The Race to the Bottom Goes Global

It seems funny, but you’ve heard the saying, “fighting fire with fire”. We had a Great Recession who’s root-cause was a result of gov’t encouragement for affordable housing for all. The net result was an overburden of debt for a multitude who could ill afford it, and inevitable this led to the big collapse. Now our gov’t leaders are saying that we the people have to take on unlimited Gov’t debt to cure the economic hangover. ‘Not sure I agree…

The debt binge leading up to the Great Recession pushed housing prices to unsustainable levels. The updraft price instability in real estate had a ripple affect on commodity prices as well. Maybe you recall the big run up in the price of oil to $140 per barrel. Then the bottom fell out and the roller coaster plunge was even more dramatic. Not only was real estate rocked by price instability, but oil went from $140/barrel to $30 in a very short period. I blows my mind to think of it.

In order to correct the situation, or Federal Reserve Bank brainiacs say they need to bring about financial stability by actively and aggressively supporting big spending by our Gov’t. They’ve declared an unlimited war on deflation and are buying up US Gov’t debt by the truckload.

But does anyone wonder how they are financing this adventure? Maybe an even more pointed question would be: Do any of our leaders know what a balanced checkbook is, or do they think it’s all currency is just funny-money? What I learned in Econ 101 is that our financial system is in reality funny-money, and Gov’t debt is ultimately paid for by inflation. But on the other hand, and especially for those who have been through the 70’s and 80’s, a little inflation goes a long way.

Now back to the theory of fighting fire with fire. I think it’s a very poor analogy. It seems more like a situation comparable to binge drunk-a-thon being cured with a tail-of-the-dog binge-a-thon. Those who are driving Fed policy obviously think that the printing press is infinite. Our leaders (along with Paul Krugman) believe that the power of the press has the ability to overcome any adversity. THEY ARE WRONG! They are doubly wrong because they are trying to fix a train wreck by piling another train wreck on top of what was done.

The US economy was trashed by foolish policy. Now they are trying, with continually increasing desperation, to wreck our US currency in order to artificially buoy our economy out of the damage that was done in the past. But this process has dire consequences for our global neighbors. For every percentage point we force our currency lower, it shackles our neighbors with a corresponding percent of deflation. So it wasn’t long before the European Central Bank was trying to trash the Euro. Now we are in what’s called a race to the bottom. It’s like we are all in a big hole and clamoring over one another trying to get out. The Federal Reserve Bank and the European Central Bank are committed to seeing who can outdo the other by using (we the peoples) currency as a weapon of mass destruction. Not that alone, but to make matters worse, the last bastion of conservative culture has now joined the fray – JAPAN!

Link to Financial Times Report on BOJ policy change.

So here we are with a race to the bottom that’s finally gone global. I suspect that Paul Krugman is jumping for joy and will be the life of the party tonight. He thinks that we conservatives are waiting for the train wreck that will never happen. How can people be so foolish? It’s like our nit-wit leaders trying to leverage wealth in the foolish dream that it’ll eventually make us all wealthy. All they will manage to do is destroy wealth and make us all poor. Lord help us! Or should I say: Put not your faith in Man…

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