U.S. Economy Dancing On Quicksand
By: Bob Clark
Jul 12, 2010
Do not attempt to adjust the picture. We control the horizontal and the vertical.
(Old outer limits TV show intro)
Bernanke speaking to the heads of the reserve banks
“Pssst, want to make a trillion dollars. We control government policy. We control fiscal and monetary policy and we will tell you where we are headed with our policies. They will be the opposite of what the majority is expecting. We will change direction when the consensus is extreme and the other side of the trade is available so we can take on huge new positions. Then we will switch course. It is risk free and the gains will be spectacular. They will help us survive this financial debacle.” Question from a bank president. “But what about the citizens Ben?” Bernanke replies. “To hell with them”
When the government is manipulable it gives new meaning to the concept of a contrarian trade.
We will all be rich
It used to be that only a few countries could be wealthy, the United States was rich because it had became a manufacturing super power at the same time as it took advantage of third world countries by having it’s multi national corporations, protected by the CIA, drill for oil, strip off various minerals and resources and keep all the profits. Sure they would throw the local dictator a bone now and then and keep him in power but most of the cash ended up leaving the country. They operated a protection racket on the Saudis for example to get cheap oil. Before the United States, Britain was the master of the world, through their military land forces and navy they brought the world to heel and basically pillaged it’s resources.
Now the conventional wisdom is that everyone can be wealthy at the same time. All we have to do is wait until China and India grow into financial super powers then we all become rich. This at the same time that resources become rarer. That is crazy talk, globalization floats on a sea of debt, to me we are being sold a load of bull.
Lets double dip ’em
Things just do not add up, at least not if you are looking for benevolence. The bailout has been mainly directed at the banks or the money has funneled down to them. Is this new austerity idea an ongoing way to help the big banks make it through this crisis? It seems clear the Fed does not want it’s reserve banks to lend to anyone unless the government is backing the loan. The Fed is continuing to hold junk debt from the reserve banks and pay interest to otherwise insolvent banks, government money I might add. This is a clear effort to make banks profitable, risk free, at a time when lending money is clearly not a profitable business. They are intentionally preventing the banks from making loans to the public and small business by paying out on deposits that are risk free.
Here’s the thing, they could easily stimulate the economy by simply not paying interest on deposits held at the Fed. This is a big, obvious silver bullet but it seems to me they are so fearful of economic conditions that they have no intention of using it. A slow down will give even less reason to lend.
There is an even darker take on what is happening. It is that the Fat boys are using a weak President and a government full of hacks to swing the economy around and yo-yo the fundamentals that effect and stimulate the way money managers invest people’s money. They are doing it after taking the other side of the all those money managers trades and essentially stealing the money, with no intention of helping the little people on main street. Now in hindsight it seems clear the plan was never to restore prosperity but to swing toward austerity. Keep in mind austerity is just another word for hard times. That is why the banks were not lending.
When you factor in malevolence things start to make sense.
The whole thing stinks.
In hindsight the austerity plan has been known to the big boys for awhile, the bond market is starting to look like a replay of the stock rally from the March of “09” lows.
Again, it seems like they set it up and will now make it look like something else caused it.