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Friday, December 24, 2010

Ben Bernake Flunks Econ 101 AND Physics 101

Here are two numbers to pay attention to, the amount of U.S. currency in circulation.

2008; $875,000,000,000 ($875 Billion)
2010; $1,996,054,000,000 ($1.2 Trillion)

That is an increase in the money supply of 228%.

During that same period, the GNP (the value of all the goods and services created in the U.S.has grown 3%-4%.

So we now have a HUGE increase in the amount of money in circulation and a TINY increase in the amount of goods and services on which to spend that money.

The Econ 101 definition of INFLATION is too much money chasing too few goods. It is also the Physics 101 definition of the behavior of any two quantities.

What is there about this fact of life that the Administration cannot understand?

And the answer from the administration since Hank Paulson used your money to bail out his pals at Goldman Sachs has been the same every time, e.g., Things would have been truly terrible if we hadn't taken this action."

How do you answer this kind of quackery?

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