Most economists, including yours truly, have been saying that the huge budget deficits the country is running will result in inflation. So, where's the inflation?

Inflation normally lags changes in the growth of the money supply by one to two years. The big monetary expansion took place in the last half of 2008. So if the economy follows past trends, one would expect to see growing inflation by the latter part of this year.

There are several reasons why inflation does not occur simultaneously with a sudden growth in the money supply. (Remember, inflation is caused by the money supply growing faster than the supply of goods and services.)

A particularly disturbing aspect of the accelerating rush to a very possible near-future fiscal collapse of government at all levels - bankruptcy, default, the destruction of the dollar as a currency, the increasing dysfunction of  markets under increasing  loads  of regulations and taxes - is that none of  the potential  Republican  candidates for President in 2012  have provided  a vision that impacts the emotions of this destructive scenario.

People see what things look  like now  -- not so bad, even for the worst off if nobody in the U.S. is  starving to death, people still get  their Social  Security checks, etc. -- but they are not being warned of what their lives will be like under rapidly approaching desperate conditions that will be very different from now. 

All Republicans give you is numbers, like the x fund (Social Security, Medicare, etc.) will run out of money in y years, the amount of the GDP going to pay just the interest on the national debt will be x in only y years.  People are unlikely to be frightened by dry numbers because they can't imagine what the end results will look  like, so there's no emotional impact. 

Unless the emotional brain is involved, nobody is going to care enough to seriously consider what needs to be done to avoid disaster.   What is needed for any possibility of change or at least to help people prepare for the (coming soon) unimaginably bad years is for the general public to have a vision that impacts the emotions of what the world of Americans is going to look like in a collapsed America. 

Relax.  Close your eyes, take a deep breath, then another, think of a beautiful sunset and the smell of an ocean breeze.  If it's not too early - the sun is over the yard-arm somewhere - pour yourself three fingers of your favorite adult libation.  It's going to be okay.

True enough, parts of the world around you went even more nuts this week.  A left-wing looney with contempt for the Constitution became a Supreme Court Justice.  A left-wing limp-wrist judge with contempt for the very basis of what makes us human and for millions of his state's voters forces his homosexuality upon us all.

Yet there's also good news, good judicial news.  While Judge "Swish" Walker was emasculating Prop 8, the California Supreme Court upheld Prop 209 - 6 to 1! - this week (8/02) which bans "affirmative action," i.e., preferential treatment of women and minorities in public school admissions, government hiring and contracting.

The Left took a real hit on this one.  Yet that wasn't the only one, for on that same day (8/02) the Left suffered a double-whammy when US District Judge Henry Hudson refused to dismiss the State of Virginia's suit against ObamaCare on the grounds of unconstitutionality.

This, potentially, is a much bigger deal than banning affirmative action.  Here's why...

Over the last two weeks, the rule of law has been strengthened in a couple of major cases, one in the United States and one in Switzerland, but has been undermined in an action - surprise, surprise - by the IRS.

On Jan. 22, a Swiss court upheld the rule of law by saying that an agreement between the U.S. and Swiss governments to turn over UBS files on private bank clients to U.S. authorities violated Swiss law.

Switzerland has different laws than the United States regarding financial privacy and what parts of the tax law are felonies and which are not. Just because the Swiss law is different does not make it inferior to U.S. law. (In fact, Switzerland has direct democracy and a very long tradition of upholding human rights.) The United States considers it a felony not to file a W-9 tax form, while the Swiss do not consider the failure to file the appropriate form a felony.

An IRS official said, "We expect the Swiss government to continue to honor the terms of the agreement" - despite the agreement having been deemed unlawful. Of course, the IRS has a long tradition of ignoring the law and the Constitution when it suits its purposes.

Amidst the many dangers posed by the political conflagration now engulfing the Arab world, we are presented with a unique opportunity in Syria.

Syrian dictator Bashar al-Assad, like his father from whom he inherited the regime, is an unadulterated rogue.  He is an illicit nuclear proliferator, has a large stockpile of chemical weapons including Sarin gas and blister agents, and is a major sponsor of terrorism.

If the Assad regime is overthrown, it will constitute a major blow to both the Iranian regime and Hezbollah. In turn, Lebanon's March 14 Democracy Movement and the Iranian Green Movement will be empowered by the defeat.  This is an opportunity we dare not squander.

Growing up as a teenage California surfer in the late 50s/early 60s, my favorite music was Surf Rock.  The record we all loved the most then is the one that keeps reverberating in my head now with little more than 90 days to go until November 2^nd.

In 1962, five kids from Glendora High School (Jim Fuller, Bob Berryhill, Ron Wilson, Jim Pash, and Pat Connolly) called themselves The Surfaris, and talked the owner of a small recording studio in Cucamonga, Dale Smallin, into recording a song of theirs called Surfer Joe.

Needing something for the throw-away "B-side" of the 45 record, Ron Wilson started blasting away on the drums while Jim Fuller went wild with surf guitar riffs.  Dale Smallin decided for a gag to start it off with his crazy Witch Laugh cackle.  They named it after what happens to a surfer when a giant wave crashes on his head.

Here it is now, the greatest surf music ever played - and it should be the theme song for what's going to happen to Democrats this fall:

"So what?" is the implicit expression of much of the Washington political class when it comes to spending and taxing. The consequences of Washington's fiscal irresponsibility are not evident to many in the media and electorate - yet. But the pain will come - and it will hit almost every American.

Last week, I explained how government deficits are strangling necessary capital formation. The following describes the impact on job creation and growth, and next week, I will present a way out of the mess.

This past week, the White House claimed that the stimulus bill "saved 2 million jobs," but just before the stimulus bill was passed, the administration said the unemployment rate would peak at 8 percent with the stimulus bill and 9 percent without it.

Now, we have both the stimulus bill and an unemployment rate of more than 10 percent, which shows that the White House is developmentally challenged when it comes to basic arithmetic.

In response to Jack's article last week, A Tsunami of Insanity, in which he described the Financial Armageddon bearing down upon us, I was asked on the TTP Forum:

"OK, Skye, do you have a list of things you are doing to prepare for the storm?"

Yes, I do. I'll be discussing this in detail at the Las Vegas Rendezvous, but here are a few of the high points:

*Don't live in a city. A small town in a small county will be much safer - so long as the town and county aren't populated with a lot of Progressives.

Check the voting data for both the town and the county. A small conservative/libertarian town in a low population gold mining county will do relatively well as the dollar depreciates. A town where 40% of the income is dependent on the continuation of corn ethanol subsidies would be a very risky location, no matter how rural.

Even though the government is running massive deficits, interest rates and inflation are low. So, what's the problem? The following discussion will clarify the problem.

The United States is now in a situation in which the government is taking a very large share (40 percent) of the nation's savings to finance its deficit spending, leaving a diminished pool of capital to meet the needs of both families and businesses.

You might be thinking, if there are not enough savings available for investment needs, why are interest rates so low? The answer is that the Federal Reserve (Fed) has been creating money by loaning the banks nearly free money and buying mortgages from Fannie Mae and Freddie Mac.

Soon, as even the Fed acknowledges, it will have to start selling the mortgages it owns to private parties and increase short-term interest rates to avoid saddling the country with high inflation. In sum, inflation cannot be avoided without a big increase in both long- and short-term interest rates.

What are we to make of the fact that no one has taken credit for Wednesday’s (3/23) Central Bus Station bombing in Jerusalem?

Wednesday’s bombing was not a stand-alone event. It was part and parcel of the new Palestinian terror war that is just coming into view. As Israel considers how to contend with the emerging onslaught, it is important to notice how it differs from its predecessors.

For both Fatah and Hamas, the most important target audience is Europe.  Fatah, for example, is in the midst of a global campaign to build international support for a unilateral Palestinian declaration of independence in September.

The fact that Fatah and Hamas have neither waited until after September to attack nor sought to differentiate themselves from one another as the attacks coalesce into a new terror campaign indicates strongly that the Palestinians no longer feel they need to pretend to oppose terror to maintain European support for their war against Israel.