Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why the Feds Are Desperate to Avoid an Economic Correction

Economics / Economic Stimulus Apr 13, 2011 - 07:48 AM GMT

By: Bill_Bonner

Economics

Best Financial Markets Analysis ArticleWhoa! This is getting interesting. Two major central banks are tightening – China and the ECB.

But nobody seems to care. These central banks are warning investors to sell their high-risk investments. Instead, gold hits new records! The dollar is at a 15-month low. And oil moves up to $125 a barrel.


Either investors don’t believe China and the ECB are serious…or they’re counting on the USA to come through again – with more money and more credit.

Speculators may be forgetting that we’re in a Great Correction. On the other hand, maybe it doesn’t matter. If the feds keep pushing enough money into the system long enough, the correction will take a grotesque, unusual and terrible new form – it will end in a hyperinflationary depression!

Gold at $1,470? You ain’t seen nuthin’ yet!

Only we, here at The Daily Reckoning, will appreciate it. It will give us something to watch…something to write about. Something to laugh at. More important, we’ll have yet another opportunity to wag our finger and say: “We told you so…”

And who sees it coming? Just us…and a few other cranks, eccentrics, outcasts and marginalized diehards…

But word is getting out. You can’t just add to the world’s money supply indefinitely…not without consequences.

Many mainstream analysts are now looking for gold at $1,500. But watch out, they say. Just wait until QE2 ends!

They may have a point there. The major, natural tendency of this market is towards contraction. The market wants to correct. No kidding. After a half-century of credit expansion, it’s time to pay up…to settle debts…to recognize bad investments and to write off mistakes. That’s what’s happening in the housing sector. That’s why about 12 million Americans don’t have jobs.

But that’s the way economies work. They “breathe out and breathe in,” says old-timer Richard Russell. Unless we’re wrong about it, the markets are holding their breath. They’re waiting to see what effect all this pure oxygen – coming from the Fed – will have.

Why are the feds so desperate to avoid a correction? Well, that’s where the story gets interesting.

It’s a tale of one part vanity, one part necessity and one part cupidity.

In their vanity, the feds think they can command the economy to do as they want. They’ve invested whole careers…and gotten Nobel prizes for their crackpot theories. They’re not going to give up now; they think their central planning can succeed, even though central planning by others has been universally disastrous.

But there’s more…they are running what is little better than a ponzi scheme. That’s where the cupidity comes in. We were delighted to see that Christopher Caldwell, writing in The Financial Times no less, sees it as we do:

“The story of the past half century is that Americans found a way to extract money from future generations and leave them with the bill. What they have been enjoying is not prosperity, but luxury.”

We would put it a little differently. What they have been enjoying is not prosperity, but larceny. They’ve stolen from those who can’t vote. Many of them haven’t even been born.


A study by the Urban Institute, for example, shows that the Medicare system pays out in “benefits” three times as much as it collects in revenues. This kind of thing adds debt fast. Mary Meeker calculates total unfunded liabilities of the US government at $75 trillion already.

(Estimates are all over the place…depending on what assumptions you make… But Meeker’s estimate is likely to be low…)

Congressman Ryan has begun to address the inherent problems in this scheme. It will be interesting to see what happens. He seems to think that voters and politicians will “come to their senses” and do the right thing. We doubt it. And there was no sign of it in the deal just struck to keep the government’s lights on.

Paul Krugman put his finger on the problem with democracy. He agrees, for once, with us. Writing in The New York Times, he tells us that Ryan will fail. As soon as the greedy old bast**ds figure out that they are going to lose benefits, the jig will be up:

“Mr. Ryan and his colleagues can write down whatever numbers they like, but seniors vote.”

Yeah, the zombies vote. Most likely they will vote themselves into an economic catastrophe.

That’s the necessity of it. If they want to keep this scheme going…they have to borrow. And if they have to borrow…they have to keep credit easy and cash plentiful.

Stay tuned…

Bill Bonner
The Daily Reckoning

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com

    © 2011 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in