Hyperinflation is not anything that's going to happen. The Fed isn't stupid, and we're not a third world nation.
The Federal Reserve's expansionary monetary policy spanning more than tewnty years is going to have disasterous long term repurcussions, beginning now and getting worse.
Interest rates are the price of borrowing money. The Federal Reserve has consistently kept interest rates below what would otherwise prevail, that is, the Federal Reserve has made the price of borrowing artificially low. More is demanded and less is supplied at low prices, so credit (that is, future income) was always going to run out too soon, creating a credit crunch, temporary deflation, and a recession. But the recession is not the problem, it is the solution! The boom precipitating the recession was the problem, that is when the mistakes were made.
Since the mistakes have already been made, there is nothing any government entity can do to avoid a recession. All they can do, and all they are doing, is shifting the costs among different groups, for example, taking money from competent and successful businesses, and handing it over to politically connected failures like General Motors. Rewarding the wasteful at the expense of the productive is, of course, not good for the economy.
In any case, the Federal Reserve has already been "stupid", and moreover, its current policies offer no indication that they are about to wise up. Hyperinflation, latin American style, is a real possibility, since the Fed's policies are frighteningly similar to those which destroyed the currencies of so many third world nations.
By recomending consumers cut back their spending, you're pretty much recomending we kill the economy.
In a sense, that is exactly what I am recommending. It is vital that GDP declines. People cannot spend if they have no money, and by way of excessive lending, they have already depleted their future incomes. The only way to increase spending now is to borrow even more money, but this will only make the eventual problem worse. The economy has been artificially boosted by easy credit, and it will contract one way or another. There is nothing the government can do to help except get out of the way.
While tax cuts are a horrible idea right now, they do put more money in the consumer pocket to spend on goods--it's a short-term fix.
under very few conditions are tax cuts ever a "horrible" idea. The U.S. government, in its current form, is a massive burden on the economy, and one that ought to be reduced during a period of economic hardship.
Abolishing the Fed? That is just dumb.
No, it's quite sane. Before the Fed the U.S. never had a depression. It had recessions sure, but nothing to rival the Great Depression or the mess we are in now. The Federal Reserve's manipulation of interest rates for short term political gains has been instrumental in engineering both crises.
Virtually non-existant regulations is how we got into this mess in the first place; the fact that our nation's larges investment banks and hedge funds were buying these morgage-backed securities, KNOWING that income statements weren't even required, proves the Industry cannot regulate itself.
But the regulators were complicit!
The problem was not that regulators failed to monitor the housing market, but that they served two masters with conflicting goals. On the one hand they were to prevent a the malinvestments which precipitate a bubble (more on that in a moment), while on the other they were to encourage home ownership among groups with low credit ratings, or in other words, encourage malinvestments. Politicians were threatening lenders with legal action unless they stopped discriminating against particular groups, even though such groups were, by and large, only discriminated against because they had high rates of default. The problem was compounded by organisations like Fannie Mae and Freddie Mac and their implicit gaurantee against failure by Congress. They could buy up these malinvestments from lenders with impunity, or to put it another way, they created a demand for malinvestments which lenders rushed to satisfy. Regulation and meddling has consumed the financial industry for years now, and it helped to create the current mess.
In any case, few people seem to appreciate the problem which regulators have to confront.
Suppose the government decided that it did not want to waste money on unsuccessful scientific research, so they put together a regulatory body to prevent scientists from conducting research that does not lead to any useful results.
The problem is that the whole point of doing the research is to find out whether it will be successful. If regulators knew beforehand what the results would be, then there would be no need for the research in the first place. No regulation would be needed, and instead scientists would just go to beureaucrats for results to experiments which they never conducted.
The market, the profit and loss system, is a discovery procedure. Profits and losses are the result of experiments, feedback by which we learn which investments are good or bad or what the best price to sell a product is.
If regulators were better than private investors at making good investments, then regulators would quit their jobs and government salaries, buy stocks, and make millions! Meanwhile, every private investor would be clamoring for their advice.
Bubbles are easy to see in hindsight and more difficult to see with foresight. And even when a bubble is correctly predicted, it does not follow that the entire bubble is a malinvestment, for example, the dot-com bubble contained many good investments over the long term.
Politicians will tell people whatever they want to hear to get votes, and if people want to hear that regulators can get us something for nothing (in the above situations, the something being got for nothing is knowledge), then politicians will tell them that. Whether or not regulators actually make things better or worse is less of a concern.
Stop the bailouts? No. But yeah, they haven't been mannaged well. Thankfully Obama is going to expand government investments into badly needed infastructure projects, creating jobs.
He isn't creating jobs. The money he spends is just taken from someone else, either now or in the future. Over the long term his policies' net job creation will be negative. He is posing as a savior to some while invisibly denying jobs to others, because every wage he pays will be money not paying another wage (or two) somewhere else in the economy.