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Worst case scenario. Economic growth.

August 11, 2011

I have a quick second for a rant.

The Fed seeks:

Inflation(2%)
Economic growth.

Bernanke recently stated that he will maintain the fed funds rate at 0% until 2013. So how exactly does he plan on doing that?? He will need to buy treasuries. (monetize debt)
The Fed already owns trillions in treasuries which means they are exposed to massive losses if rates rise.

What will cause rates to rise ???

Inflation
Economic Growth.

Fucked.

Nothing like a nice mkt crash to lower your borrowing costs right Geithner??

Duh. We are in this mess because of excessive borrowing and excessive consumption financed by excessive cheap money. All this has resulted in the misallocation of capital.
Cheap money is lazy money
Profit or production???
Savings and investment have been replaced by borrowing and consumption. Corporate profits are just debt-funded ponzi schemes as the public maintain their standard of living by borrowing.
The only way out is default. Bank geeks cant engineer some clever financial innovation to keep the illusion of wealth alive forever. At some point We will fully recognize the costs of our debt binge. Financial innovation is itself another form of capital misallocation, stealing intellect away from real innovation – (to keep the illusion alive) we need innovation and true engineers – not the financial “illusion machines”
We need the markets and interest rates to fall to their natural levels. They will eventually.

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3 Comments leave one →
  1. August 13, 2011 7:08 am

    Pilots who request a mental fitness evaluation are sane, and therefore must fly in combat. At the same time, if an evaluation is not requested by the pilot, he will never receive one and thus can never be found insane, meaning he must also fly in combat.

  2. A. Strung permalink*
    August 13, 2011 11:43 am

    The “debt binge” cost is all Washington has talked about for the last two months.

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