Well, at least Warren realizes pols only have 3 levers to pull:
1) Pass a law
2) Raise taxes
3) Spend money

Since 1) and 2) probably won't get them re-elected, we're stuck with the buckets of money solution for all of our problems.

Maybe if they just asked for something, anything, in return for all the money they dole out, it might work a little better.

I still don't think hyper-inflation since they'll bump interest rates before that happens.

We'll surely see some inflation sometime. The tricky question is, "When?". For now, the $1.8 trillion deficit seems modest in comparison to the $8 trillion of "wealth" that has vanished over the past year or so in the deflation of the housing bubble. With that, it's hard to imagine inflation of any serious proportions as long as one in four are unemployed or underemployed, and there is substantial unused production capacity as consequences of the housing collapse.

Won't there be serious inflation when it comes to the dollar's buying power overseas - starting with oil? How do we get the rest of the world to keep taking the dollar seriously?

Can you say Weimar Republic?

Some economists think that a weaker dollar would be, on balance, a good thing for the U.S. because of our persistent negative trade balance -- something to worry about along with the deficit. And some government policy goes along those lines -- complaining, for example, that China keeps its exchange rate artificially low in relation to the dollar (something it does by buying our debt securities) artificially low to stimulate its exports to us. No doubt oil prices, while stated in dollars, follow other currencies, and can be expected to rise if and when the dollar falls. What's not clear is how much that will affect inflation. The official CPI doesn't include energy or food costs, which are assumed to be "baked in" to the other numbers. And in recent times, oil price spikes haven't done much to prices. As people find their pockets and bank accounts empty, demand becomes elastic, and higher prices just result in lower sales.

So, if I read that article correctly, we had much higher Debt to GDP ratios in the early 40's. And ummm, somehow we made it out of that okay.

Italy and Japan have even higher ratios. And I'm quite alright with the US becoming like Italy or Japan.

Not to say we shouldn't work at chipping away at the deficit. But how come it's only when we spend money on domestic issues that the deficit becomes a big deal. For wars, all the debt in the world is okay.

Buffett was for Obama, before he was against him.

Justin, you make good points and ask good questions there. The main difference though is that the real productive economy that converts energy and materials into useful things was essentially the only game in town at the end of WWII, and we were essentially the only one with an intact one. It is no exaggeration or phony Hallmark sentiment to say that the Axis Powers were defeated in US factories and shipyards -- we simply overwhelmed them. Using American materials, the Soviets hung on long enough to break the back of the Wehrmacht and we flooded the Pacific with ships and planes. At the end of the war, those enormously productive factories were re-repurposed and turned back to making consumer goods, so we had an explosion of low-cost, high-quality (for the times) goods available for the public.

We were still the world's #1 oil producer and exporter as well, and we converted the country from one where most people could live pretty well without a car to one where lack of a car is either a hallmark of wealth or poverty. We splurged on the greatest public works project ever, the Interstate Highway System, using borrowed money that was never repaid. There were still abundant fisheries and smelters throughout the Northwest, where only a few dams had been installed.

In short, we were pretty much in the diametrically opposite position of where we are today, where many of the brightest people spend their days manipulating pixels that connect to nothing in the real world of real value. Our resource base has been plundered and we have a huge overhang of failing infrastructural investments that we can't afford to fix or to let collapse.

So, regardless of why the debt exploded, it does have some fundamental bearing on the world we're going to face. In fact, it's the worst of all worlds -- the grinding ratchet of an energy-constrained world means that we're very likely to see cycles of deflation and then hyper-inflation, which should just about do a job on everybody.

The most important indicator of just how much we have become a country of nonproductive Disneytainment rather than a country that makes things of value is that the people whose lives revolve around manipulating the tax code and creating exotic financial instruments have ensured that the many proposals for a tiny tax on stock and derivative trades (say, 0.25%) are completely and carefully excluded from the debate.

The parallels between early 21st C. USA and the late Roman "bread and circuses" phase of empire are simply too easy to list here, but that doesn't mean that they are not all-too-apt or that our result won't be similar.

The creative class will never let it happen.

The $20 loaf of bread will more likely result from our propensity to puchase designer food at any price in order to feed our egos as well as our bellys. When I was a kid we had 2 types of bread, white or whole wheat (brown). A very rare treat would be a loaf of sour dough bread from San Francisco. Go to the store today and look at the bread products available. Yes, inflation is a worry and will contribute to rising prices, but so do our tastes, budgets and fashion.

I have a response neither conventional Dems or Repubs are going to like. The bailout was not necessary, it was only mandated by a ruling class, global elite that basically owns our elections process (via Diebold and ESS voting machines which are easily hacked, but refuse to be audited). We spent trillions to core the rotten balance sheets of ONLY A HANDFUL of big banks that account for 80% of the entire derivative mess. A rare bipartisan coalition came together in a way that only happens when authorizing "use of force" (i.e. excuse for war) on a weak victim, and they did so to protect the power of that ruling, banking elite to whom they owe their undeserved titles and jobs.

In other words, we threw money into a pit to soften the fall of the very same criminal banking cartels that caused the crisis. Which is why the likes of Buffet, Kissinger, Rockefeller, and Evelyn Rothschild and their very old money buddies have been doing the financial media appearances over the last year saying we had to have this bailout.

Now that the rotten banks have stabilized (relatively), the well-healed of that elite are worried about recession and the ancient medicine for economic woe will be employed--that is the reduction of consumption in an economic system to a level where the money supply is equal to the demand for goods and services. If that seems a little confusing to you, it basically means the reduction of your standard of living via depreciation of your earnings and savings. Only now can the liquidation or "slaughter of the innocents" that characterized the late 70s and early 80s be allowed to progress.

Why? Because if the government had allowed the excesses of the last decade to implode upon themselves like the real estate boom of the 1920s or the Dot Com boom of the late 90s, then the elite banking fraternity itself would have been wiped out. The global system of political control that has existed since Montagu Norman and the establishment of Bank of England in the 18th Century (and importantly the later establishment of the BIS post WWI) would be wiped out. Had that money gone instead to small regional banks with strong balance sheets, it would have been loaned out and a new upwelling of financial-political power would have occurred. The system our founding fathers put in place would have purged itself, as it did with the Sherman Act and Clayton Act in the early 20th Century.

Instead we will see our leaders defend at all costs the need to soldier on with "globalization" as industries consolidate into cartels feeding off government subsidies and we'll call it "socialism," because its such a pleasant euphemism for "fascism."

Read "Tragedy & Hope" by Prof. Carrol Quigly of Georgetown Univ., mentor to Bill Clinton. It's not cheap or short, but it's one of the most important books ever written.

And yet there are plenty out there that still see signs of deflation in the near term:

http://seekingalpha.com/article/157021-more-evidence-of-deflation

http://bespokeinvest.typepad.com/bespoke/2009/08/record-low-ppi.html

Jason