Wednesday, October 24, 2012

Romney/Ryan: Disaster of Unintended Consequences?

I am a supporter of the Romney Ryan ticket.  I am a strong supporter of Paul Ryan (somewhat disappointed that following a WIN he will be relegated to the back shelf).  I am a skeptical supporter of Governor Romney.  That being said, I would have voted for the Governor regardless of Paul Ryan's selection.  I suspect that the Romney Ryan ticket will win in November.  I've done my part: vote already submitted.  What concerns me however, is what will happen when the ticket actually takes office.  Maybe even before the ticket takes office.

The great thing for the reader is that I am not a prophet.  I can't think of too much of anything that I have ever predicted would come true, actually did come true.  So, maybe you're in Luck.  Nevertheless, this thought has stuck with me for weeks on end.  So I am going to write it down.  Since 2008 our M1 money supply (the amount of actual dollars in the market place) has arguably increased by 300%.  Currently, the FED is pumping $40 billion a month into the system as a function of QE3.  Leaning as I do toward an Austrian understanding of the economic cycle I am very nervous about all that money out there.  I can remember 4 years ago telling my son to watch as inflation kicked in.  That you can't print money out of thin air like the FED is doing, and not de-value the monetary supply.  As I sit here today, inflation has hardly budged.  Why?  I suspect that the very reason that we do not have a robust recovery underway, is the very reason we have little or no inflation.  I suspect that this money is sitting out there, in banks, in bank accounts, in businesses and all the institutions that normally use and spread large amounts of cash.  It hasn't made it in to the marketplace because in spite of making the money available, no one is actually using it.  This, because there is no business entity out there that has confidence enough in the economy to actually take a risk with that money.  I believe they are afraid.  I believe they are afraid of the current administration.  The fear of regulation, taxation, unknown regulatory costs, has served to prevent that money from being breathed into the US economy.  So, what happens when the Romney/Ryan win results in a collective exhale by businesses and institutions that effectively spews all that M1 from it's safe, inflation avoiding locations and into the market place in the form of consumption and investment?  Inflation.  And, if the hypothesis is correct it will be huge massive and unprecedented inflation.

I hope I am wrong.  I hope that Romney's 5 point plan will be all that he says it will be.  May my poor track record continue.  We can only hope.