We all think differently.

Our noggins are all wired differently. I used to marvel at how some classmates in College math could understand calculus, let alone the proof of the 'Nesting Variable Theorum'. But, I could whiz through social science subjects with the best. So, I do not admit to being stupid by not understanding Jim Puplava's point. I just needed to see it from a different perspective. If you are like me, perhaps this may help.

Yes, but!!

For months I have listened to Jim Puplava's broadcast. I was ambivalent. My mind kept telling me something is wrong! My thoughts have been along the lines that prices are going to have to be a return to the mean. All things (housed, food, fuel, etc.) have value relative to each other. Returning to the mean must imply that prices of the high flyers must come down, thus price deflation. That is what a recession does. I missed the point. The point is that the political process (which includes the FED) never lets the prices return to their start point because the FED inflates the money supply before that point is reached. Control of the money supply is dependent entirely upon the combined political will of the Congress, President and FED to refrain from printing money.

So, that is it.

But, control of the system is in the hands of political opportunists. No politician obtains political gain from applying economic pain on the American people. So the system has a built in bias that responds to the pain, and not the need to maintain price stability. Just because interest rates go up does not preclude dilution of the value of money by adding more money to the total in circulation.

Debt is not inflationary by itself.

It is inflationary when the pain of servicing it is lessened by printing money. Political gain is obtained by lessening the pain of debt service. The actual cost of paying off the huge pile of debt now burdening the American people and government is too much pain for the political establishment not to act to lessen it by inflating the money supply. The political system is such that it views the need to relieve the debt squeeze as something desirable and necessary; sort of like relieving sniffles during a cold. It will simply print money to pay off the debt and lessen the pain. This time the financial conditions(no savings, high debt everywhere, rising commodity prices, etc) are such that such rolling private debt into the national debt and rolling that over will not work quite like it has in the past.

In the past, unpaid debt was assumed by the government. The bad debt from the S&L's was simply rolled in to the national debt. Debt has been continuously rolled over. This time, the debt burden is too much and lenders will demand interest rates that will make the debt burden unserviceable. The government will be unable to fund operations and service the debt simultaneously. If the process of rolling over the debt will no longer be possible, then the only way to respond will be to print money to pay for current operational needs. Printing money under that circumstance will ignite a fire in the financial markets. The big picture bottom line is that this time around the fire will be lit.

OK, I got it!!!