Amazing...Economic theory Wrong? In the most basic terms people have made some assumptions when it comes to currency and interest and borrowing, and money supply...it goes basically like this...Let us say you are Person or Country A. A's income is Stable....As A prints more money the value of that money goes down, and the interest rate they pay to borrow goes up...Now if A's Income were to decline this would have the same effect as printing more money the value of A's currency goes down and the cost of borrowing goes up...Now if A were to have a Drop income and at the same time start massively printing currency...Well that would drop the value of currency rapidly and increase borrowing costs dramatically as well as reduce A's credit rating which would further increase A's borrowing costs....This is not my theory this is just a really simplified example and of course there many other factors but the basic Idea has Generally been True....Until Now................................................................................................................................................................................................................................................................................Since the Collapse of 2008 the US has increased spending relative to income dramatically and at the same time massively printed more dollars...As the Basic example above demonstrates this should cause our Borrowing costs to be High...Especially when you consider that our credit rating was lowered because of these reasons...But at Yesterdays 10 yr Bond Auctions was our Borrowing costs at all time Highs as one would expect? NO...Just the opposite...The Ten year Bond went for a RECORD low...Less than 2%....So even with our Massive debt, reduced credit rating, lower income, and massive currency printing our Borrowing is the Lowest cost it has EVER been....Amazing......................................................................................................................................................................................................................................................How could this Happen?....It is the fact that the US Dollar is the DeFacto Reserve Currency for World Trade....What does that mean? It means that if Europe were to fall apart the World still thinks the Dollar will be here...And while they may not be able to use worthless Euro's they think they will be able to use Dollars...That faith makes the Dollar stronger than the underlying income/expenses may indicate and that is how our interest rates are so low....So how is this Spenderific?
The Germans are afraid to Bailout the Euro...They fear it will cause they devaluation of their currencyand the Euro as per the above example...and they are probably right....most everyone would agree...HIstorically...that is the case....Except for US...We are the First to ever be able to DEFY the rules of Economics...But then we are the First true World Reserve Currency....You see as Europeans borrow and spread money around in Europe it increases their borrowing costs and devalues their currency...just as you would expect...There is only one Country in the Entire World that has the Ability to Borrow, Print, and Spend, without affectiing our Borrowing costs...And that is US....And here is how it gets Spenderific......................................................................................................................................................................The obvious solution is to have the FED bailout the Eurozone with a Huge Bailout Package(4T) that trades Euros for Dollars basically giving Europe the same interest rates we enjoy...Of course unlike China's loans to US we need to make sure these loans to Europe and tied to our Borrowing costs so that as our borrowing costs go up so do the interest rates on the loans...As the world economy recovers the interest rates will return to normal and without a peg to inflation we, like the Chinese, would lose a lot of value.............................................................................................................................................................................................................................................................................I can hear the conservative screams already...No way...You could never get that passed....lol...Ben Bernanke has already stated that the FED has the Authority and Ability to Buy any Assets or Currency they deemed necessary to protect the value of our currency or Institutions...He does not need Congressional Approval...of course not, they are Private Bank...Backed by US of course but never the less...a private company that can decide to spend Trillions of our Dollars if that is what THEY decide that is what WE need to do....I can see how some may not like this idea...it goes against everything we were taught....But so do the facts since 2008...obviously there is more to the story than what we were taught...The Dollar goes where no Currency has gone before...Absolutely Spenderific!...
Some would say Obama would never allow it cause he would not get elected....Well I am sure George Bush was not Thrilled with having to pass the Largest Government Bailout in History either...Sometimes things don't turn out like you might like for them to...and on the flip side...they are wrong...If he does this he will certainly Guarantee his election....Once a deal is done that puts a stable footing under Europe as this would we will experience a huge Rally World wide....That is Popular...This is all it will take and really all it is US allowing Europe to take advantage of the Benefit we receive by being the Worlds Reserve Currency...We are all in this together....nobody wins if we all lose...Let us look at this as an investment in our Future............................................................................................................................................................................................................................But this is it...That is all we can do and we will not allow the Banks to put us in this Situation ever again...We must stop the Backroom Gambling...Banks can not be Investment Houses and Vice Versa...Insurance companies are not Banks or Investment Houses....Car Companies Retailors, or Multinationals like GE are not Banks or Investment Houses....We Did NOTHING after 2008...and Here we are again...Have we learned our lesson yet?....The Rating Agents must be Jailed for the Fraud they committed that led to the collapse of 2008...The Business Model of the Ratings agents must be Changed...A financial transaction tax must be implemented to reduce the High Speed High Volume Computerized trading done by the Trading Houses, Banks, Car Companys, Insurance and Multinationals...oh I mean Banks...lol...so where are we...The Banks have Gambled us back to edge of the abyss once again...and we are Forced to bail them out or Everything collapse...That is Poo-poo WE must stop the Gambling....at the Very least make it transparent so we can see exactly what they are betting on...Just that would drop the volume in Half...............................................................So get ready America we are about to save Europe Again, of course we could not even consider do this without the overwhelming faith place in US by the rest of the world and our Chinese Banker friends in Particular...