Is the US headed towards a socialist government?

[kandrathe]

That's possible, although historical experience seems to indicate that governments who devalue sharply to cover their debts will break their own backs.

You mean like we did last time? Trust me... Obama is the new FDR.

Practically every communist government tried this at one stage or another. The Soviets, the Cubans... I can't speak to the Khmer Rouge, but it would hardly surprise me. However, this is the *opposite* of inflation. There is no such thing as inflation in a barter economy, and if the state is fixing prices for everything, then the obvious consequence is that prices are not moving. (Edit: I suppose it has some of the effects of a one-time massive hyperinflation shock, rendering all cash savings valueless. But unlike printing money to get the same effect, the government does not get to keep the proceeds. Very stupid policy, and the results speak for themselves.)

The reason they did it was that the currency became worthless, and their utter hatred of greed and status based upon the amount of money one has. The objective is to crush the greed from the bourgeois.

Except that this is the whole point. Not only did Lenin not agree (in the sense of he never said anything specifically in agreement with what Keynes was writing), he did not even agree in the sense of believing inflation was good for socialism and bad for capitalism. He apparently believed exactly the opposite.

I believe he thought inflation was bad for the proletariat.

How so? Inflation is a powerful tool that cuts back on accumulated cash reserves and funnels them to the government, but that gives powerful incentive to invest rather than hold cash.

In an environment of growing capital(positive DOW) then it would encourage investment, however in a shaky depressed market (such as the one we have now), investors lose either way so they move to things like precious metals and unaffected currencies.

Investment means private ownership, not government ownership. Things would only revert to the government if the devaluation was total, and the Fed obviously has no interest in hyperinflation. (Wow, writing that sentence made my head hurt.)

When the private sector refuses to invest(spend), then according to our current government, the State has the responsibility to "stimulate" the economy by going on the largest spending bing in the history of government spending.

Unless you're in a liquidity trap, in which case you'd better be prepared for deflation, not inflation. But, then, if these things were really predictable, you could make a killing in the currency market.

Oh, yes, the liquidity trap. Well, answer that one yourself. How close are we to having "zero" interest rate? Get your rapidly depreciating dollars ready for that currency killing. I'd suggest investing in the Yuan. I'd suggest looking at some charts and forecasts as well. What is the stock market forecast, T-bills, gold, currencies? It's time

This article, Is the Medicine Worse Than the Illness? from the Wall Street Journal sums up my thoughts nicely. "If the Fed is going to create boatloads of depreciating, non-yielding dollar bills, who will absorb them? Who will finance the Obama administration's looming titanic fiscal deficits? Who will finance America's annual surplus of consumption over production (after 25 more or less continuous years, almost a national trait)? Inflation is a kind of governmentally sanctioned white-collar crime. Every crime needs a dupe. Now that the Fed has announced its plan to deceive, where will it find its victims?"

I liked the end... "Finally, he [Ben Bernancke] should be directed to put himself into the shoes of a foreign holder of U.S. dollars. "Tell us, Mr. Bernanke," a congressman might consider asking him, "if you had the choice, would you hold dollars? And may I remind you, Mr. Chairman, that you are under oath?""