Former Heritage Foundation think tank economist Peter St Onge just issued a fresh warning about inflation.
In a new video update, the economist says the Federal Reserve’s decision to end quantitative tightening (QT) and start buying short-term U.S. Treasury bills will likely cause inflation to jump higher once again.
“The Federal Reserve just announced it’s unleashing the money printers to finance a $9 trillion wall of federal debt coming due this year – as in markets won’t buy it, so the Fed will with counterfeit money. This is where the Fed types zeros on Excel sheets in the basement, declares they’re dollars like any good counterfeiter, then uses those fake dollars to buy government debt called Quantitative Easing, or QE. [Fed chair] Jerome Powell said the Fed’s kicking off with $40 billion a month, which is a half trillion dollars per year, lovingly printed straight out of your wallet.”
St Onge warns the Fed is firmly locked in a dangerous situation, as the government grapples with the need to control interest rates and keep the financial sector afloat.
“Now this is concerning because the last time the Fed did this in the 1940s to finance World War II it sent inflation into the double digits. At one point in 1947 annual inflation was 20%. In fact, it’s how Weimar Germany got to hyperinflation in wheelbarrows of money, because once the central bank starts printing the deficit with inflation, it’s very tempting to make that deficit very big. After all, there’s a lot of special interests to feed in Washington – a trillion here, a trillion there, soon it is real money.
What’s even more concerning is that in the 1940s it was just about financing government debt. Today, the Fed needs to pump hundreds of billions just to sustain a financial sector that has ballooned to nearly five times GDP.
The Fed literally admitted this with Jerome Powell claiming that this is not real QE, which everybody knows is inflationary, this, in fact, is necessary to maintain ‘ample’ reserves so the Fed can maintain control of interest rates. In other words, the financial system breaks unless the Fed keeps a full plate of cocaine, or inflation, by the bar.”
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