Royal Bank of Canada (RY)

[LouisDesyjr]

USA hyper inflation?

I think it is a possibility because of all the QE programs we have run and the money that has been borrowed to fund government expenditures. It is so high right now that it probably can never be repaid. To pay off the debt there are only three ways to do it:

1: Cut spending. No matter who gets elected, government spending just keeps going up. We even spend several hundred billion over revenue every year and show no sign of stopping. Some economists even advocate MORE spending.

2: Raise Taxes. We are probably at the maximum of what can be collected for revenue. No matter how you change the code, or raise or lower rates, tax revenue usually is around 20%. Sometimes it is less because the economy is not doing too well.

3: Debase the currency. After the first two are not done or can't be done, the only way to make the debt payments after a while is to debase the USD. In effect print more money to have the money to make the interest payments. The QE programs has been the treasury issuing bonds that the federal reserve bought large amounts of. So far it has worked but at some point something will go wrong with this arrangement. The big problem is that if interest rates go up too much, it will reduce the value of the bonds, and would make the federal reserve insolvent, so we can't let that happen.

Louis J. Desy Jr.