By Chuck Doud
The Madera Tribune

I often wonder what Dr. Pinkney C. Walker would have thought about today’s economic problems and President Obama’s plans to solve them.

Walker was my economics professor at the University of Missouri, and at the time was regarded as one of the foremost economists in the country.

In one memorable lecture, he described inflation as being the result of too many dollars pursuing too few goods, but he also said inflation can result when the prices of goods or services become higher than their economic benefit.

He liked to lecture in front of an extra-large blackboard, and to illustrate his point, he would throw the chalk to a point higher on the blackboard than he could reach.

That is where inflation is likely to go if government starts printing money to force short-term solutions to long term problems, he said.

Then he would pick up the chalk and throw it at the ceiling, saying that’s where inflation would go when too much government-printed money was used to buy commodities that were priced beyond their current value.

I think Dr. Walker would say inflation was on the way very soon. The Federal Reserve decided last week to buy billions of dollars worth of Treasury bills — in other words, to lend the government money.

Keep in mind that the Fed is not a government agency. It is the central banker for banks and other enterprises that make up the financial system.

But no longer. It now is becoming a backup lender to the U.S. Treasury, which in turn will use some of that money to lend money to banks and other big companies flirting with failure.

This, in effect, is printing money to buy money to buy bad investment paper.

It may not be long before the chalk hits the ceiling.

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