Ben Bernanke goes to Capitol Hill today to try and explain to our Congress what can be done to keep Americans in a lavish lifestyle- at least those who are in power. Stagflation is enering the doors. Merrill Lynch just reported a $10,000,000,000 loss and that"s not acceptable of course- for the wealthy. Those who have no power will always remain poor of course. Can a government go bankrupt? Maybe the better question would be, which ones already are but are in receivership?
The US looks poised to lose its mantle as the world"s dominant financial market because of a rapid rise in the depth and maturity of markets in Europe and more importantly because America has pursued a totally insane, irrational, and untenable economic lifestyle. Where did we get the idea that we could control our economic life such that every year is better than the last without any down years?
Tell me how logical is that premise?
As Ben Bernanke goes before Congress he will recommend all sorts of relief and incentive packages. These will of course be on top of the BILLIONS that the Fed has already loaned large corporations so that they won"t go bankrupt or cause a financial crisis in the banking industry. However, the US markets are beset by credit woes beyond any simple fix. Is there any wonder gold is at historic all-time highs?
Sure, The Fed will cut rates January 30th, but that"s not going to stop a recession. We can extend the Bush tax cuts, but that"s not enough. We can give every one a $250 rebate, but that won"t do it. For you see, the question is really, how can we get people to spend more, buy more new cars and houses when they just did that?
People can"t buy a new car every year!
People don"t buy a new or used home every other year!
The credit crisis has dented confidence in the health of America"s financial institutions and its model of finance. The subprime shock suggests the credit turmoil has intensified in 2007 in terms of the global disruptions. And today we"ve learned that new home construction is down 25%, the most in 27 years! And then there"s the state of the Dow, Nasdaq, and S&P which have been deep in red ink from the New Year get-go.
Obviously, politicians and especially those running for president have switched they "talking points" from the war in Iraq to the economy here at home. That may not be good for Rudy who carried the strong terrorists image, but it"s good for Romney who is more of a fiscal conservative. Politicians and their messages can go bankrupt over night as well.
While America, and all governments have the potential to just print more money, borrow more money, and otherwise sell of national assets, that only prolongs the inevitable and does so on the backs of the poor who are powerless to change anything, this side of a revolution.
Don"t rule anything out!