Sjeltur

In his first weekly address on radio and TV since taking office, President Obama showed he understands how serious the current economic crisis is. He called it “unprecedented”, and presented new plans to get out of it. But he might be too late.

In his address he said: “We won’t just throw money at our problems, we’ll invest in what works.” If that’s his philosophy then he should call the Federal Reserve immediately and tell them to stop their printing press that spits out dollars at a rate never seen before.

On September 10, a few days before the crisis really broke out, there was about $874 billion out there. Then the amount of money just exploded. On January 14 this year, only four months later, it was $1751 billion, an increase of 100%! The growth of the money supply was about 6% annually before September 2008, but now the growth is about 300% annualized… Note that this money has an intrinsic value of zero, it’s not backed by anything of value.

So far only a small portion of the money created in the past months found its way to the real economy. In the months to come, the economy will be more and more flooded with money, and this money will dilute the value of the dollar. It might spark hyperinflation, followed by the demise of the currency. Obama has to stop the creation of money out of thin air immediately, but considering the large amount of money already pumped in the system, it might be too late to prevent a disaster.