Gonzalo Lira: How Hyperinflation Will Happen "Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-
lite) and indirectly (through the Too Big To Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path—increase in aggregate demand levels or increase in aggregate asset values—leads to the same thing: A recovery in the economy.
This recovery is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we
didn’t avoid a double-dip—we never really managed to claw our way out of the
first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been—and is headed—
down."
We have to high of a debt to income ratio. It takes time to reduce the debt by paying it off or writing it off. It is the ratio of debt to income. Increase the income and you get less debt per income. This will allow the acquisition of more debt. And with it the economy will grow.
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