Monday, March 2, 2009

Obamanomics and the Dread of Inflation

Greg Mankiw posted the growth forecasts from the Obama administration (in Red) and a competing forecast from a group of private economists (in Blue). It should be no surprise that the Obama administration forecasts are far more optimistic that the "Blue Chip" private forecasters; administrations are notorious for forecasting rosy scenarios when their economic plans are concerned; politics is a strong influence and the Obama regime is no different than other administrations before it.

2009: -1.2% -1.9%
2010: +3.2% +2.1%
2011: +4.0% +2.9%
2012: +4.6% +2.9%
2013: +4.2% +2.8%

Needless to say, I agree with the sober forecast of the private economists. If and when the economy does have some growth, it will be slight and hardly robust due to the massive spending in the public sector. In my opinion, the biggest threat to the economy will be high inflation once there is a return of confidence and some GDP growth. The M2 money supply has been growing at a pace that has never been seen before--the printing presses are working hard printing money in order to pay for all of the bailouts and for Obama's kooky stimulus scheme. This will not end well.

3 comments:

Jeffrey Perren said...

I'd be curious to know something about how those private economists arrived at those projections.

I'm far from an economist, but I'd expect pretty much no real productivity growth for the next five years, 10 if Obama gets a second term.

That estimate is based, of course, on not counting an inflated dollar as a real gain in wealth, nor counting a government created job in a malinvestment like windmills as an enlargement of the economy.

But that's just me.

Paul Eilers said...

The key is to hang on until 2010 and then of course, 2012. Hopefully, the American voter will have learned its lesson.

At the same time, I'm tired of the idea of looking to government to solve our problems.

Paul

Eat Well. Live Well.
PurpleGreenPops.com

VH said...

There is huge slack capacity in the economy right now. So, I would say that there would be some growth--albeit, very small--in the economy but it will come with inflation or worse--hyper inflation. Then we would revisit the 1970's in a bad way.