Wednesday, January 27, 2010

Nero Once Fiddled, Now Obama is Manning the Printing Presses

The New Romans
President Obama and the Federal Reserve have a much easier time of opting for inflation than Nero did. Our leaders don’t have to re-mint debased coins or even overwork printing presses. Instead they can create money out of thin air with a keystroke.

Last summer the Wall Street Journal wrote that the U.S. government has been, “flooding the market with dollars. By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear… The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.”

The problem is that the Obama/Bernanke bull can’t last. The creation of money is a zero sum game and alone it does not revive a fundamentally weak economy. And unless the economy itself improves—beginning with greater confidence in the dollar—the stock market is bound for a serious fall.

Read it here.

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