Wednesday, October 27, 2010

New bubbles for old 

Robert Reich comments on the latest round of 'Stimulation' in the USA and sounds a warning.

He says:

The latest jobs bill coming out of Washington isn’t really a bill at all, it’s the Fed’s attempt to keep long-term interest rates low by pumping even more money into the economy (“quantitative easing” in Fed-speak).......

Problem is, it won’t work....

So where will the easy money go? Into another stock-market bubble.

It’s already started. Stocks are up even though the rest of the economy is still down because money is already so cheap. Bondholders (who can’t get much of any return from their loans) are shifting their portfolios into stocks. Companies are buying back more shares of their own stock. And Wall Street is making more bets in the stock market with money it can borrow at almost zero percent interest.

When our elected representatives can’t and won’t come up with a real jobs program, the Fed feels pressed to come up with a fake one that blows another financial bubble. And we know what happens when financial bubbles get too big.

Might be worth keeping an eye on any similar tendencies in UK markets?

This is on Reich's blog linked to Guernica online magazine

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I agree completely with Reich on this. I also don't have any answers. I know what has to be done(LOTS more 'manual' half/decently-paying jobs NOT funded by the State). I just don't know how to get from here to there. That's unfortunate.

Evidently however, no-one anywhere, know how to do that little thingy, That's not just unfortunate --- that's disastrous in the long-term.
And it's not because the Coalition is 'wrong'. It isn't. It's policies are,imao, the right(ONLY) ones to pursue. It's that the underlying structure is flawed and is now making the whole edifice wobbly.
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