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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

 
Commentary Of The Month
December 18, 2015
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HOUSE OF CARDS

By John Ing

Since 2009, the Fed has purchased almost $4 trillion of Treasuries and mortgage backed debt, funding over half of the government’s federal debt load. Debt monetization and quantitative easing has poured trillions into the global financial system, creating credit bubbles. Yet despite rounds and rounds of quantitative easing, the world’s economies remain in a funk, laying the ground for another pump priming exercise. In fact, a “dithering” Fed has even lost credibility with the biggest beneficiary of its stimulus policy – Wall Street who feasted on the cheap credit. The world is simply addicted to this money creation exercise and cannot get off the treadmill.

Despite the United States only accounting for 23 percent of global GDP, 60 percent of global foreign exchange reserves are in dollars. Seven years after the Lehman collapse, the U.S. has added nearly $8 trillion of debt, doubling its debt-to-GDP ratio. Much of America’s obligations are owed to foreigners which represents a clear and present danger for the dollar. America’s trading partners’ patience is wearing thin with America’s hegemonic power and use of its financial clout as a political tool. Today, most trade and transactions are conducted with dollar payments either directly or indirectly. As such, global banks are largely American. Indeed this “exorbitant” privilege of owning the world’s reserve allows America to borrow in dollars, pay for spending, and finance a growing debt and huge deficits in a currency that it prints.

The United States, the world’s largest borrower has become increasingly dependent upon its creditors. America’s debt holders have noticed and some like China are dumping dollars as China discovered that quantitative easing reduced returns on its massive dollar-denominated reserves to near zero. The failure of the Fed to wrestle these problems has eroded trust in America’s ability to act as a financial steward of the world’s reserve currency. The dithering and politicking over a much overdue rate hike has increased volatility, undermining respect in the dollar. Still to come is the unwinding of America’s extraordinary monetary policy and the eventual symbolic first interest rate increase in a decade. The dollar is the world’s currency. However, because the U.S. consumes much more than it produces and owes much more than it owns, the creditors of America’s debt have a vote. This time there is no lender of last resort.