The Great Recession has offered the perfect occasion to witness the phenomenon, a financial crisis which specifically kicked off amidst 150 dollar oil in 2008. Instead of advising the President that the country faced debt-deflation, with a nasty overlay of high commodity costs, the White House economic team has drawn from the post-war playbook which holds that if you stimulate the economy generally then the system will magically reorganize itself. Well, that hasn’t happened and it’s not going to happen.[/quote]
Which is why QE3 will only make matters worse.
They are trying to solve a liquidity crisis, when what we have is a solvency crisis. There is TOO MUCH MONEY sloshing around the system, but it’s in the hands of those at the top…those who are already wealthy, and looking to get wealthier. They are competing on the demand side with true end users of the assets and commodities that they are “investing” in, because they fear inflation. This is even worse than what would have happened if the central banks had refrained from pumping so much money, rather indiscriminately, into the financial sector.
