Cairo Coming to a Town Near You

The Federal Reserve pretends that Quantitive Easing  is helping the economy. It is now obvious that it is not.

At best, QE provides a political diversion. It makes the economy look like it is improving (or at least not worsening), but only for a short period of time. Eventually that effect wears off and  it results in high levels of inflation. We have passed the point where QE can fool anyone and have entered the inflationary stage.

Fiscal policy is out of control and has been for years. Recently government spending shifted into overdrive with generating deficits approaching 50% of revenues. Any fool (unless that fool holds elected office) knows this situation is unsustainable and driving us to sovereign bankruptcy.

Government spending is driving QE. If QE is stopped, then so is government!

Prices are beginning to explode around the world. Food prices are blamed on the riots in the Middle East. At some point, if current policy continues, they will produce similar unrest here.

Through it all, government and the Fed insist we are in a recovery. If matters were not so serious, we all would be laughing at their duplicity and incompetence. Unfortunately, it is they who are creating our pain and it is about to become much worse.

Some commentary by Mangan’s follows:

Silver Goes Parabolic

Silver, and to a lesser extent gold, have spiked up in price. See, for example, here.

Meanwhile, the Ben Bernank says that we have no inflation and that the Fed still needs to print money to prop up the economy. The latter half of that sentence is absolutely true: without continued money printing, the U.S. is doomed. The problem is, we’re probably doomed with it.

Do you see any news about the silver spike in the MSM? I didn’t think so. All that they want to do is keep the sheeple in the dark, buying equities (like Wal-Mart!) for their 401(k)s, not worrying that USG is driving the country, as well as much of the rest of the world, into the ground. We’re about to see the biggest one-year jump in government debt in history. China and Russia have become sellers of US Treasury bonds. Shadow Government Statistics has the true unemployment rate at about 22%.

I know I usually get a big yawn here when I write about this stuff, but I believe that one should be paying attention, that is if one values one’s future. The government is doing its damnedest to assure everyone that everything will be alright, but it just won’t.

How this all plays out is uncertain. At best we end up in a plain-vanilla depression like the 1930s. But that likely requires the Fed to cease and desist QE. That option means the government must drastically cut spending. To do so, probably brings Cairo to the streets of the US and plunges the economy into a Depression.

To not do so, ratchets inflation up to hyperinflation and brings Cairo and possibly Tripoli to the US streets. Hyperinflation collapses the economy when only barter provides the means of trade. The middle class wealth is wiped out in this scenario.

Doing the right thing is discontinuing QE and allowing the Depression to occur now. It would be painful, but it would cleanse the economy of its distortions and excess debt without destroying the middle class.

Not facing up to this unpleasant scenario produces a more unpleasant one, one in which there is risk of losing our political system via martial law and eventually totalitarianism.