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Money Creation Madness
Through September 2008, it took the Fed nearly 14 years to double bank reserves. Bernanke did it again in less than four months, swapping good assets for bad ones, bank held toxic junk, but only a small fraction of their total holdings, so the big ones remain insolvent.
Bailouts and massive borrowing are crowding out the private sector, making it hard to impossible for most businesses and consumers to borrow. In his March 15 commentary titled, "The Great Credit Squeeze," financial expert and investor safety advocate Martin Weiss explains the dangers:
-- total government borrowing (federal, state and local) at an annual pace of over $1 trillion; while
-- businesses reduced existing debts at a near $1.1 trillion annual rate; and
-- consumers virtually shut out entirely from credit markets "cut(ting) their existing mortgages at the annual rate of $365.1 billion and their consumer credit at the rate of $145.3 billion," totaling an annualized $510.4 billion cutback.
Confirming the ongoing record bank credit contraction, "credit (overall) is actually being sucked out of the consumer and corporate economy at a torrid pace." The real economy is starved because of massive government borrowing fueling a potential sovereign debt crisis like in Iceland, Greece, and Eastern Europe, and threatening Portugal, Ireland, Italy, Spain, the UK, and America.
Author Niall Ferguson sees three possible Greek outcomes, potentially affecting all heavily indebted countries:
-- "one of the most excruciating fiscal squeezes in modern European history;
--outright default; (or)
-- some kind of bailout," but he omitted the one chosen as a long-term fix - the imposition of IMF austerity, including deficit reduction through:
-- large government layoffs;
-- a public sector 10% wage cut, including a 30% reduction in salary entitlements;
-- a 20% cut in civil service bonuses;
-- freezing pensions;
-- a two-year increase in the average retirement age;
