http://www.marketwatch.com/story/brynjolfsson-bets-on-inflation-2000-gold-2010-10-20
Who am I? Not on a spiritual level, but in this world. I am a mother of two with a degree in economics and an MBA. I have a very small tax preparation and consulting business and am planning on sitting for the CPA exam within the year.
However, I am no Einstein. I have no PHD in economics. I do not work for the FED, and I have spent most of my adult life raising children and running a household.
But I am smart enough to know this:
In order to believe that you can beat deflation with cheap money, and not destroy value in the process, you must not understand how wealth is created. So, it follows logically that he really believes he is doing the right thing by flooding the system with money and credit, and that he thinks the cure for deflation is inflation. He must think he can bring about growth through currency manipulation. He is mistaken.
It seems many on Wall Street agree with him and also believe the remedy for deflation is quantitative easing. It is not.
They fail to realize that rising prices won't stimulate demand, but will depress it even further.
Printing money does not create jobs, it devalues currency, destroys wealth, reduces purchasing power, and is the way many great civilizations have come to an end.
If the FED goes ahead with QE2 there will be so many distortions in our economy that it will become pointless to analyze it. We will end up with a hyperinflation depression, similar to Weimar Germany's pre-WWII episode.
I was naive enough, and hopeful enough to believe that if QE1 didn't work, the FED would change course and accept that we needed to go through a period of asset price deflation in order to bring the economy back in to balance.
Apparently, since this would mean the end of many powerful banks and bankers, the FED does not have the integrity, or the guts to do the right thing.
I will be voting for anyone who stringently opposes QE2 and proposes a change of leadership at the FED. Bernanke and his followers need to be ousted immediately if we are to save this country from economic ruin.
Thursday, October 21, 2010
Wednesday, October 20, 2010
Our Economy Has Been Doped
When I say "doped" I am referring to the kind of doping that goes on in sports. Athletes call the dope "performance enhancing" drugs.
Here is the analogy: The economy is the athlete, cheap credit and money are the performance enhancing drugs, and the FOMC at the Federal Reserve is the corrupt physician who keeps prescribing the dope.
The doping of our economy began with the creation of the Federal Reserve system in 1913. At first, it didn't take much dope to keep things running. At times, cooler heads prevailed and they kept the amount of dope in the system to a minimum to avoid side effects. Eventually though, addiction took hold, and they needed to add more and more dope to get the same high.
Natural economic downtrends became "problems" that could be fixed with a little more dope.
The new problem is that the dope isn't working anymore. The system is rejecting it. The FOMC's solution seems to be to up the dose.
Like a retired athlete suffering from crippling arthritis after years of stellar performance, our economy has entered a period of unavoidable decline.
It appears to many that excessive liquidity and cheap credit are helping. In fact, they are destroying value and slowly killing our economy.
The only way out of this mess is for our Government to become fiscally responsible and cut spending drastically. The budget must be balanced. Taxes should be held where they are for the time being and then, when the debt is paid down to a sustainable level, the whole tax system should be scrapped. We need a tax system supports savings and investment, not one that encourages debt and consumption.
All Federal subsidies in any form to financial institutions must be ended immediately. Only depositors should be made whole through FDIC when institutions fail, no money should go to "counterparties". Any TARP money that is left should be returned directly to the taxpayers, and divided equally among them in proportion to their prior year tax liability. If you had no tax liability in the years TARP was active, you should get nothing.
Our country can avoid so much pain and turmoil if we do this now, otherwise it will be a very painful bottom to endure.
Here is the analogy: The economy is the athlete, cheap credit and money are the performance enhancing drugs, and the FOMC at the Federal Reserve is the corrupt physician who keeps prescribing the dope.
The doping of our economy began with the creation of the Federal Reserve system in 1913. At first, it didn't take much dope to keep things running. At times, cooler heads prevailed and they kept the amount of dope in the system to a minimum to avoid side effects. Eventually though, addiction took hold, and they needed to add more and more dope to get the same high.
Natural economic downtrends became "problems" that could be fixed with a little more dope.
The new problem is that the dope isn't working anymore. The system is rejecting it. The FOMC's solution seems to be to up the dose.
Like a retired athlete suffering from crippling arthritis after years of stellar performance, our economy has entered a period of unavoidable decline.
It appears to many that excessive liquidity and cheap credit are helping. In fact, they are destroying value and slowly killing our economy.
The only way out of this mess is for our Government to become fiscally responsible and cut spending drastically. The budget must be balanced. Taxes should be held where they are for the time being and then, when the debt is paid down to a sustainable level, the whole tax system should be scrapped. We need a tax system supports savings and investment, not one that encourages debt and consumption.
All Federal subsidies in any form to financial institutions must be ended immediately. Only depositors should be made whole through FDIC when institutions fail, no money should go to "counterparties". Any TARP money that is left should be returned directly to the taxpayers, and divided equally among them in proportion to their prior year tax liability. If you had no tax liability in the years TARP was active, you should get nothing.
Our country can avoid so much pain and turmoil if we do this now, otherwise it will be a very painful bottom to endure.
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