[Borodog]

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So what we are set for is staglation; we are entering a recession at the same time we will see significant price inflation. The last time this happened was the 1970s, and that occured for largely the same reasons it is happening now.

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Borodog can you expand on this? As far as I am aware, oil prices are leading to inflation but growth is still rather strong. I checked the latest economic data from the Fed and there was 3.9% growth in the last quarter, and very little spillover from housing into other sectors. But I'm writing a paper right now and cannot do further research [img]/images/graemlins/frown.gif[/img]

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In the long run, only monetary expansion can drive inflation. And I believe that it is probably inflationary expectations that are driving up the price of oil, just as with gold.

The problem with the Fed's growth data is that GDP is entirely driven by the expansion of the money supply. When more money is created, loaned out and spent, GDP goes up. People are hired and the unemployment rate goes down. People bid of the prices of inputs, so corporate profits go up in the capital goods industries. Wages are bid up. Workers spent their new money on consumer goods, driving up profits there as well. So these kinds of macroeconomic aggregate indicators can all look "good", but what is really happening is that you are weakening the economy even more, by yet more misallocations of scarce resources. You can delay the recession by papering it over with new money, but you cannot do that indefinitely. Eventually all of this malinvestment and increased consumption must be paid for.