Buckle up and here we go for some thoughts, reflections and opinions from the cheap seats…
There have been some murmurs about the Federal Reserve taking action to reduce its Treasury holdings without destroying the bond market and at the same time reducing the National debt and the deficits. They would simply forgive the debt owed by the US Treasuries they have bought in the last few years. This would reduce the debt by at least hundreds of billions if not over a trillion easily and simultaneously would reduce the deficit because no interest would be due on that forgiven debt. It sounds so simple. But the problem is that such an action would focus attention on the fact that is funny money to begin with printed out of thin air by the Fed as a means for the government to fund its deficit spending and that there is nothing really supporting the value of the dollar other than “confidence” in our money. It would be severe blow to that confidence. After all if they can do it once they can do it twice. Why not then just default on the Treasuries held by the Chinese; we don’t like them all that much anyway and they manipulate their currency. It would be so appealing politically short-term but devastating in the near and long-term to our economy. The politicos could brag and say “see, we fixed all that debt and deficit stuff” . Of course what would it make the dollar worth in your pocket?
Both Dow and Dupont have recently announced pretty negative outlooks for the near and mid-term future of their businesses and industry. Between they have also announced plans to cut 4000 jobs. That is not a good sign. When the economy is doing well those plants are humming putting out products for both industrial and consumer use. We all use tooth paste whether the economy is good or bad and that use doesn’t really indicate the health of the economy but when basic materials used in everything you can imagine are cut back we aren’t doing so well.
Greece just got a two-year extension of time to comply with it bailout loan terms. Two more years to meet both revenue and deficit reduction goals. This should come as no surprise. Regrettably it is like a person going on a diet saying they will have only two more pieces of chocolate cake and then start next week. Good luck with that.
The Federal Reserve at this month’s meeting stated it is continuing its ongoing purchases of goodies in the market place to the tune of at least 40 billion a month and will continue to crush savers by keeping interest rates near zero for two more years minimum. They also posited that the economy is still sluggish. Hey, we all know about the latter but some of us are concerned about the former. How much more money can they prune off that money tree growing in their back yard before they kill it and our soon to be hyper-inflated economy they are fostering?
Good for the Brits. They had the good sense and back bone this week to tell the EU court to stuff it. That court in a spasm of political correctness gone berserk had ordered Britain to allow all its prisoners to be allowed to vote in elections. Not gonna happen at least with Cameron there.
With regard to Biden and his comments at the debate about Iran’s nuclear capacity one should caution him to know a bit more about engineering and history before he states so positively that Iran can’t have a nuke for a long time because even after they have the fissile material they still have to have a weapon for it. Well, Joe, the weapon is the easiest and quickest part. All they have to do is watch the History channel to see how to construct the bomb. They just need a big iron ball with ordinary explosives on the outside to ignite and force the fissile material to the middle where the nuclear reaction will take place. Does the Joke really believe they are developing the material and haven’t given a moment’s thought to how they will deliver it to the intended target? They already have some missiles we know and it doesn’t even have to be delivered that way necessarily. They could simply build the device and put it 0n a truck or on a small ship and or even a cranky old DC-3. They could quite likely get any of those all the way across Iraq to Israel without being intercepted. They for sure good get them to the Strait of Hormuz which is their own shoreline. I hate glibness with serious issues.
Sanctions against Iran are very problematical. History should teach us that. Doesn’t hurt to give them the old college try but don’t bet the ranch on them working. The Soviet Union had an effective and real blockade against it for decades both by law and by inclination of much of the world and the Soviets themselves self-imposed sanctions by not trading with most of the West because to do so went against their ideology. They couldn’t allow their people to import Mercedes or Cadillacs and let them be compared to the cars the Commies made; nor TVs and a long list of other items. They never reduced their danger to the western world in spite of being cut off. Likewise North Korea has been a pariah for decades and sanctioned out the wazoo but that hasn’t fazed them, ditto for Myanmar. Fanaticism and locked-in ideology doesn’t bend to normal logic. The Iranians in spite of timid protests here and there are obviously content to let their country be dominated by the Ayatollah and his cohorts. As long as their religious beliefs and goals remain pure in their minds they really don’t care about the condition of their people, after all, they will all end up in paradise for their sacrifices. Sadly my friends it will require a much firmer hand than saying they will have a lower standard of living.
“There is no worse heresy than that the office sanctifies the holder of it.” Lord Acton, British historian and statesman. http://www.olcranky.wordpress.com