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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 Doug Noland
March 17, 2011
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Federal Reserve liquidity operations have been fundamental to the marketplace’s accommodation of escalating federal borrowing requirements.  And each passing year of rising federal deficits ensures an even larger gulf between the total amount of system Credit creation required to sustain the boom and the limited capacity of the private-sector to begin carrying the load.  Furthermore, the longer the government finance Bubble is prolonged, the greater the systemic dependency for this type of finance both from a financial and economic system perspective.  Or, explained somewhat differently, the larger the government finance Bubble the smaller the potential private sector Credit impact.

Federal Reserve monetization has also exacerbated global financial system liquidity excess, as increasingly speculative global finance comes further unhinged from even a semblance of a stable “reserve” currency.  Surging global food and energy prices are an increasingly conspicuous consequence of activist global policymaking, a dynamic that is no friend to U.S. household vitality or creditworthiness (or, inevitably, bond prices).  And here the dimensions of the previous “private” Credit Bubble (as opposed to the seemingly favorable federal debt position) are the determining factor with respect to the scope of quantitative easing operations.  Irrespective of government debt ratios, post-Bubble economic maladjustment and Credit impairment create fragilities that ensure our central bank errs on the side of ultra-low rates and aggressive monetization.  I see the unfolding boom in federal finance as anything but mitigating our structural debt and economic problems. 
The federal government sector did commence the post-mortgage/Wall Street finance Bubble period with manageable marketable (not including contingent liabilities) debt levels.  From a Credit Bubble perspective, however, this is proving a liability.  The marketplace has accommodated the greatest 3-year expansion federal debt in history, reinvigorating Bubble dynamics and re-inflating systemic fragilities.  And despite Fed-induced artificially low borrowing  costs, our government’s so-called "favorable" debt ratio has deteriorated rapidly.

The government sector is now well on its way toward impairing its creditworthiness.  And while diminished, the dollar’s status as reserve currency (“ability of a country to print globally acceptable scrip”) has been instrumental in the ability of global central bankers to “recycle” the unending surfeit of dollar balances right back into our securities markets.  In this respect, I would argue another “asset” is proving a quite unfavorable Bubble-fomenting “liability.”  These days, our government finance Bubble has counterparts all around the world, in an environment of Monetary Disorder and increasingly unwieldy global finance.

In the final analysis, when it comes to gauging the probability of “ultimate success,” I fear that our policymakers have pilfered our nation’s assets for the perpetuation of problematic – and in the end unsustainable - Bubble dynamics.