This week's letter looks at the latest attempt by the U.S. Fed to put off the increasingly inevitable by pumping an additional $45 billion a month in newly printed greenbacks into an economy that so wants to deflate. While I talked about this in my last post, one point that is made here, that I missed, is that this new money is to be used to buy subprime mortgage debt.
What the fuck?
This means that for all the bitching and moaning about dishonest bankers and their ways, we are now giving them an additional half trillion dollars a year incentive to do exactly what they were doing in 2008 to bringt the world economy to its knees -- writing garbage mortgages that ultimately prey upon the poor and that U.S. taxpayers not just backstop, but pay for on an ongoing basis. And this will be done forever!
I reiterate: what the fuck?
This will of course also free up bank reserves so that they can plow more money into increasingly shaky equity markets so that we can continue to pretend that the economy is OK on that front as well. So the two main false hopes for economic health, commodities and equities for the rich (and for middle class pensions for those few who still have them) and reinflating real estate prices for the middle class. But of course at the price of setting up the next round of financial institution failures, mass foreclosures and socialized losses paid for by those of us poor losers who actually still pay taxes.
Kunstler rightly argues that the only viable path now is to wipe the slate clean -- to allow equities, real estate and commodities to decline or even collapse in the absence of world-historic monetary expansion. This is debt repudiation and an end to asset inflation and it is needed to do what bankruptcy is meant to do: to wipe the slate clean and allow us to start over.
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