Tuesday, March 8, 2011

Painting The Global Economy Into a Corner

With inflation rearing its ugly head across the globe (and knocking on Dr. Deficit's door), there have been rumors flying around Wall Street for the past 3 weeks that there will be no more QE. If true, this will be very interesting to watch as almost everyone living above the ground knows by now, the direct correlation to the Fed's easy (read: funny) money policy and the almighty stock market's price. Further, as I pointed out in a previous post, the "recovery" that they want you to believe you see (but not feel) is not the sustainable organic growth an economy needs to walk on its own; rather, any magical growth you see is an illusion. It is a byproduct of monetary stimulation to the max -- we're in uncharted waters now. (Have you seen the Federal Reserve's balance sheet recently? Don't! For your own health, avoid it! Yes, it's that ugly.)

On the other hand, if the Fed continues to use QE to stimulate "the economy," then not only will the US continue exporting inflation (Houston! We DO have an export!) to China and the rest of the developing world, but that inflation will really begin to creep up on our shores- in many ways, it's already here.

See the conundrum? End QE and bring the entire global economy to a dead stop, or continue QE indefinitely and bring Zimbabwe-like hyperinflation to the entire world. Hmmm... what to do, what to do? My bet is they will continue QE for the indefinite future and risk hyperinflation over hyperdeflation.

In other words, there is no way out of this mess. Period.

No comments:

Post a Comment