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Golden Ben is Trying...

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Governments cannot control markets despite that belief by life-long bureaucrats.

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He is trying to appease our foreign lenders with higher Fed funds. He is trying to appease equity investors with a phenomenal 10% growth rate in the now unpublished M3.

In doing so he is in between a rock and a hard place.

He is wrong that deflation can be avoided simply by pumping money into the system. That eventually culminates in massive debt (sound familiar) and a collapse into deflation. That process can take years, which it has as $40 trillion in credit has been accumulated in the U.S. over the last twenty years. The end of nice inflation (which helps rich people as asset prices are bid up) is hyperinflation as more debt is needed to fuel growth. That ends in deflation which rich people hate.

Speaking to Herb Greenberg this morning, he made it clear just how vague all this is to the common person. He made it clear that almost all in Congress do not understand this.

The middle class is being boiled slowly like a toad, which does not recognize it until dead. The consumer in debt will default at the breaking point. Balance sheets look good until asset prices go down; the debt does not go away.

Globalization by definition transfers wealth thru income to poorer countries. This is what is happening to the U.S. as income is exported and debt is imported. A huge transfer of ownership to our foreign lenders will be the result, unless the U.S. throws up barriers to that. Then it will be worse.

The government wants you to take on debt and risk. You should do the opposite: pay off your debt and reduce your risk.

Central banks will fight this, but the fight will only make things worse in the end. Governments cannot control markets despite that belief by life-long bureaucrats.
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