Has the massive Obama stimulus plan put us on a collision course with virulent inflation?

It sure looks that way.

Let me explain …

When the U.S. Commerce Department on Friday said the U.S. economy contracted at a 1% annual pace in the second quarter, the report was actually seen as good news: It was a slower decline than in each of the two prior quarters, and economists had expected a contraction of 1.5%.

“This is good news,” Nariman Behravesh, an economist with IHS Global Insight Inc. (NYSE: IHS), told The San Francisco Chronicle.

But here’s the wild card: Although government spending did increase during the April-to-June quarter, only about 7.7% – $60.4 billion – of U.S. President Barack Obama’s stimulus package had actually made its way into the U.S. economy by June 30, the quarter’s official conclusion. Of that total, the largest component went to U.S. states to …

To show you the kind of idiocy that passes for economics, The Wall Street Journal, in a story about the imminent rise in the minimum wage from $6.55 to $7.25 an hour, notes that the Economic Policy Institute “estimates that the minimum-wage increase will add $5.5 billion to the economy” which makes me laugh – Hahaha! – in a mocking-yet-scornful way as my humble way of saying, “These guys are idiots!”

If another lousy 70 cents an hour will add $5.5 billion to the economy, then raise the minimum wage by $7 an hour and add $55 billion! Or raise the minimum wage by $70 an hour and add $550 billion! Hahaha!

So I’ve got a real Hot Mogambo Tip (HMT) for these Economic Policy Institute (“a liberal think tank” says the WSJ) weenies: Wrong-o! Morons!

For one thing, money does not appear out of nowhere, including that $5.5 billion. It

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Back in December, with the U.S. recession in its 12th month – and showing no signs of abating – Money Morning Contributing Editor Martin Hutchinson warned that an “L”-shaped recession was very possible.

The U.S. recession is now in its 15th month, and many economists now expect the downturn to last until 2010 – if not longer. In fact, some economists now say the U.S. malaise could easily evolve into the virulent “L-shaped” downturn that Hutchinson predicted – a development that would guarantee both the maximum pain and the slowest recovery, experts say.

“I said in December that the recession could be ‘bloody-L shaped.’ With the huge deficits, that now looks the most likely outcome – and believe me when I say that it will be very bloody,” Hutchinson said this week. “The economy will bottom quite soon, but every time it tries to

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DR readers might have been alarmed to read Dan Amoss‘ warning in yesterday’s edition that, “Some in Congress are floating a proposal to steal your 401(k), sell the proceeds, and invest in ‘government-guaranteed’ retirement accounts.”  Alarming especially to folks reading about it for the first time.  So let’s go into a little more depth.

This blog was among the first to warn last month about a proposal to wipe out the tax advantages of 401(k) plans.  During the last week or so, probably because of Mr. Obama’s election, this has caught fire on the Internet.  And like many things that catch fire on the Internet, people are inclined to present the issue in the most dire form imaginable.  So a plan to wipe out the tax advantages of 401(k) plans has morphed into a plan to “confiscate” 401(k) accounts — probably because Argentina’s government did something similar a

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September 23, 2008 – The Economic Policy Institute has weighed in on the Paulson bailout plan: With $700 billion of taxpayer money at stake, Congress, the administration, and Secretary Paulson must represent all of us, not just the financial markets. This means paying attention to distressed mortgage holders and to job seekers facing an unemployment rate of 6.1% (more than 10% for African Americans). To offset whatever costs emerge from this bailout, we will need to raise revenues—we suggest levying a tax on financial transactions and raising the tax on income from capital gains and dividends to the same rate as wages. Otherwise, the nation’s needs for expanded health care and investments in infrastructure, renewable energy, and education will be curtailed. We also must make sure that those who are bailed out do not enrich themselves further with excessive salaries and benefits. Well, so far it looks highly unlikely that the ...