The Fed is Poisoning the World

John Rubino discusses exploding inflation and the pickle that puts us (and the rest of the world) in. He believes the following:

Obviously this can’t go on. See Seeds of Their Own Destruction for some reasons why.

Continued ease in the US and more tightening abroad means increased pressure on the dollar — at a time when the dollar is already falling against pretty much everything. Even the pound is at a 17-month high of 1.66 dollars. Logic says that the dollar’s decline will soon become a political liability and/or a source of immediate instability. But logic is an unreliable guide in bubble-land.

You have to feel for the Brazilians and Chinese. They’re behaving correctly, saving and investing and building up capital, and their reward is a tidal wave of destabilizing hot money flowing from a desperate US Federal Reserve. Our inability to deal with our own problems leaves Brazil in particular with two unpleasant choices: tighten until they choke off foreign capital flows, which would probably send them into a recession, or “capitulate” and simply let inflation rage through their society, destroying savings and making life literally unlivable for people at the bottom of the economic ladder.

Because home prices are still falling in the US and the other countries that had banking crises, they’re reluctant to tighten, lest housing really tank and pull the rest of the economy back into recession. So the tightening — and the attendant suffering — will begin overseas.

The irresponsibility of the Federal Reserve and the Federal Government risk our economy and others around the world. If the feckless economic policy is not stopped soon, we will be the world’s economic pariah. Unrest will arise in areas outside the Middle East.

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