Author Topic: Easy Money Bubbles  (Read 1359 times)

Offline Dan

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Easy Money Bubbles
« on: October 14, 2011, 08:49:57 AM »
If I could attack music then this is where I would insert Don Ho's famous "Tiny Bubbles".
 
The US easy money bubble part one was residential real estate and securitizations. We are just now learning to deal with the hangover related to this party. But now we are already loading up on the second one of printing money to fund the deficit. That's basically what happens when the fed buys your government debt. It's like pouring more and more water into the cool aid jar until it stops being cool aid and starts becoming cool aid flavored water. Our only saving grace to date has been that the rest of the world currencies are either (1) too small (2) pegged to the dollar or (3) in worse shape than use. But that won't last forever and when the easy money bubble pops it will affect the US economy worse than the real estate bubble. We are playing with fire here.
 
Europe's easy money bubble was soverign debt. Basically they financed their cradle to grave wellfare state with borrowed money and now it is coming back to bite them in the ass. All they really did is to force their children to pay for a few years of freebies that the children will not be able to afford themselves.
 
And China's easy money bubble is getting their banks to fund massive infrastructure programs and the building of factories that will never be occupied. These are make work projects. And once it is determined these loans will not be repaid the banks should be required to write down the loans. But they aren't doing it. For a while you can get away with it, but in the end this is looking more and more like something Bernie Madoff would have done.
 
There are no free lunches or free rides. Eventually we all have to pay the piper. But someone really needs to tell the politicians before they dig this hole any deeper.
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

Offline arpad

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Re: Easy Money Bubbles
« Reply #1 on: October 14, 2011, 12:26:58 PM »
Well, we did give the political class a little tune up last November. Trouble is, human nature means that the lesson has to be relearned at intervals.

If we, the people, aren't willing to reinforce that lesson then the inevitable happens and our representatives, who aren't any worse or better then the people they represent, start acting like we'd act if we were in their place.

Offline Dan

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Re: Easy Money Bubbles
« Reply #2 on: October 14, 2011, 12:42:05 PM »
If you look around then the easy money bubbles aren't hard to spot.  ;)
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

 

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