This is a rush transcript from "On the Record ," March 6, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: If you have a job, hang onto it. Employment --unemployment has gone bam -- 8.1 percent. That's worst than last month. It's terrible. Employers slashed 651,000 jobs just in the month of February. These are the worst numbers since 1983.

But there's some slightly good news. The DOW was up today -- only 32 points, but up is better than down. Will the government stimulus and bailouts help get us out of this mess? Our first guest Dick Morris says all the spending will lead not just to inflation but to hyperinflation and a global recession.

Dick Morris, former advisor to President Clinton and the author of "Fleeced" joins us live. Dick, we are all looking at the job numbers for this month and watching this DOW, whether it is up or down, mostly down. But you are looking at it a little farther out, aren't you, at the money supply in the impact it is going to have?

DICK MORRIS, FORMER PRESIDENT CLINTON ADVISOR: Yes, the money supply, the amount of money in circulation plus in reserve, has tripled in the last five months. It has gone up 271 percent according to figures I just got a few days ago from the Federal Reserve board.

Greta, you know, car sales have tripled and home sales have tripled, and consumer spending has tripled, right? Not quite. And so where is the money? If all of that stuff is down, where did the money go?

And the answer is it's parked. It is in parking garages all over the United States. Some people put it in paying down their credit cards, other people put it in paying down their student loans, their mortgages, Treasury Bills, home-equity loans. Everybody is saving, trying to get out of debt, hoarding their money.

A little bitty trickle of it is coming through and is spent, but not enough to get the economy moving.

So why is everybody holding onto their money? Because they are scared to death. They are scared they're going to lose their jobs. They're scared they're going to lost their homes, and they are hanging on to what they have.

And that climate of fear is making things worse.

And the problem is that Obama, while the stimulus package is well intended, he then comes in with a tax-increase proposal that says, "Hey, I am going to take this away from you. Go ahead and spend, but in two years, I am going to be serving you for dinner."

And that causes people to be more and more afraid. And Obama says it is just the rich, but those are the people that are the employers, who sign paychecks and create jobs.

And I think what is going to happen, Greta, is that in two years or three years, when we begin to come out of this, all that money that is in the parking lot is going to come onto the freeway all at once to buy goods to expand plants and equipment.

And then I think we will have runaway inflation. And the only way to cure that is another recession. Sorry.

VAN SUSTEREN: But in terms of holding on, that seems like such a personal decision that is so prudent, personally, because the last thing that you want to do right now with all the criticism of people buying things they couldn't afford, homes they couldn't afford-

I understand the thought of sort of tie down everything and get rid of your debt. So as a personal decision, that makes a lot of sense, I think.

MORRIS: And, by the way, it does, ultimately, solve the problem. The biggest reason that we're in this crisis is that ten years ago Americans owed 70 percent of their income, not counting mortgage. Now they owe 140 percent of their income.

And as that begins to come down, people begin to have not to have that debt overhang and not to be maxed out on everything, band they can begin to spend some money.

But the problem is that Obama is trying to force the pace with this massive spending, and the money is not being spent. It is being parked. And when it comes in, it will just come in all but once, and we will have incredible inflation.

VAN SUSTEREN: Is it also a contributing factor that in order to pay off this enormous debt that we are now accumulating, one of the mechanism is to print more money. The minute you start printing more money, you really are running up the inflation.

MORRIS: Precisely. When you add up the $2 trillion the United States is going to have to borrow, the $2.3 trillion businesses in China, not the government, businesses are going to have to borrow, the amount of money the EU and Japan are going to have to borrow, you're talking about $10 trillion that somebody has to lend somebody in the world.

And there is just not that kind of money around. There is only a fraction of that.

So what's going to happen is the Federal Reserve board will create money. And that increase in the money supply just begs inflation.

Watch Greta's interview with Dick Morris

VAN SUSTEREN: Everyone seems to say that this is the cycle, and that eventually we will come out of it. Maybe I am just a pessimist, but I do not see where we come out of it, because it has gotten to such a catastrophic level.

Are we going to come out of this? We are going to have a lot of hardship, but at the end of the day, it might be ten years from now, but we will come out of this?

MORRIS: It won't be 10 years from now, but it might be five or six.

The debate among economists now-the optimists say this is U shaped recession-down, down, down, and then out of it. The pessimists say it's an L shape-down, down, down, and then we stay down.

I am a U-shaped guy because I think the economy basically is pretty vibrant, and America has a strong level of domestic demand. It's just that everybody is terrified.

The problem is that Obama has scared us all half to death, not only of the current situation, but of the taxes that are coming.

And instead of sending a message of confidence, and instead of sending a message of "Keep your money and invest it and spend it," he is saying "I am going to raise the debt, I'm going to raise the deficit, I'm going to print money like crazy. And on top of that, I am going to tax you to death."

And those are not the kind of messages to send to get the economy in good shape.

Greta, two years from now, you and I will be doing a show on what caused the massive inflation.

VAN SUSTEREN: Probably, indeed, we will be.

All right, in terms of the president right now, his economic policy, what percentage of the economic policy is pure economic policy, and what percentage of it is politics?

MORRIS: I don't think it is either of economic policy or politics, Greta. I think it's ideology. I think that this is precisely the program President Obama would pass if we had five percent growth rate and if we had three percent unemployment.

I think he would pass the same bills for the same spending for the same healthcare for the same leasing tax policy. He might do it over eight years and not over eight weeks, but he would pass the same stuff.

And what he's doing is using the crisis as an excuse to get passed what he wants to get passed anyway, not because of politics--it may not help him win-certainly not because of the economy, it has nothing to do with that, but because of ideology.

He believes that over the last 30 years or 40 years the rich have gotten too rich and the poor have gotten too poor, and he wants to readjust it.

And in a way, he has a point. The top one percent of the country went from eight percent of the national income 20 years ago to 22 percent of the national income now.

But in a way he doesn't have a point, because they pay 41 percent of the taxes already.

VAN SUSTEREN: Who is driving this more, the White House or Capitol Hill? Or are they partners in this because it's the Democrats who run both at this point?

MORRIS: The White House role is to say "I want a stimulus package, and I want it to be a little less than $1 trillion. I want healthcare reform, and I want it to be about $600 billion. I want a budget, and I want it 3.6."

Then he turns it over to Pelosi and Reid who, in turn, turn it over the members, and say "Dream your dreams, and just give us all these projects you have had stored up-earmarks or alternate energy sources, broadband--whatever your pet project is, give it to us, and it's going in the budget."

So Obama has let them design the details, which is like the inmates running the asylum, and he is setting the parameters.

VAN SUSTEREN: You mentioned earmarks. In the campaign, President Obama, then-Senator Obama, at least the quotes I read last night on the air, he said that we are just not going to have those in his administration.

Now with this omnibus bill, which is the bill which supports the government between now and September 30, there are over 8,000 earmarks in it. Is he breaking his promise?

MORRIS: Absolutely. Of course he is. I believe he ought to veto it. I mean, I seriously believe that if I were a liberal Democrat, and I was in the White House, and I was working for Obama, I would say to him, "You have to veto this thing because it so clearly violates your campaign promises."

But let's understand-there's nothing particularly awful about an earmark. An earmark is when a congressman says "Spend the money on this as opposed to that." When you tell a bureaucrat "Spend the money the way you want," that's kind of almost as bad.

VAN SUSTEREN: I will tell you what is bad about it, because first of all it's a violation of your campaign promise. That's the first thing.

The second thing is earmarks are-these are made up numbers. It's not like they went out and asked for three offers on a project and took the lowest one.

These are just totally fanciful, made up on the American taxpayers money. They're made up. And that bothers people.

MORRIS: You are right. And it also is an invitation to corruption. There is a guy named Alan Mollohan, congressman from West Virginia, who is under investigation by the FBI. He used to be the ranking Democrat on the Ethics Committee.

What he does is he sets up a nonprofit operation in his district in West Virginia. He gets an earmark for it to make native handicrafts, or something, and then he takes the executive director of the operation and buys real estate with him in Florida.

Thad Cochran gets campaign contributions with one hand--a Republican from Mississippi--and with the other hand puts the earmarks in the bill.

And then the lobbyists who promote the earmarks also give him campaign contributions. It is an invitation to bribery, really.

VAN SUSTEREN: And both parties to do it.

All right, we only have 30 seconds left. One quick question--what do you think of the news that former Speaker of the House Newt Gingrich is at least thinking or considering or not ruling out a run in 2012?

MORRIS: Well, I was excited by that too back in 2008. And I am not sure he ever really intended to run. He sort of dangled and teased it out there. He would make a good president.

The problem is that we have no obvious leader in the Republican Party. And if Gingrich were to step forward and become that leader and become that spokesman, I do not know what he is going to do in four years, but we sure need him now.

VAN SUSTEREN: Dick, thank you.

MORRIS: Thank you.

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