Send America to Rehab
The US economy must be weaned off credit addiction. Pumping endless billions into the economy is like injecting more addictive drugs to a sick addict. The economy needs a period of austerity in which remaining credit bubbles, bad debt, and financial distortions are purged. This is called recession, and it's an essential part of the capitalist free market cycle. Without a period of pain, we can't restore economic health or sanity.But panicky American politicians plan to spend $8.5 trillion to try to combat this necessary, beneficial recession and fund government liabilities. Their misguided efforts risk igniting a future firestorm of inflation that will be far more dangerous and painful than any recession.I keep asking bankers, at what point will the printing of money spark hyperinflation? No one seems to have the answer.
The cautious European Central Bank, with vivid memories of the terrifying 1920's hyperinflation in Germany, when a loaf of bread went from pennies to 80 million marks, has resisted deep interest rate cuts and printing money. In the view of many Europeans, the same financial alchemists who led the US over a cliff are now running the so-called rescue program. The Fed's recent slashing of US interest rates to zero is a sign of utter desperation and an act of folly. Once investors realize that Europe, Canada and Asia are far safer investments than the US, watch for the US dollar to nosedive - as it should.
1 comment:
Is this not a lesson that needs to be learned the hard way. In the twenties uncontrolled spending on credit at least in part contributed to the crash of 29, and the thirties. Those who were old enough, grew up to be very hard workers and savers. Their children (boomers) sought a better way of life, (buy now pay later)and lived with the devaluation of currency. The next generation has continued to spend on credit, with no real plan to pay the debt, until the lender insists. Even then they look for bankruptcy to get out of it, and repeat the process. Let's wait to see how their children, who also will need to deal with the environmental disaster, will react to the pursuit of prosperity.
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