Thursday, June 09, 2011

Economics 101

There are some pretty simple truths about economics. If you loan money to someone, you expect to benefit from the transaction through some interest added to the repayment. If you borrow money, you know you are going to have to pay the lender a bit of interest to make it worth his while. That's not rocket science.

So, we've to $14.5 trillion in debt and we are desperately seeking Vito "Big Pastrami" Genovese for a payday loan of another couple trillion. Here's a realistic analysis:

Fed Stops Buying, Interest May Rise to Attract Mob Money

There is a lot of meat in that piece. Of course we will have to pay interest. When we are so deep in debt, we are hovering at the point where Moody's, S&P and other raters are downgrading our credit rating. That means more interest. In the US, the Fed has pegged funds rate a 0% for quite a while now. That is underwritten by somebody, aka YOU, before anybody transfers any money to anyone.

We've had the Treasury "buying" US debt which is sort of like you loaning yourself money from your left pocket to your right to buy drugs when you don't have any money in either pocket. Now, if the Treasury stops buying, and the Fed keeps issuing, and nobody wants US bonds because wise investors can see a future collapse, what comes next?

Is it any wonder that now more than 60% of Americans are unhappy with the Messiah's handling of the economy? The other 40% can't add or subtract but generally vote Democratic.

1 comment:

The Donald said...

I would invest in Remington 870s, Sig P290s, Savage Model 12s. (OK, I'd like to go with Purdey, Sig, and Dakota, but I'm trying to keep it practical here.)

And lots of ammunition.

The zombies are about to be loosed.