living in the USA, 60 trillion equals roughly $200,000.
Take a family of 4, and they owe $800,000 thanks to our gracious and benevolent government.
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