I was traveling on Friday and am visiting the Northwest U.S. this week. And the one conversation I heard on the plane and in the waiting lounges at the airports was the looming government shutdown.
Everyone was glued to the TV counting down the hours. To me, it seemed like it was New Year’s Eve all over again.
And then in classic Hollywood fashion, at 11:10 p.m. — 50 minutes before the deadline — the leaders of both warring parties agreed to compromise and save the country. Thank you, oh great leaders, for saving our country – not.
It is unbelievable how distract-and-dodge techniques still work in America. It is an insult to our collective intelligence when our own elected leaders think that they can fool us and we will not know any better. Keeping us distracted with their squabbles while they divert attention from the fact that the U.S. economy is still deep in the doldrums.
The housing market is decimated and will continue to barely stay afloat as long as the Feds dish out the low rate Kool-Aid. And right on cue, the IMF (International Monetary Fund) has made the announcement that the slow growth in the United States requires low interest rates and continuing easy liquidity. QE3 anyone?
For all those new to the class, QE stands for quantitative easing. And that means the Federal Reserve printing money and buying U.S. Treasurys and U.S. debt. They have already completed QE1, are in process to complete QE2 in June. And what do we have to show for all that? Naught.
The only real effect of the incredible waste has been the plummeting U.S. dollar. It has hit long-time lows (and in some cases all-time lows) against the euro, Canadian dollar, Australian dollar, Brazilian real, Swiss franc, Mexican peso and many more. It has even fallen against the lowly British pound. The only currency that it has strengthened against is the Japanese yen. And it took a 9.0 magnitude earthquake to have that result.
Not to be outdone, gold has hit all-time high at around $1,470 while silver has reached $41 and is headed higher. Brent crude has hit $125. Copper, cotton, cocoa, corn, soybeans and every other commodity that is traded in the open market is now soaring.
That brings up two interesting conclusions:
The first one that scares me is the continual claim from our Fed heads that inflation is under control. We not only see that happening now, but I am battening down the hatches for a tsunami of inflation that is about to hit the U.S. shores. If you thought the scenes of the real tsunami from Japan were unbelievable, wait until you see what happens here.
The other conclusion that has me terrified is the continual belief that the Fed needs to continue to bail out the markets (financial, housing, industrial, etc.) with low interest rates and gobs of additional dollars. This is the kind of thinking that has already gotten us into trouble and will continue to have us head lower into the bowls of real crisis.
While all of this should be what we need to concentrate on, we spend our time focused on the Hollywood-style debate of whether the government should be shut down or not.
Thank God the government is still open and functional. Or would it have been better to shut down the source of the real problem?
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