Up, Up, and Away, in My Beautiful Hindenburg

Posted: November 8, 2010 in Commentary, Economics, News, Politics
Tags: , , , , , , ,

And so it begins.   Helicopter Ben and the Fed have commenced QE2.  This time they intend to kick it up a notch since (as with everything the government spends money on to fix) they did the right thing the last time, they just didn’t do enough.  So now they are going to buy $600 billion in government treasury bonds so that the money goes straight into the economy instead of into those evil bankers’ reserves.  In addition, they are going to repeat some of the work of QE1 by printing another $300 billion to roll over those nasty mortgage-backed securities into US treasuries.  All of it spells the foreshadowing of disaster – like hydrogen instead of helium in the greatest airship of its time, the LZ 129 Hindenburg.    

All of this government sanctioned currency counterfeiting has a purpose, purports the chairman, putting the US on a rational target for core inflation of 2 percent.  Never mind the stated purpose of the Fed IN THE LAW that it is to keep inflation from happening at all.  THIS inflation is necessary, says the Fed, to jump-start the lagging economy and stimulate employment – which the previous attempt in QE1 failed to achieve.  QE1 has succeeded in generating price inflation, however, just not enough to suit the Fed.  This currency devaluation should help import jobs from overseas by making our labor and products more competitive in the global marketplace goes the refrain.

This of course assumes that our international trading partners won’t respond in kind to our dictum by devaluing their currencies to keep their economies from taking the brunt of our assault.  The Chinese central bank wouldn’t manipulate their money supply to keep their economy chugging along.  The Japanese central bank wouldn’t continue devaluing in their twenty-year continuing attempt to revive their economy with domestic government spending.  The British wouldn’t cut their support for our imperial acquisition spree by significantly reducing their government outlays.  The Germans wouldn’t stop the ECB from continuing to support the PIIGS with German resources.  As LBJ used to say, “That dog don’t hunt.”

The Hindenburg flew its first commercial flight starting on March 31 1936. For over a year it regularly traversed the Atlantic flying nearly 192,000 miles, carrying 2,798 passengers, and transporting 160 tons of freight and mail.  On May 6, 1937 the zeppelin was destroyed as it was attempting to dock with its mooring mast at the Lakehurst Naval Air Station, adjacent to Lakehurst, New Jersey. The actual cause of the fire remains unknown.

The explosive disaster is well recorded because of the significant extent of newsreel coverage, photographs, and the live on-the-scene radio report from WLS Chicago.  With the amount of television, radio, and Internet reporting available today, the coverage will be overwhelming  when the monetary disaster happens for the US and the world.  We may again be hearing the wail of Herbert Morrison, “Oh, the humanity!”, as the US economy tanks and takes the rest of the world with it.  The treasury borrowing and uncontrollable spending by Congress will simply add more hydrogen to the fire.

35 of the 97 people on board were killed. Who knows the extent of the harm caused by a global economic collapse?  Will it be the destruction of international commerce, the crippling of capital markets, the unavailability of food, the disappearance of available energy, the lack of medications, police crackdowns on rampaging crowds of people who just want work, food, and housing, government imposed rationing, or new world wars to acquire resources and distract the population.  At least we will know the cause of this explosion.

Our Hindenburg launched Thursday, November 4, 2010.  How long will it fly?  Who knows?  Actuaries will tell you that a probability will happen.  When will it happen is the critical point.  What is the probability of a monetary disaster occurring as a result of massive currency devaluation.  In 4500 hundred years, no government has ever repeatedly inflated and devalued their currency and restored a normal healthy economy successfully.  That puts the likelihood of a failure pretty high.  It’s only a matter of time.

Copyright © 2010, Jim Blandford.  All rights reserved.

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