Saturday, September 14, 2013

The Dance Band On The Titanic

     It is said that the dance band on the Titanic played Nearer My God to Thee on the deck of the gargantuan ship as it sank into the icy waters of the North Atlantic. Some accounts even have the musicians on the ill-fated ship playing their instruments, seemingly oblivious to the rising waters that engulfed and finally drowned them. I am reminded of those musicians as I watch the stock market continue to climb higher among the rising waters of almost non-existent Gross Domestic Product growth, employment continuing to deteriorate, a government that prints 85 billion dollars a month to buy its own debt, a record hundred million people on some sort of government assistance, instability in the Middle East threatening to boil over into a regional war that may include the United States and a federal government that seems completely incapacitated by fear and incompetence.
     And yet, with the dire economic conditions engulfing our country, threatening to break apart the hull of our republic as surely as the frigid waters of the North Atlantic broke apart the hull of the Titanic, the market mavens continue to play their instruments as if nothing is wrong. But they are not playing Nearer My God To Thee, the tune they are bellowing on this sinking ship is Money For Nothing. And as long as they have a friend at the Federal Reserve in the person of Ben Bernanke, they can continue to play that song right up until the point that this nation's fiscal head disappears under the icy waters of economic realities, which are sure to make an appearance in the not-to-distant future.
     The problem with Ben Bernanke printing 85 billion dollars a month and using it to buy Treasury bonds for the purpose of keeping rates on those bonds historically low to drive money into stocks to keep them artificially high, is that at some point he will have to stop buying and start selling. And with no signs of the actual economic health of the country improving, and actually worsening when  ObamaCare is fully implemented, the money that Mr. Bernanke will be pulling out of the economy through his selling will not only collapse the market, but the economy at large. Unfortunately the people who will be hurt the worse are the middle-class and the working poor, who will lose employment and wealth from their retirement accounts.
     I recall, toward the beginning of the Obama regime, then Secretary of  the Treasury, Timothy "tax cheat" Geithner, told the Chinese that the United States was not and will not monetize its debt with the printing of dollars to buy its own bonds. Of course that is exactly what the administration was doing and has continued to do, only the last couple of years they have labeled it "Quantitative Easing." The stimulative effect that this monetizing of federal debt was suppose to have on the economy, has only served to stimulate the stock market. QE has become just another grand academic exercise imposed on the free market by people who never spent a single day actually working in that free market. The men responsible for the coming collapse, like Mr. Bernanke, will knock over the women and children as they lunge for the limited life boats that will take them to the safety of high-paying jobs in academia and in future administrations. And the rest of us will be the musicians on the deck of Titanic playing Whipping Post.

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