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Larry Summers bows out; inflation a shoo-in?

Larry Summers shocked — and gratified — the investment community when he asked not to be considered as the next chairman of the Federal Reserve. Stock indexes around the world rose on the news, with the belief that money will continue to flow freely around the world. Gold and silver prices did not respond immediately.

The near consensus is that Janet Yellen, who is an advocate of continuing quantitative easing, is now Obama’s most likely choice, although there are other Establishment economists who could be selected.

According to the Washington Post, Yellen would be the most qualified Fed chairperson ever. “She led the San Francisco Federal Reserve from 2004 to 2010 and has been Vice Chair of the Fed since then. So she’s served across multiple chairmen, in multiple positions, during good economic times and during the depths of the financial crisis. Experience isn’t everything, of course, but it matters — particularly when the Fed is in such uncharted waters.”

The Post goes on to note that Ben Bernanke had only three years on the Federal Reserve’s Board of Governors when he was named chairman, that Paul Volcker had only four years leading the New York Federal Reserve before he got the call , and that Alan Greenspan had never worked at the Fed at all.

Yellen has been outspoken in her calls for more quantitative easing, topped only by Paul Krugman, the Nobel laureate who, at the onset of the World Financial Crisis in 2008, called for the printing of $8 to $10 trillion to solve the world’s financial ills. In his most recent blog post for the New York Times, Krugman asked the Fed to continue printing. To Krugman, there cannot be too much cheap money.

Krugman’s supports his reasoning for not tapering by pointing to the jobs market. Ironically, he notes that the much heralded unemployment rate is a bogus number, that it has come down not because more Americans are working but because fewer are looking for jobs. Real numbers verify that the jobs market is weak.

Number of Full Time Workers in US Stagnant Since 2001
In 2001, roughly 114 million Americans held full-time jobs. By 2012, the number of full-timers had inched up to about 115 million, an increase of a mere one million workers while the population swelled from 282 million to 314 million. Further, more than five million fewer Americans are working full time today than in 2008 when the World Financial Crisis hit. Money creation has not produced the jobs that were promised when the printing presses were turned on, but that does not stop Krugman–and Yellen–from calling for still more money creation.

Inflation is the future, and anyone with wealth to protect needs to invest accordingly.

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