13 January 2011
The global economy has just OD'ed on credit, and the Fed's response is to make the offending intoxicant free for all the junkies. And, to make matters worse, the Fed sees itself as its new best customer. Even street-level drug dealers know better than to get high on their own supply. Metaphors aside, and as increasing numbers of unemployed, under-employed, un-housed and unpaid Americans know, the United States is in the terminal stages of a broad systemic failure brought on by the excesses of too much money in the system. And sadly, the patient is still in denial.
Economics, this now more dismal than ever of sciences, fails to reconcile the fact that the amount of capital available to the global economy and its movers and shakers must needs by directly proportional to real demand for actual products. Opportunity is not created by the mere manifestation of unlimited quantities of counterfeit zero-cost capital. The excessive amounts of ersatz wealth created by the dot com era, the derivatives matrix, and incomprehensibly complex mortgage securities has resulted in the present problem of Too Much Stuff. There are too many houses, too many cars, too many baubles and gadgets and plastic doodads manufactured in China sitting on shelves and in lots around the world un-purchased and un-wanted because the demand for these things is gone. Everybody's got one or two or three, and the population will not grow fast enough to generate sufficient demand to consume the output of our horribly efficient industrial infrastructure.
All that is accomplished by making capital freely available to the world who doesn't want it or need is to confirm for even the unborn and newly dead that the capital proffered is worth exactly its cost: zippo bippo.
The distance between the present reality and current delusion under which these doped out leaders and their woefully befuddled economists operate is vast in terms of required economic policy revision. Credit needs to cost, and currency levels need to be reduced. Gambling on Wall Street with taxpayer's equity needs to be outlawed. The incestuous inter-relationships among government and banking is shockingly blatant. And criminal. Though not in our current legal system, which is presently aiding and abetting as opposed to overseeing and regulating.
As global citizens seeking to protect and enhance our modest wealth, our common objective is to identify the schemes and scams perpetrated by this government-banking organized crime group, and avoid them, since no law enforcement is available in the absence of suitable law.
Make no mistake. We live in an age of collusion where the government of the United States and its banking underwriters are the enemies of the global citizenry. They prey upon us to satisfy their insatiable lust for riches. Using their currency and credit, you are corralled into a perpetual cycle of labour and debt in which you will die and leave your children encumbered with the very same fate. (I'm speaking primarily to Americans here.)
For Canadians, there will be much less pain, but pain nonetheless. Our ratio of resources to population assures a future where if even the worst case scenario arrives, there are plenty of caribou and salmon and lots of land to go homesteading on. For many, the increasing destabilization of global markets and financial systems will go unnoticed. Our conservative financial disposition protects us from foolish short term policy manipulation. Tacitly, we understand the larcenous nature of those who gravitate towards business and have no illusions about the market being capable of correcting itself. Healthy doses of strong regulation prevent the inundation of court rooms with large scale frauds.
The news is full of warnings about Canadian housing bubbles in 30-odd markets across the country. Since we sell large portions of everything we make to the United States, who's buying interest is evaporating steadily, we may soon be in the company of misery with our U.S. brethren. My own brother is woefully trying to keep his once-flourishing turn-of-the-century home restoration and reselling business alive. Its not looking too good in Portland - or anywhere else on main street America these days.
In the U.K., poor U.S. style banking tactics have rendered the country impotent economically without the infinite drop-breaking benefit of the currency being the global medium of trade. Private equity funds liquidating, house prices falling, unemployment rising, all mirror images of what's happening in the United States without the bloated deficits of regional governments. Will the deflationary effects of inflation extinguish what flicker of recovery exists in the dark economic night upon the edge of which perches the British empire?
And Germany, now the juggernaut of growth and foundation of financial strength upon which the future of the whole Eurozone rests. Can it continue to carry the weight and drive the growth of this increasingly fragile trading block?
For 2011, there is no sign of slowing for the default mechanism of quantitative easing. The only question is, at what point will this junkie overdose terminally?