Print the Money! Hurry!!

Yes, we have talked about the U.S. financial predicament quite a bit in the past few years. It is truly amazing (interesting?) to watch the smartest men in the world pull their power levers in an attempt to keep their global-paper-money-tower, from tipping over. And it may be that the U.S. powers have just pulled the last big lever they have...and now just have to sit and wait to see what happens....because that lever has NEVER been pulled before. The lever controls the printing presses than print U.S. dollars, and the pulled lever put those presses into ultra-high speed.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless.

Interpretation; "We have no prior history to understand what pulling this lever actually does."

Now, as we have said numerous times....you can't simply print copious amounts of money because in reality, it is only paper and if there is too much of it...it becomes worthless, kind of like Monopoly money.

It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.

There's that word, "ever", showing up again. The translation on the above paragraph is; "It's possible that we could be the next banana republic like Venezuela, Zimbabwe or Nigeria...where they need to come up with a new currency....because 1$ won't even buy a gumball."

But hey?....can't all the smart people we have elected pull us out of this mess? Can't we soon go back to our carefree spending days when everyone could buy anything they want and just put it on a monthly payment? When jobs were so plentiful that even if you wore your pants down below your butt-crack...you could still be hired? Days when EVERYONE could have a 5 bedroom house that literally turned into a huge piggy bank of bottomless equity??

Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury's planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.

Translation; we can't have the Fed selling bonds trying to take money OFF the street...at the very same time the Treasury is trying to sell bonds to finance the operating budget of the Federal government....the bond auctions would fail...and the world might then realize that the U.S. is going to start defaulting on it's promises. That would mean....collapse.

Read full article here; http://online.wsj.com/article/SB124458888993599879.html

Please notice that this article was written by Art Laffer. He is the author of, "The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let it Happen." Mr. Laffer has been a purveyor of doom and the world's economists have largely dismissed some of his findings.

What's interesting to me is that the world largely dismissed all of the OT prophets, calling them purveyors of doom, as well. They simply refused to believe that anything would ever change to bring them off their high horse. Today, it seems we simply refuse to believe that God is in control.