re: Poll on Economy... Is it still 'Bush's Fault'?

quote:

---

Predicting the "end is near" without saying what is currently wrong isn't saying anything. The primary reasonable fear is some after affect of the country's debt service causing a problem. Is there some other industry (banking, etc) issue that would cause a sudden impact that administration isn't addressing?

---

I would love to explain.

During the dot-com era, assets became overvalued and eventually the stock market went way down as the bubble burst. Unemployment went up, the economy shrunk, etc.

This short-term pain was necessary to reallocate resources around the economy. But Alan Greenspan didn't want that, so he manipulated the interest rates down to make borrowing cheaper and encourage investment.

So all of that investment created by cheap money went into housing. Housing values went way up.

Greenspan kicked the can down the road, and once again, the bubble popped. The housing bubble and credit crunch.

So what did the government do this time? Did they let the economy reallocate resources, which would be painful but necessary to rebuild the economy stronger? Nope. They kicked the can down the road again.

Now, the Fed is creating money and the banks then lend to the Treasury to pay for government. All of this is possible because of the extremely low interest rates.

They can keep borrowing because the dollar is the reserve currency. The more they print, the less the dollar is worth. Eventually, borrowers are going to get tired of getting paid back with dollars worth less than the ones they loaned. Eventually, the credit market will dry up.

Eventually, the interest rates will go up. They have to. And for the largest debtor nation, that is bad news.

Adjustable-rate mortgage? Payments will skyrocket. Welcome lots of foreclosures, and eventually another housing collapse.

Banks? If the interest rates rise, many banks will be done, too.

Then we got the national debt. Most of it matures in less than a year, and rising interest rates would be catastrophic.

Will the government tighten or print? Of course, they will print. This will cause massive inflation.




There is a lot more to it, but in short, it will end eventually. Who knows when. But it will.

The economy is not in great shape even with extremely low interest rates and the Fed pumping money into the economy. That is only keeping up appearances.

It will come to an end eventually, and when it does, it will be a big crash.