Monday, December 21, 2009
Ready to go POP!
As the Federal Reserve continues to keep interest rates low in an attempt to inflate the economy out of the doldrums, some economists warn that this will lead to another asset price bubble. No surprise there and when it happens it will be ugly. It seems that the people in power can not avoid making the same mistakes over and over again while the average citizen is eventually caught in an economic storm that they did not create.
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2 comments:
The asset bubble you are referring to is right in front of our face. Most asset bubbles are always hidden right in plain sight. Public debt is an asset borrowed against the future growth of the overall economy just as a home is usually an asset borrowed against your future income. The size of the shareholder capital in the entire global banking industry in 2007 was $2 trillion dollars. What is Obama's projected deficit for next year? About $2 trillion dollars. The amount of money that our political leaders are intent on borrowing dwarfs the global banking industry before it collapsed. Obama's debt binge is nothing less than another asset bubble.
Burro--you're point is well taken. I'm afraid that the "pop" of the public debt, as you aptly describe, would then lead to the collapse of the world's reserve currency--the American Dollar.
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