Guest Post: The Big Print Is Coming
by Mike Krieger
The BIG Print is Coming
Momentum is a strange thing in general, and social experiments as large and complex as massive economic systems are not immune to its mysterious ways. Once momentum gets going it is extremely difficult if not impossible to reverse in the near-term. This is why I have been pounding the table on China not doing anything as things unravel over there. In waiting so long to try to respond to their major slowdown, they have now seriously risked a hard landing, unless they have a plan (this is not clear as of yet) as I outlined in last week’s piece China Better Have a Plan.
Here in the U.S., I think that The Bernank’s plan was to pretend they didn’t need to print more money, get commodity prices down and then hope that the economy would respond favorably to that development. This wouldn’t have negated the need for more printing; however, it would have bought time and allowed for a potentially lesser degree of action. Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money. The debt burden is too large, the mal-investments too pervasive, the corruption too systemic. The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing. So what do you think they are going to do?
If I am correct, and the U.S. economy itself is now in the early stages of what will probably turn into a serious economic slowdown, then it will not be easily stopped with incremental Central Bank policies. The fact that they have waited this long and the fact that the global economy is in the midst of a serious slowdown tells me one thing. They are way behind the curve and by the time they realize this it will be too late to stem the momentum. That said, I do expect them to respond and the fact that things will have gotten much worse than they expected will mean a major response. I’m not talking operation twist part deux. I mean a serious print. Potentially the BIG ONE.