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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: Bread Upon The Water who wrote (104325)	11/17/2011 11:00:31 AM
From: RetiredNow	Read Replies (2) \| Respond to of 149317

Hi Bread, actually, we absolutely will know who was right on this call. You see, in "saving the economy" by bailing out the banks, we have increased our debt by $4.4 trillion since Obama took office. Now, if the Fed wasn't intervening in the Treasury markets, we would have ALREADY seen interest rates rise dramatically, just as we are seeing interest rates rise in Europe by 100bps on a monthly basis. Spain's borrowing costs have increased by 1% in one month. Italy is on a worse parabolic curve. This action is typically called "bond market vigilantes". Said in less esoteric terms, it is when investors like you and I decide the risk of holding those bonds is much higher because the governments that issue them may not pay them back. This is a free market in action. Our Fed short circuited the free markets by deciding to print money to buy Treasuries. So instead of allowing interest rates to rise and the increase in debt servicing costs to impose its own discipline on the profligate spenders in Washington, the Fed has become an enabler of deficit spending by keeping rates low through the artificial demand they created for Treasuries. There is another and more insidious consequence. In printing money to prop up Treasuries and keep rates low, they have increased the money supply dramatically. This devalues the dollar and makes us all poorer in purchasing power. So instead of the parabolic curve being the rise in interest rates, here in the US, we decided we prefer the parabolic curve of money supply increase and dollar devaluation. Oops! No wonder Thanksgiving is costing the average family 15% more than last year (this is no joke...I read this fact in a recent news article). You see why they it's called a catch 22? There is no escaping the consequences of massive deficit spending. If you live beyond your means, either the bond vigilantes will hold you accountable or, if governments short circuit free markets, then dollar devaluation will hold you accountable. Either way, it is very painful. So how do we get out of this mess? We might as well just absorb market realities and realize the only way out of this mess is to take our lumps and start living within our means. To do that, we need to force the banks to take debt haircuts, bust them up, reinstate the rule of law, add a few more laws like a reinstatement of Glass Steagel, and regulate derivatives. Most importantly of all, we need to shrink the size of our deficit by 80-90% from $1.5 trillion per year to more like $150-300B per year. Then we can reset our economy for growth and build this country back up from a sound foundation, secure in the knowledge that the criminals are in jail and the honest people will see the rewards of their hard work.