Get ready for the smackdown

[Cain]

Quantitative Easing by the Fed ends next month.  This means the gravy train for commodity speculators also ends next month.

While this is on the surface good news, as it means food and oil prices are already stabilising, it's actually not good at all.  Stock markets are already starting to slip as the realisation that monetary supports are being withdrawn sets in.

When the last round of QE stopped, the real quarterly GDP in the US in the following three months was well below projected estimates (check the WaPo or NYT for the figures, if you doubt).  This time, the rot is setting in even before the program has ended.  The Fed is trying to blame the slowdown on Japanese problems and natural phenomena, but almost all economists are united in their agreement that inflation and high food/fuel prices are the real problem.

Does that sound familiar?  It should, as we had this exact same set of conditions in 2008, just before major banks started tanking.  The US is heading into a summer where the economy is so weak, I wouldn't rule out the possibility of recession at all.  The thing is....next year is election year, and the Fed is always accomodating to the occupant of the White House.  Bernanke himself wanted to forge ahead with a QE3, but was defeated by an internal coup within the Fed (which is notable in and of itself).  But as 2012 rolls around, Obama is going to want a strong economy to help him win the election (if that unemployment rate stays above 8%, his election chances are toast, even if the GOP run the exhumed corpse of Richard Nixon against him).

If QE3 gets the go ahead, I would expect hyperinflationary expectations in certain markets (gold, commodities), an investment bubble which will almost certainly collapse and plunge the world into another, much more prolonged global recession.

Minsky wins again!

[Phox]

If I'm reading what you're saying correctly, the economy's fucked six ways from Sunday and it isn't going to be fixed in the long run? Well, damn.

[Cain]

Under an economic philosophy designed to create non-zero sum conflicts and promote "win-win" scenarios, the drivers of the global economy have somehow driven us all into a lose-lose situation.  That is quite impressive, and should be recognized accordingly.

As things stand, liquidising everything and removing public sector debt is the only viable solution.  And that will be as popular now as it was when Andrew Mellon first proposed it to Hoover.

[Mesozoic Mister Nigel]

Oh good.

[Phox]

Under an economic philosophy designed to create non-zero sum conflicts and promote "win-win" scenarios, the drivers of the global economy have somehow driven us all into a lose-lose situation.  That is quite impressive, and should be recognized accordingly.

As things stand, liquidising everything and removing public sector debt is the only viable solution.  And that will be as popular now as it was when Andrew Mellon first proposed it to Hoover.

That's what I thought. Good to know that excellence in failure is so highly valued in these important matters.

[Succulent Plant]

Under an economic philosophy designed to create non-zero sum conflicts and promote "win-win" scenarios, the drivers of the global economy have somehow driven us all into a lose-lose situation.  That is quite impressive, and should be recognized accordingly.

As things stand, liquidising everything and removing public sector debt is the only viable solution.  And that will be as popular now as it was when Andrew Mellon first proposed it to Hoover.

What is the everything you're referring to when you say "liquidizing everything"? 

[Cain]

Everything.  I'm talking about going back to a 19th century standard of living for 90% of the global population.  No unions.  No safe and healthy regs.  No social security.  Everything that can be sold off, cut or made cheaper has that done.

I mean, they could try a global debt amnesty, I guess.  That would be sensible.  But economics is zero-sum at the end of the day, and it is better to rule in hell and all that jazz.

[The Good Reverend Roger]

I think Cain may be a tad optimistic.

[Freeky]