Inflation Countdown in Final Stages

Focus: MARKETS

Richard Lehmann Image Richard Lehmann Publisher, Forbes/Lehmann Income Securities Investor

What it will take to get through the current mess will mean that once it's sorted, we'll have to deal with the oncoming train of inflation, argues Richard Lehmann of Income Securities Investor.

Our financial problems today are the result of decades of abuse of a political system, democracy, which is conceptually flawed. The flaw is that it elects to office those who promise the greatest number of voters the most, irrespective of whether such promises are sustainable over time.

Greece is currently the most egregious example of a country which has spent itself into bankruptcy. Coincidentally, it was also the first example of a failed democracy, around 300 BC.

The fact is, our problems cannot be fixed by normal means-they are too big. It's not just the $16 trillion in national debt, it's the $86 trillion in unfunded government mandates. That doesn't count the trillions in similarly unfunded state obligations.

The seeds to our economic future, however, have already been sown. The agent of change is the Federal Reserve.

It is they, the unelected arbiters of our economic growth, who will manage the solution of our dual burdens of trillions of dollars in national debt and unfunded, un-payable mandates. Mandates are spending commitments for pensions, health care, and other social programs imbedded in current legislation.

The Fed's solution, in a nutshell, is inflation. Inflation grows government revenue without having to raise tax rates.