Election 2016: A Lose – Lose Proposition? (Flipping A Two Headed Coin)

Coin Flip2015 first quarter data just published show the US Economy slowing toward near stasis. The new second quarter does not look improved and world trade data are similar as we have reported recently. Reality is once again following its own guide rather than the orders of politicians or media. Q1 GDP “growth:” if one wishes to call it so, was less than 1%. That may be ‘recovery’ to the President, a millionaire, but hardly to those too many living from paycheck to paycheck, watching unacknowledged inflation hollow their earnings.

The Fed is in shock; hell-bent as it has been upon restoring interest rates toward normal, now it has removed all the prospective dates from its previously announced plans to do so. It also says that the slowdown is temporary. Knowing as we do that international trade has slowed significantly around the world with freight shipping rates in near collapse, we wonder who the Fed is fooling …

Its unpalatable choice has all along been between raising rates and thereby perpetrating defaults, asset collapse as the air leaks out of overvalued assets and enormous losses for banks and other investors or alternatively, continued inflation of values via money and credit expansion, devaluing currencies until they collapse.We recall an old quotation: “The coward dies a thousand deaths, the brave man dies but once.” We are beginning to see which the Janet Yellen Fed fits …

We estimate (A writer’s euphemism for guessing) that U.S. real estate and assets in general may be worth perhaps 50% to 60% of what they list in dollars now, post collapse. If as it appears, the Fed is shrinking from its avowed restoration of market interest rates, that will postpone while augmenting this difference between underlying real and surface published values for assets. The longer we await the letting out of the air in asset values, the greater will be the shrinkage when the leak occurs. Inflation is followed at some point by deflation, that bane of governments. Balloons that rise full of air, sink again when the air leaks out. So too with economies.

Politicians’ “this time is different” and “We will save you” are speaking in tongues; what they mean in reality is: “Apres moi, le deluge!” But this is ever a form of musical chairs; someone is always left when the music stops. Now, Democrats and Republicans are throwing up suckers risking that sacrifice. They are both torn between allowing the other control of the reins of power on the one hand, and electing the next Herbert Hoover on the other.

One of them will win and the other will lose in any case; the American taxpayer will lose either way. It’s “Flip a coin: Heads, I win; tails, you lose.”

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About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
This entry was posted in Economics, Federal Reserve, Politics and tagged , , . Bookmark the permalink.

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