For some time we've been saying that the FED is addicted to Quantitative Easing (QE) and that it wouldn't be so easy to kick the habit. Then last week we told you that there are signs that the Deflationary roots go deep and the only thing keeping the economy on a steady keel is all the money being created by the FED. But all that funny money is eroding the foundations and the FED can't keep it up forever. Up until now every crisis required a bigger and bigger entity to step up to the plate and assume the debt. At this point the only entity bigger than the FED left to step up is the World Bank. So when the FED runs out of bullets it will be the last round of musical chairs. But at this … [Read more...]
Inflation: America’s #1 Export
What’s America’s No. 1 Export? by Bill Bonner In 1950 the typical working man was able to support a family. Today he can barely support himself because the costs of his main expenses have gone way up. He has to work about twice as long to pay for a new car and a new house. Health care is worse. In 1950 the cost per person per year was about $100. According to the government’s numbers, prices today are about 10 times higher. So health care should cost about $1,000. Not even close. It’s $9,000. In 1950 the typical father earned about $60 a week. For a family of four, he had to work fewer than seven weeks to cover the year’s health care expenses. Today how much does he earn? We’ve … [Read more...]
2 Types of Money
From the beginning, productivity improved with specialization. If one person can produce fruit more efficiently while the other was a better hunter, more wealth will be generated if the hunter hunts and the farmer farms. Forcing the farmer to hunt or the hunter to farm is just plain inefficient. But in order for the system to work there has to be a medium of exchange. Somehow the farmer has to be able to get the wild game in exchange for his crops. And what if the farmer wants meat but his crops aren't ripe yet? Well, that is how credit developed. In today's post Bill Bonner looks at mediums of exchange i.e. money and credit. He examines how they began and what they mean for us and our … [Read more...]
Lessons from TARP Boss Neil Barofsky
By Bill Bonner Yesterday evening we drove down to Zombietown. A friend in Washington had promised to introduce us to Neil Barofsky, inspector general of the TARP program. You remember TARP? It was the feds' $700 billion program to rescue the US economy from a correction. Neil Barofsky was in charge of it. So we decided to go down and ask him how it turned out... Rewarding Mistakes Bill: So... where did the $700 billion go? Barofsky: "I wondered the same thing," he said (from memory). "It was amazing to me that no one knew. We gave it to the banks. But no one knew what they did with it. I proposed to Tim Geithner that we find out. He was outraged. He cursed me out, using the … [Read more...]