Saturday, June 22, 2013
The Fed has turned our Economy into a Drunken Spoiled Teenager with Car Keys
Poor stock investors. Their sugar daddy - Ben Bernanke - announced this week that the Fed might, just might, end the gravy train of cheap money sometime later this year.
The stock market, along with gold, commodities and your grandma's investments in antique clocks all too a huge hit on this "terrible news".
To quote the President, "Let me be clear"....
Simply put, the whole country has been turned into a parent's worst nightmare - the drunk, spoiled teenager with keys to a car paid for with mommy and daddy's money.
The teenager in this case is all of us who are riding high on the most massive printing of fiat (translation: worthless in the future) money since Adam and Eve were first trying on underwear.
Ron Paul warned all of us about this stuff. When you have a currency that is not backed by gold and is controlled by human beings - and those human beings are trying to stimulate the demand for goods and services - and do not have to answer to anyone and put "In God we Trust" on what they are printing, it is a recipe for disaster.
Just ask the Germans who remember the 1920s. Ask current residents of Zimbabwe about the hyperinflation created by Robert Mugabe. Ask any nation that has ever printed money to deal with economic problems. The result is always - I repeat ALWAYS the same.
The people fall in love with cheap money, making it hard for central banks to stop giving them cheap money.
The cheap money eventually leads to a devaluation of the currency which leads to huge increases in prices.
The huge increases in prices lead to a collapse in the economy.
Then, depending on the politics of the day. the collapse in the economy leads to new politicians or new dictators or new World Wars.
I find it hard to believe that in just seven years after the last cheap money recession began we are now pushing towards the same - and bigger result - with even more cheap money.
Somewhere around 137% of the current increase in home values and stock prices is tied to cheap money. This means 137% of the next recession will be caused by the consequences of cheap money.
The Fed (which should be abolished) should announce that the bond-buying binge is going to end and let the drunk teenagers (us) with car keys (economic choices) pay for their own cars with sound money that comes from an economy driven by real economic growth polices (low taxes, less regulations and tighter money supplies).
I don't think Bernanke has the guts to tell Obama that the cheap credit days are going to end and need to be replaced with Reagan-like fiscal policies.
Since it is unlikely that quantitative squeezing is coming any time soon, we can expect those who are addicted to cheap money to cry and scream every time the Fed (our money parents) even mention making us live within our means.
Living within our means will be what results from the sugar daddy Fed driving our economy into the ditch of irresponsible monetary policy.
Enjoy the ride....