Tags: Catch | Me | fed | congress | debt

Catch Me If You Can

By    |   Wednesday, 21 Mar 2012 01:05 PM

It seems like every few days someone asks me the following question: “Bob, with the market going up so much, do you think that maybe the government can get away with it for another 4 or 5 years. I mean using money printing and borrowing to manipulate the economy and the stock market for a lot longer?”

My answer is a simple "no."

Yes, they can get away with it for a while longer, just as I predicted in "Aftershock," but even the current and past massive interventions haven’t exactly turned the economy red-hot.

And, make no mistake about it, the intervention has been massive. Keeping it up will ultimately be costly and increasingly less effective. It won’t fail this year and probably not next year, but they certainly can’t get away with it for another 4 or 5 years.

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However, that question gets to the heart of what a lot of people in the government and many on Wall Street are thinking. They think they can get away with it. Congress thinks it can get away with massive borrowing and never have to pay it back or even pay much interest on what they borrow.

Even if they had to pay a lot more interest they would probably assume they can just borrow more money to pay the interest. And, hence they can keep getting away with it. So far, they’ve gotten away with it. Why would it ever change?

Ben Bernanke is thinking the same thing. Massive money printing hasn’t caused a lot of problems so far, why will it change?

It’s like a big game of Catch Me If You Can. Remember the movie “Catch Me If You Can” about Frank Abagnale, the person who in real life actually went around impersonating pilots, lawyers, and constantly passing bad checks? Each time he got away with it, he got more confident. And, each time it made him more money and was even more fun. Just the thrill of getting away with it was great. It was like getting something for nothing—money from heaven. It’s not only the mentality of the Fed and Congress, but a lot of people on Wall Street are also hoping they can get away with it.

And, from a personal standpoint, some people will get away with it in a sense. In a few years Ben Bernanke is likely to leave his job. Many in Congress will have left.

What they leave behind will be your problem, not theirs. And, that’s the key point. It makes sense that the guys who are doing this think they can get away with it. The problem starts when YOU believe them. Because, you can’t get away with it. They’re playing with your economy and your money.

Sure, like many on Wall Street we all hope Congress and the Fed can get away with it. But, it’s a false hope, even for 5 years. Too much is happening too fast that is very de-stabilizing to our economy longer term, not just here but around the world.

Although the full effect may not hit for 5 years or more, lots can happen before then. Remember, it’s you who will take the hit when things go wrong not them.

Make sure you don’t think like them and think they can get away with it.

About the Author: Robert Wiedemer
Robert Wiedemer is a managing director of Absolute Investment Management, an investment-advisory firm for individuals with more than $200 million under management. He is a regular contributor to Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here to read more of his articles. Discover more about his latest book, "Aftershock," by Clicking Here Now.


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2012-05-21
Wednesday, 21 Mar 2012 01:05 PM
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