$40 billion a month? That’s their big plan? I came in from my canoe trip to watch this? Anyone with a rudimentary understanding of how an economy actually works will realize that our economy does not suffer from a lack of liquidity. In fact, there is too much of it. The banks have so much excess cash, they don’t know what to do with it—so they just park it with the Federal Reserve. What will more liquidity do?
The US economy suffers from too much government regulation, too much leverage, excessive taxes and interest rates that are too low to allow businesses to go bankrupt. Getting the government more involved in the business cycle by trying to convince banks to lend more to an over indebted economy will only serve to make the problems worse. It is the EXACT OPPOSITE OF WHAT SHOULD BE DONE!!
I looked at the headline, my dad and I both said ‘thank god we have a bunch of gold’ then we went back to our canoeing—what else could we do? I sure don’t want to invest money in the US economy—I want it in hard assets, or a sprinkling of companies that do well based on perpetual low interest rates or rising commodity prices. I’m positioned perfectly, so I might as well enjoy the fresh air. The Federal Reserve is supposed to want people like me to put our capital at risk in the economy and create jobs—money printing only leaves me more revolted with the whole system here in America. If I still had capital at risk, I’d be getting it out of harm’s way and into gold.
Not only will $40 billion a month do nothing to fix the economy, it will add to inflationary pressures that have been building for years. Put it this way, if you could inflate your way to prosperity, Zimbabwe and Argentina would be economic powerhouses. Over the past few days, I have read the media coverage; “bold response,” “proactive stimulus,” the commentators are agog over the money printing. I guess they will cheer for anything that makes share prices go up–$40 billion a month will do a lot of that—it won’t accomplish much more. Even in perspective, $40 billion a month is $480 billion per year—or only about a quarter of the total money printing thus far. If they couldn’t fix the economy with two trillion dollars of money printing, do they really think that this will do the trick?
How would I fix the economy? I’d RAISE interest rates. I’d do everything to take the liquidity out of the system. Sure, the financial system will freeze up again. A bunch of banks will fail. Any business that is addicted to leverage will be in trouble. Prices will drop—substantially. I would allow the debt bubble to collapse. Then, those with capital would step in; they’d buy assets on the cheap. It would take a few years—there would be terrible economic pain in the short run, but the economy would recover and it would be quite robust. During the recovery period, I’d remove these idiotic employer health care laws that inhibit companies from hiring new employees. I’d fire two-thirds of all government employees. It doesn’t really matter which ones you fire—they’re almost all impediments to growth. I’d cut taxes and get the government out of the business of running the economy. The economy is simply too important to allow the government to get involved in it.
Of course, our politicians will not follow anything that looks remotely like my plan, at least until they’ve tried everything else and totally destroyed the economy. Even the communists eventually gave up because they realized their system didn’t work. In the US, there will be years of stunted growth and very high inflation until the economy finally implodes. Hopefully, at that point, something like an unobstructed economy will return. Until then, my capital is staying out of the US and is instead being invested in places where it is respected.