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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: Kirk © who wrote (32875)	5/30/2012 1:40:15 PM
From: Hawkmoon	3 Recommendations Respond to of 218739

Kirk, The Fed loaning out money to banks at 1/4% permits those banks to buy US Treasury debt yielding much higher returns, right? And you're absolutely right about how the Obama administration spent all of that borrowed money.. Pretty much wasted, IMO. It never hit the "demand" side, represented by "Main St." sufficiently. I think a better use would have been to facilitate tax credits, or grants, to small and medium sized businesses to retain, train, and hire, new employees. Of course, this is a "labor subsidy", but it keeps people working, instead of on food stamps and welfare. Instead the money is "wasted" with no real ROI to taxpayers by giving it away as an entitlement. And there certainly is a need for infrastructure repair and replacement.. big ticket projects that the private market isn't willing to invest in, but which sustain and increase economic productivity. One further point. According to the data I've seen, the US national debt was 16% of GDP in 1929, thereby giving the Federal Gov't the ability to deficit spend to stimulate economic activity. Now that National Debt equates to nearly $16 Trillion, while GDP is roughly $15 Trillion. brillig.com scribd.com usgovernmentdebt.us So now the Fed and Treasury is facing the quandary of extending US national debt a lot further beyond the 100% "point of no return" level (where countries almost never can pay back that debt), and trying to fight the deflationary pressures in the private debt markets, or standing pat and let the USD climb, bringing down the price of commodities. Bringing down commodity prices, combined with very low interest rates might prove to be the ticket to sustaining some economic growth. But either way, the Fed/Treasury is between a rock and a hard place. This has been my thinking for the past year, but there may be a lot of holes in my logic. But I feel pretty certain that without more Fed/Treasury intervention, deflationary forces are going to take hold. But that has the added effect, for those who have cash, of increasing purchasing power. For those who don't, they become "collateral damage".. sad to say. Hawk