Barack Obama's stimulus plan could cost $700 billion. That's in addition to the $700 billion Congress authorized for the TARP program. The carmakers want$34 billion and may get $15 billion this week. They may need as much as $125 billion according to one estimate. The states want a bail out estimated at $125 billion or more. The Federal Reserve has pumped more than $1 trillion into credit markets.
The sources of all this money are: (1) borrowing and (2) money creation. Both are inflationary. When will this inflation be reflected in the economy? Soon is a good guess. Does this mean we could replicate the 1970s when the economy suffered from stagflation -- inflation and stagnation? Could be.
When will the demand for bail outs subside? As long as there are bail outs, someone will want one and will justify the need for one the same way the carmakers and the states are justifying their demands.
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