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US Economic Policy, Inflate

                It’s no secret that the Gov, Fed and Bankers all have one thing in common, and that is a desire to print as much dollar as possible to keep asset prices high.  The reason is logical and simple; our economy is the most leveraged economy in the world fueled by government debt, corporate debt, personal debt and private debt.  We are so leveraged that a realized correction of 20% in residential and commercial RE would wipe out all of the capital in the system.  It was no coincidence that the March bottom came the day the government eliminated mark to market accounting.  Once they gave corporations the go ahead to lie in their financial statements, that same day the market bottomed.

                Now, the stock market has become the new bubble, creating wealth from thin air as long as there is a greater fool willing to pay more than you did for the stock.  So many investors now that evaluations aren’t even close to being reasonable, yet the Fed and Gov policies will punish any prudent investor.  Rates are so low that it makes savings accounts worthless, so the equity market is the only place to go short term.  The one thing that is justifying the higher US market is the devaluation of the dollar.  As long as it doesn’t become a panic dumping but a controlled devaluation, the economy will stay stable.

                The problem with all this will come decades from now when inflation kicks in.  It will be 10 years before we start to experience hyper inflation.  This number was not pulled out of thin air; it is based on long term oil contracts written in dollar terms.  China and USA both have 10 year contracts to receive millions of barrels of oil at a ridiculously low cost.  As long as oil is cheap, global inflation can be kept in check by Fed and Gov manipulation.  However, when supply strains are real, there is no manipulation that can save the day, you either pay more or be without.

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