Monday, September 2, 2013

US Economy - RIP ???

From time to time I enjoy writing about economics. I also understand that any three economists, discussing any subject, will have at least five different opinions. As economics is an inexact science and subject to a wide variety of external pressures, it is difficult to make predictions with any accuracy. Now you understand, this is a disclaimer, just like you see on TV in those lawyer commercials. But if you take the time to read or listen to a lot of news and think about the opinions of smart and knowledgeable people that you respect, you find, that on occasion, two plus two plus two actually does equal six.
I am predicting here, really bad times for the US economy. I don't want make this prediction. I truly hope I am wrong. But I am compelled to write this, because I believe it may be true. There are three big pressures on the economy today that could, combined, cause serious damage. The first, the Bernanke Bubble is a subject I have written about often before. In fact, I coined the phrase "Bernanke Bubble". There are two main points of the Bernanke Bubble. The first is "quantitative easing". That is printing money as fast as the presses will run. The net effect of this is lowering the value of the dollar on world markets. And today, all markets are world markets. The second is artificially keeping interest rates low. It prevents the inflation that would normally come with excessive monitization, but it hurts the elderly as they get no return on whatever savings they may have. It also primes the pump for rapid inflation once rates are loosened.
The Bernanke Bubble is why the stock market keeps going up despite the rest of the economy being in deep stagnation. The new money is used to buy back T bills freeing up money into the equities market, while the banks are over capitalized making their balance sheets look extra good. But it is all air. Jobs are still down. The GDP is in the toilet. Both housing and manufacturing are barely alive. But those that want your vote will tell you "the economy is great. Just look at the stock market." It's a bubble.

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