Bill O’Reilly Should Do His Homework

September 13, 2011

Last week, O’Reilly Factor producer Jesse Watters confronted Congressman Ron Paul at New England College to ask him why he was not interested in appearing on Bill O’Reilly’s show.  One thing led to another and eventually Watters asked Dr. Paul about his position on the Gold Standard.  Dr. Paul responded that he wanted the country to return to the constitutional mandate that money should be either gold or silver.  At the end of their discussion, Watters asked Dr. Paul why he couldn’t have just come on the show and explained gold and silver to O’Reilly.  Dr. Paul responded, “He wouldn’t have understood it”.

Dr. Paul couldn’t have been more accurate in his assessment of O’Reilly’s knowledge of the Constitution.  On his show on September 7, Bill O’Reilly had a segment where he and Watters ridiculed Dr. Paul for his constitutional position on gold and silver.  They stated their joint belief that the Constitution ”…doesn’t say anything about gold and silver”.  Both men indicated that Dr. Paul was misinterpreting the Constitution.  O”Reilly even asked Watters if Paul is a “loon”.

If O’Reilly or his producer would have just done a little research (I mean it’s fairly easy today given a little thing called the internet) they would have understood that Dr. Paul was spot on with his interpretation of the constitutional mandate that gold and silver be used for money.  .

If O’Reilly and Watters had done their homework they would have known that Dr. Paul bases his position about gold and silver as money on Article 1, Section 10, Clause 1, of the Constitution:

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

Now, on the surface it appears that Congressman Paul did misinterpret the Constitution given that Article 1 Section 10 specifically states that “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts…  This clause clearly only relates to the states and what they are prohibited from doing.  But, sometimes an issue is more than meets the eye.

As renowned constitutional lawyer, Edwin Vieira Jr. has written, during the colonial period of our history, the Spanish milled (silver) dollar was the predominant medium of exchange in the original Thirteen Colonies.  This had to do with Spain’s important commercial and political power of that time.  In July of 1785, Congress voted unanimously to make the dollar the monetary unit of the United States to emulate the Spanish milled (silver) dollar.  On August 8, 1787, Congress resolved that the new American dollar would contain three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver.  This measure of silver made the new American dollar equal in value to the Spanish dollar.

At the same time in Philadelphia, the Constitution was being written by many of the same people who adopted the silver dollar standard for the country in the Continental Congress.  Thus, these men as well as their Constitutional Convention colleagues were well aware that the silver dollar had become and was the official monetary unit of the United States. As a matter of fact, the term “dollar” is referred to twice in the Constitution – Article 1, Section 9, Clause 1 and in the Seventh Amendment.

I suppose what confused O’Reilly and Watters was that under Congress’ powers in Article 1 Section 8 the terms dollar, gold and silver are not mentioned.  The only requirements for money in that section are that Congress has the power “…to coin money and regulate the value thereof…”  And a month before the Constitutional Convention adjourned Congress did just that by making the silver dollar with three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver the monetary unit of the country.

Thus Ron Paul is correct when he says the Constitution calls for gold and silver money.  It was implied in Article 1 Section 8 Clause 5 because that is what existed at the time of the writing of the Constitution.  Article 1, Section 10, Clause 1 was a reaffirmation of that fact and a prohibition for states to use anything but gold and silver in payment of debts.  After all, what’s good for the goose is good for the gander.  Why would the states be prohibited from using non-gold and non-silver coins when the federal government isn’t?  That would make no sense.

If Bill O’Reilly or Jesse Watters had done about a half hour of research on the internet they would have known what the Constitution said and the historical context of the issue.  They would have known that the Constitution does call for money backed by gold and silver.  Does O’Reilly’s egregious mistake give me the right to question whether he is a loon?  No, perhaps a more appropriate question to ask is, is he an intellectual sloth?

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina


Congress is Still a Rotten, Stinking Corpse

March 19, 2010

I have said it before and I will say it again, Congress is a rotten, stinking corpse.  It is no wonder that it currently has the lowest approval rating of all time.  This week more ridiculous legislation was introduced in that body that will only make our lives worse.  The bipartisan bill that was introduced would punish any country that practices currency manipulation as an unfair trade subsidy.  It would give President Obama the ability to impose retaliatory protectionist measures to level the playing field.  Of course, the impetus for the legislation is China’s alleged undervaluing of its currency, the yuan, in order to support Chinese exports to other countries.

Now, it’s funny, how the legislation comes in an election year when there is a very strong anti-incumbent mood amongst the electorate.   Many Americans who have lost their jobs in this depression are naturally fixated on statements from Washington dealing with job creation.  So as not to disappoint, Democratic Senator Charles Schumer was quoted as saying, “”There is no bigger step that we can take to promote job creation here in the US than to confront Chinese currency manipulation.”  This sounds logical on the surface, but upon closer analysis the senator as usual has it all wrong.

In the first place, to even threaten protectionist measures in such a fragile economic environment as we live in is dangerous.  The Smoot-Hawley Tariff was passed in 1930 and placed protective tariffs on thousands of imports coming into the United States from abroad.  At the time, during the Great Depression, its purpose was to protect American jobs.  Sound familiar?  Instead, the tariff caused our trading partners to retaliate with tariffs of their own thereby exacerbating an already horrendous employment situation.  What makes our politicians believe that China would not retaliate with protective measures of its own or worst yet cause the collapse of our currency by flooding the world markets with hundreds of billions of dollars it keeps in reserve?

But secondly, and much more importantly to our situation, we need inexpensive Chinese products otherwise our inflation rate would be through the roof and unemployment would be right there with it.  Here is the vicious cycle of events that is American/Chinese trade relations.  China’s products are cheaper because the cost of doing business there is less than in the U.S.  Thus, we purchase Chinese goods with dollars and treasury notes. China holds these dollars and interest-bearing bonds in reserve and then prints yuan to pay off the Chinese suppliers of our purchases.  When the smoke clears, we get cheap Chinese goods to buy, the Chinese manufacturer makes a profit, and the Chinese government acquires more units of the world’s reserve currency.  Everybody wins, right?

If the Obama Administration ends this cycle by imposing protective tariffs on Chinese goods coming into the United States, not only will the Chinese government reciprocate with retaliatory measures of its own, the prices of goods in the U.S. will rise sharply.  You see right now we export our inflation to China by way of treasury bonds and newly printed Federal Reserve notes.  Without the ability to export our debt and a lot of the dollars the Federal Reserve has been printing, all of that liquidity will be spent in the U.S. instead on more expensive goods.  As more money enters our economy prices in general will be bid up and will rise and given how much the Federal Reserve has inflated the money supply over the last few years prices will rise by a lot.  At that point, Economics 101 tells us that high prices will squelch demand and huge increases in unemployment will result.

Since the 1970s, the politicians in Washington have placed us in this no win situation with regard to trading with China.  They have destroyed our industrial base with unconstitutional mandates and regulations, and collective bargaining laws.  They have spent us into oblivion by financing a welfare/warfare state unmatched in human history.  If we impose protectionist measures against China we will incur inflation in the short run and high unemployment in the long run.  If we continue to borrow from China to buy their inexpensive goods we put ourselves on an unsustainable course.  At some point, if it isn’t happening already, China will stop financing our purchases and absorbing our inflation.  They will sell their goods elsewhere and Americans will pay higher prices.  Our standard of living will plummet and China will replace us as the world’s number one economic superpower.

But, Chuck Schumer and his colleagues on the Hill are oblivious to all of this.  Of course, they also ignore the fact that the Federal Reserve is the biggest currency manipulator in the world.  Ben Bernanke and his cabal of economic central planners better known as the Federal Open Market Committee fix interest rates and determine the supply of money.  These actions directly determine the value of the dollar.  Before Congress complains about China for not using market forces to value the yuan it should look in the mirror. 

And that is really why I consider Congress a rotten, stinking corpse.  Time and again its members grandstand for personal political gain and leave the American people with the mess.  Its hypocrisy is appalling.  Lastly, it seems like it is constantly coming up with cockamamie schemes to ruin our economy further.  This latest scheme places the blame on China for our own financial incompetence.

You Should be Furious!

December 16, 2009

There are certainly a lot of things that Washington does that should make the average American citizen furious.  I would like to point out just four: the hypocrisy of the illegality of purchasing foreign prescription drugs, federal employee salaries, the job busting cap and trade legislation, and the wanton destruction of the dollar.

The price of prescription drugs in the United States has increased by 9 percent in the last year.  Certainly the ever increasing cost of drugs is a major reason for the pressure on Congress to reform our healthcare system.  However, currently it is illegal for Americans to import cheaper prescription drugs from outside the United States.  Drugs produced by American companies, but sold in foreign markets are usually between 35 to 55 percent lower in price due to price controls of other countries.  It is an outrage to me that we are not able to take advantage of the stupidity of other governments and import and buy their cheaper American made drugs.  The same bleeding hearts in D.C. that whine about how people are dying because they can’t afford prescription drugs are standing in the way of those folks getting cheaper drugs.

Now, an argument given for keeping importation illegal is that the safety of the drugs cannot be guaranteed.  Nonsense!  We are talking about countries like Japan, the United Kingdom, and Canada which have product protection mechanisms in place.  Personally, I’ve lived in the developing world for 8 years and my family has never had an issue with unsafe drugs in those countries.  The bottom line is that there is an easy way to cut drug costs and provide much needed medication to the financially strapped sick, but Congress refuses to do the right thing.

Then there is the story reported by USA Today that the number of federal employees who make $100,000 or more jumped from 14 percent to 19 percent of all bureaucrats during the first 18 months of the recession.  The average federal worker’s salary is now $71,206 compared to $40,331 for private sector employees.  To put it in even greater perspective, in December 2007 the Transportation Department had one employee earning $170,000.  By June of 2009 the department had 1,690 workers with salaries above $170,000.  Substantial pay raises and new salary rules were the reason for the jump in salaries.  So while 7.2 million Americans were losing their jobs, not only were financial institutions and car manufacturers bailed out, your tax dollars also went toward ensuring the comfort and security of our ruling bureaucrats.  Not only did Uncle Sam not cut back on labor costs like the rest of America, he handsomely rewarded those that produce very little if anything that benefits society.  All Americans should be furious.

Turning to the environment, if Congress was intent on destroying jobs in these tough times it would have immediately passed the 1500 page cap and trade legislation.  The painful new taxes the legislation would have imposed on all of us would have increased business costs and reduced aggregate demand thereby making an awful job market that much worse.  Additionally, Environmental Protection Agency administrator Lisa Jackson admitted during a Senate committee hearing that the bill would not significantly reduce global carbon concentrations in the atmosphere.

Fortunately, Democrats have sat on the legislation given the political risks to their careers of passing it.  But, just one minute, because to the rescue comes the EPA.  This past week the agency issued an “endangerment finding” that global warming is hazardous to human health.  In addition, the enviro-nazis at the EPA threatened Congress that if it didn’t pass cap and trade then it, the EPA, “would act on its own—and in a far more blunt fashion than Congress preferred.”   According to one anonymous administration official, ,” the EPA is going to have to “regulate in a command-and-control way, which will probably generate even more uncertainty.”

Why is the EPA going to impose regulations that it admits will not significantly reduce global carbon concentrations in the atmosphere?  Why does Congress put up with this extortion?  Wasn’t the EPA created by Congress and thus answerable to it and not the other way around?  Why would Congress allow a bunch of unelected bureaucrats to decide policy?  The answer is easy: to deflect blame for stupid policy.  The EPA is doing Congress a favor – it is going to further drain our economy with expensive regulations and when your congressperson runs for reelection he/she can blame the EPA.  Of course, the question that should be asked at town hall meetings is, can’t Congress take away the EPA’s power?  Yes it can, and as Americans get wiser about what charlatans their elected leaders are they will press them more and more for upright answers.

Lastly, and most importantly, the American people should be outraged at the wanton destruction of their currency by the Fed, Congress, and two presidents.  In the last 3 years alone the dollar has lost 30 percent of its value!  What do you expect the way money has been thrown at financial firms, car manufacturers, and so forth.  For their part, the banks seem to have done well investing their bailout funds since they seem to be turning profits without loaning money.

The federal philanthropy continues – on Saturday, the Senate cleared the way for the passage of a $1.1 trillion spending bill.  The vote was held up for an hour to allow Senator Lieberman an Orthodox Jew to walk more than 3 miles to the Hill on the Sabbath to cast the 60th vote to end debate.  Now, I am not an authority on Orthodox law, but didn’t the Senator consider voting in the Senate chamber work?  I suppose, like the Constitution that body continues to violate, when it serves their purpose members of Congress fell free to violate whatever parameters will get the job done.

All the bailouts and all this additional spending with money we do not have on aid for car dealers, loan guarantees for steel companies, and 5000 pork barrel projects for individual members continues to devalue our money making it that much harder for those already struggling to make ends meet in this horrendous economy Washington has given us.  Members of Congress are either charlatans or economic imbeciles because their inflationary policies hurt the same people they purport to help.  The whole thing is a stupendous outrage.

So, what is there to do?  I already think it is too late?  We owe 12 trillion dollars with none of our problems resolved.  Congress and the President seem hell-bent on making sure America is further bankrupted by every giveaway scheme imaginable – everyone knows the litany by now, too big to fail, too important to fail, so called environmental protection, cash for clunkers, homebuyer credits, etc, etc, etc….  I suppose we have the mid-term elections to look forward to next year, but given past experience if Republicans take Congress it will be akin to going on a diet and drinking Bud Light instead of Regular Bud.  Bottom line:  both are bad brands. 

If this article has irritated you even just a little bit, understand that there is a lot more that Washington spews that is awful.  From prescription drugs to federal salaries it seems like Washington only cares about it special constituencies and not the rest of us who are hurting.  And these examples are just the tip of the iceberg.

Congressman Watt – Charlatan or Economic Imbecile?

November 8, 2009

Congressman Mel Watt (D-NC) is either a charlatan or ignorant of basic economics.  Either way he is unfit to serve in Congress let alone serve as chairman of the Domestic Monetary Policy and Technology Subcommittee.  This week Congressman Ron Paul (R-TX) announced that Watt took the knife to his bill to audit the Federal Reserve – The Federal Reserve Transparency Act of 2009 (HR 1207).  According to Paul, Watt as chair of the above mentioned committee cut out “just about everything”  in preparing the bill for a full committee vote.

Specifically, Watt eliminated the provisions requiring audits of the Fed’s transactions with foreign banks, its deliberations on monetary policy, the activities of the Open Market Committee, and disclosure of communications between the Federal Reserve Board and reserve banks.  Essentially the bill has become a shell of its original self.  Paul, of course, does intend to attempt to restore the bill to its original form during Financial Services Committee deliberations, but that is not the point.  The point is why has Congressman Watt gutted a bill that has over 300 cosponsors in the House and the support of a large majority of Americans?

It could be because he is repaying the financial industry which has throughout his career in Congress contributed over $890,000 to his campaigns.  That would be only fair given how much they have helped him maintain power and the privileged perks of members of Congress – great healthcare, great salary, and a great pension plan.

But, what is funny and ironic is that the industry that is second in contributions to Watt is organized labor at $873,000.  Big banks and labor unions make strange bedfellows?  You would think their interests are so diametrically opposed that they would not be #1 and #2 in contributions to the same member of Congress.  Labor union support of Watt is also curious given that North Carolina is a Right to Work state and not nearly as unionized as the People’s Republics of Massachusetts and California.   But, not to worry, Congressman Watt has traditionally taken care of unions as well.  He has supported every “entitlement” program that comes down the pike in favor of their leadership.  The list has included minimum wage, the “right” under law to collective bargaining, so-called fair employment practices, social security, socialized medicine – the list goes on and on.

So, if the congressman is so busy serving big banks and labor unions, what has he done for the actual people who elect him every two years?  Well, very little.  You see by supporting the Federal Reserve and bailing out big banks through legislation he is supporting the perpetuation of inflation.  Our dollar has lost 95 percent of its value since the Fed was given control over it by Congress in 1913.  But, most folks don’t understand how the Fed imposes this hidden tax on them by debasing our currency causing prices to rise.  Instead Watt and his ilk blame capitalism for rising prices and offer socialized medicine, minimum wages, and other socialist schemes to combat the higher cost of living for families.  If they would just support sound money in the first place there would be no perceived need for these wasteful programs.

So this is where the charlatan or economic imbecile question comes into play.  Does Watt understand that his support for the banking cartel known as the Federal Reserve System is what actually causes hardship for labor and ordinary Americans in his district?  Does he realize that by gutting HR 1207 he will help to continue the debasement of our currency?  Has it clicked in his head that his support for or at the very least his blind eye toward the reckless monetary policy of the current Fed leadership will be responsible for the future hyperinflation we will experience.  Has he considered his own culpability in the coming collapse of the dollar which will usher in an era of even higher unemployment with a drastically reduced standard of living in America?

Given the bubble mentality around Washington, a reasonable person could conclude that Watt is both a charlatan and an economic imbecile.  He is an economic imbecile because he must believe that economic doom caused by Fed policies is not inevitable otherwise he would not support them in light of the fact that the collapse would also affect him negatively.  He certainly is a charlatan because like many members of Congress Watt has the best of both worlds.  Special interests of all stripes get federal goodies from him which personally cost him nothing.  In return those special interest groups guarantee his reelection every two years with huge cash contributions to his campaigns.  In the meantime, our national debt is grotesquely high, our manufacturing base continues to move overseas, our financial industry is bankrupt, and the dollar is on the brink of collapse.

This is the essence of our problems.  Too many charlatans and imbeciles have been in charge of Washington for far too long.  Unfortunately all good things must come to an end.  The federal gravy train that Congressman Watt and his comrades have built to continually get reelected is about to crash.  When it does they won’t understand it, but they should because it will be caused by the fraud they have perpetuated on America.

Bernanke is between an Overheated Printing Press and a Hard Place

October 17, 2009

Recent actions of the world’s central banks have sent a warning shot across the bow of the ship known as the Federal Reserve.  Since July, 63 percent of all new cash going into foreign central banks have been euros and yen – not U.S. dollars.  The greenbacks share of new cash, 37 percent, is far lower than its 66 percent share of 10 years ago.  According to the International Monetary Fund, dollars currently make up about 62 percent of reserves at central banks.  This is the lowest on record!

Additionally, the story has broken that the Persian Gulf states have met with leaders from China, Russia, Japan, and France to set-up payments for oil in currencies other than the dollar.  Naturally, the story has been denied by several of the participants.  But, from what I have experienced so far about Qatar living here for just the past 2 months, the Qatari government is very astute at acting in the nation’s best interest.  They are not going to make bad investments (accepting debased dollars for oil) in the long run and interrupt their own economic growth just because the U.S wants them to.  A source of mine on the ground here in Doha has also indicated that the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, U.A.E., Oman, and Saudi Arabia) which plans to institute a common currency in 2010, is currently debating whether that currency should float or be pegged to another currency.  Apparently, the leading favorite for pegging is the euro.  If this were to happen, overnight the euro would also become the currency of choice for purchasers of oil.  None of these indicators are good news for the dollar and its future as the world’s reserve currency.

It’s no secret how we got to this place.  The U.S. has been on a spending binge ever since Richard Nixon took us off the last vestige of the Gold Standard in 1971.  Throughout, the term of George W. Bush the welfare / warfare state accelerated federal spending, and interest rates were kept very low by the Fed.  Once the bills came due and the financial crisis hit, the politicians, especially the current president, and the money oligarchs at the Fed knew only to spend more money and lower rates even further to combat the emergency.  See, they either never considered that these actions of theirs got us into the mess in the first place or they realized that since we were in a messy fix they needed to help their benefactors on Wall Street and the best way to do that was to pursue the same policies, but label it “stimulus” or “quantitative easing” to fool the masses.  Only time will tell whether their chicanery has worked.

One thing is for sure, Fed chairman Ben Bernanke is between an overheated printing press and a hard place.  If he raises rates and siphons trillions out of the economy he will burst the current Fed induced stock market bubble.  Housing values will sink even lower to reach supply/ demand equilibrium.  Unemployment will accelerate even more given the higher cost of money for businesses.  If he maintains the status quo, which seems likely given his cowardice in the face of political consequences, the dollar will be finished as the world’s reserve currency.  He claims he has the tools and the know-how to siphon trillions of dollars out of the economy to prevent inflation once the recovery picks up.  But, given the amount of money and credit the Fed has injected since the crisis began, and Washington’s thirst for huge deficits, Bernanke would need to be more than a mere mortal to accomplish that.

Many may ask, well, what would be so bad about the dollar losing world reserve currency status?  For one thing, demand for dollars will evaporate.  Foreigners will not need them to buy oil and other commodities.  Consequently, the Fed will no longer be able to simply print new money to cover the future debts of Congress’ because no one will be interested in buying the Treasury bonds that support the monetization.  Since demand for the dollar will be gone its value will drop precipitously and this will actually force our government to raise taxes and/or print money just to buy the necessities of a nuclear power and industrialized society – namely uranium and oil.  In light of the amount of debt we already have and the future unfunded liabilities of Medicare and social security, the standard of living in the U.S. will be equivalent to Mexico’s.  One huge benefit would be the death of the welfare/ warfare state because merely put, “you can’t get blood out of a stone.”  But the loss of wealth will not be worth it.

In some ways the chairman of the Federal Reserve is the most powerful person in the world.  He supplies the money the whole world uses to buy commodities.  That distinction will soon come to an end.  When it does Ben Bernanke will go down as the worst Fed chairman in history since the dollar collapsed because of his policies and on his watch.  Congressmen Ron Paul R-Texas and Alan Grayson D-Florida are about to request that the Senate delay Bernanke’s confirmation hearing for another term as Fed chairman until he releases more information pertaining to the many bailouts of the Fed in the current crisis.  Instead President Obama should withdraw Bernanke’s nomination altogether.  It is possibly too late to stop the inevitable collapse of the dollar.  Maybe Obama can find a competent hand to pick up the pieces when it happens?

The Dollar is Living on Borrowed Time, No Pun Intended

March 7, 2009
March 7, 2009

It seems that the title of this article is a cheap attempt to attract as many readers as possible.  However, anyone who is aware of current trends affecting the greenback’s future value knows that the title is more prophetic than cliché.  Yes, recently, the dollar has gotten relatively stronger against other currencies.  But, due to a combination of events (past, present, and future) this won’t last.  As a matter of fact, at some point in the future the dollar may need life-support to survive.

Life support?  Those are fairly harsh words you might say.  Well consider this, the standard definition of inflation is too many dollars chasing too few goods.  This week it was reported that unemployment hit a 25 year high at 8.1 percent.  If you include all the discouraged workers who have given up looking for work, like the government use to include in the rate, the number balloons to between 14 and 20 percent!  We have not seen these numbers since the 1930s.  It makes sense that this many unemployed workers will generally reduce national production of goods.  Combine this reduction due to unemployment with the trillions of new dollars the Fed and Treasury have injected into the economy in the last year and you have a recipe for a strong decline in the value of the dollar and much higher prices.


Chart of U.S. Unemployment

So, where has all that new money the government and central bank has injected into the economy gone?  The answer is into savings accounts and bank balance sheets.  Government figures show that the household savings rate jumped to 5 percent in January from 0 percent last spring – the highest rate since 1995.  Back in December, the cash reserves of banks in the U.S. increased to $774.4 billion from $604.7 billion in November and an incredible $2.39 billion in December 2007.  Thus, the new money along with trillions pulled out of the stock market sits on the sidelines and not in circulation where it would be making for higher prices.   At some point, when banks resume lending and consumers spend their savings on fewer goods, the deluge of cash into circulation will significantly debase the value of the dollar and cause an inflationary depression the likes of which we have never seen.

History tells us this scenario is not far-fetched.  Strapped for funds because of huge debts incurred by spending for World War I, the Weimar Republic experienced a deflationary collapse in the early 1920s.  As the German government printed new money to stimulate the economy, the mark actually appreciated against other foreign currencies for a while.  However, as additional debt mounted and the economy refused to improve, the German people lost faith in their currency and began spending billions of hoarded marks in the marketplace making for one of the most severe episodes of hyperinflation in modern economic history.  Sound familiar?  Replace spending for World War I with spending for a general warfare state and we have fulfilled three-quarters of the above scenario.  The only part left is the deluge of huge amounts of dollars back into circulation making for some level of hyperinflation.

Of course, Fed chairman Bernanke claims the Fed will be ready when recovery hits to sterilize the money supply and bring it down to an appropriate level.  But, how does he know what that level should be?  Will it be commensurate with the smaller economy we will have then?  The above scenario only takes into account domestic economic factors.  What about the foreign countries and nationals who hold dollar reserves?  Can it not be assumed they will act in their own self-interest?  Countries will spend dollars to stabilize their currencies and individuals will dump dollars to preserve their savings and spending power.  Lastly, the Fed induced Treasury bond bubble will burst expanding the Fed’s balance sheet and unleashing more dollars into the economy.  With all of these events working together, Bernanke will have a complex, high risk, long and drawn out job bringing the money supply into line with market needs.  At the end of the day, Fed policy caused our patient (the economy) to get sick; the Fed’s cure (spending) is killing it.  It won’t be long before our patient needs life support.