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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

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 Richard Russell
March 20, 2012
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There is only one thing that leads to deflation. It is massive debt followed by a contraction of that debt. At this time the entire world is straining under massive debt. The debt bubble has now burst, leaving in its wake a tide of deflation.

Rather than let the contraction have its way and cleanse the economy of its imbalances and rot, the Bernanke roared in with billions of dollars of credit in a vain effort to stem the deflationary avalanche. Under the ocean of newly created credit, the stock market spurted higher. Quantitative easing (QE) was the name given to the Fed's new game. When the QE stopped, the market stopped. A second administration of QE was applied, and again the stock market came alive.

Thus the Fed under Bernanke has sought to snuff out the bear market by loading Wall Street's banks with cheap credit at easy terms.

Under a pure fiat money system, the Fed can create almost endless amounts of credit. In a fiat money system, credit is money and money is credit. What happened was that the real estate structure blew up like a balloon, aided by sloppy lending by the banks. Next, the real estate bubble burst, leaving millions of Americans holding properties that had sunk below their mortgage values.

In the face of this disaster, the Fed lowered its basic rate to zero and promised to hold this rate at zero for the coming two years.

Remarkably, the stock market chose to ignore the fragile structure that had been built. The stock market acts as if a giant "put" had been placed under the market by the Fed. By early 2012 the Dow had powered its way to almost 13,000, from which it stood, ready to push higher, but restrained by fear of Fed inaction. When the Fed intimated that perhaps it was through with QE, The stock market halted its climb and stood as if stunned by the absence of additional QE.

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