Wednesday, January 30, 2013

The fed should allow the dollar to collapse

We’re now so addicted to debt that the highest rate we can afford is zero,

We pay about $300 billion a year right now in interest on a $16.5 trillion debt.
What if, in two or three years — and the debt is $20 trillion — what happens if interest rates are 5%? Well, that’s $1 trillion a year in interest payments. The only justification for keeping rates so low is that the Fed knows any increase in rates will collapse this phony economy and we’ll be right back in recession.

I think a lot of this is going to be financed by the central bank. Inflation is the tax that they’re going to levy, and it’s going to hit everybody. At some point, the dollar has to give. You can’t just keep printing money, and monetizing debt, and buying bonds, without the dollar imploding. That will put incredible pressure on the Fed to raise rates, but the Fed can’t raise rates. And as investors around the world perceive that the Fed is all bark and no bite, that it’s never going to remove he liquidity because it can’t, then you get a run on the dollar.

Now, either the Fed allows the dollar to collapse, in which case we have runaway inflation, or, they aggressively raise interest rates and collapse this whole economy.