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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Aubie Baltin
January 25, 2011
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Out of thin air money” is like heroin, initially the high is terrific (short term), but the list of accompanying side effects are long term and cumulative and are always worse than the disease it was supposed to cure. It is difficult to know in advance all the side effects and unintended consequences, (that is why they a referred to as unintended consequences) more importantly, it has already resulted in a substantial decline in the dollar, stagflation, lower, if any, economic growth, reduced lending and inevitably, much higher interest rates. Inflation will show up not where the Fed wants it – in house prices – but in higher prices for Gold and Silver, commodities, especially food and gasoline (which they do not include when calculating inflation), clothing, electricity - all of which could kill consumption. QE2 will actually result in higher interest rates since investors are expecting more bonds being offered and because higher inflation will demand higher rates. 

The Fed’s manipulation of short and long term interest rates creates a long term problem for ours as well as the world’s economies.  When the Free Market is not allowed to discover what interest rates should be, we lose the single most powerful and important advantage that allows Capitalism to work while Socialism and Communism cannot: The “Invisible Hand” traffic signals that tell everyone what must be done to keep the world’s economies operating smoothly no longer work. In the long term, QE2’s success is impossible since the best it can do is delay the inevitable while making the outcome much worse than it would otherwise have been, as all the unforeseen, unintended side effects come home to roost. 

By using smoke and mirrors, the Fed wants to create targeted asset bubbles, praying that the wealth effect will make people feel wealthier and spend their phantom gains. But the paper wealth will vanish as bubbles burst (they always do) and real wealth, along with the phantom wealth, will be destroyed leaving a situation that is much worse than anyone could possibly imagine. We will replay Japan’s folly of the last 20 years only much worse because they have a surplus in their balance of trade and thus owe all their debts to themselves. Unlike us, they have the world’s highest savings rates and the Yen is not the world’s reserve currency.

Just like the Real Estate and Dot.Com Bubbles, there is always an initial giddy phase bliss when playing the “bigger fools game”. But that lasts only until the bubble bursts and all the phantom money disappears...The Fed doesn’t want anyone to be in cash, they want you to reach for yield and speculate – but don’t you dare. In the absence of good investment opportunities, the worst thing you can do is take advice from the FED. Lucky for us there are still a few excellent safe haven investment opportunities: Gold and Silver.