The U. S. economy is abysmal. It can’t expand fast enough to keep up with the pace of young adults entering the workforce. The housing market is shot, with average home prices at the same level they were in 2003. Our nation’s debt is reaching banana republic levels, with welfare, social security, and unemployment rolls at record levels. If you only paid attention to the stock market, you’d think we were in a recovery and have nothing to worry about.
Thanks to the Federal Reserve’s “quantitative easing” programs and low interest rates, the stock market has been on a sugar-high since 2008. The Wall Street meltdown of 2008 led to QE1, QE2, and now the worst idea yet: QE Unlimited. With QE Unlimited, the Fed will buy up $85 billion in assets every month, essentially creating more money out of thin air.
Wall Street loves it when the Fed prints more money. Federal Reserve Chairman Ben Bernanke can call a press conference, and stock prices shoot up in anticipation of a new injection of cash.
But there’s a price to be paid, by the public, for all this irresponsible behavior. It will come in the form of out-of-control inflation. Already, we are seeing the results of the Fed’s market manipulation. If you go to the supermarket on a regular basis, you’ve watched as prices have shot up at a pace we haven’t seen in decades. Cereal boxes are so thin, they barely stand up on the shelf, but the Fed says inflation is under control.
With Main Street struggling to make ends meet, it’s only a matter of time before the pain catches up to Wall Street, causing a correction that will rival the Crash of 1929. Many savvy investors know this, which is why gold prices continue to rise. With gold being the classic hedge against inflation, it’s a great indicator of a stock market bubble.
It’s hard to say when the bubble will finally burst. With the Fed flooding the market with cheap money, we could limp along for another year. The scourge of inflation and higher taxes will eventually bring the house of cards tumbling down on us. The saddest part is the fact that the middle and lower classes will be hurt the most when it happens.
Why won’t the government just let the market correct itself? Elections. Politicians only care about one thing; Staying in power. By kicking the economic can down the road, they can fool the sheeple into thinking everything will be fine. Creating more fiat currency also enables them to buy more votes, thus creating a cycle that must continue in order to make interest payments on the national debt. Both political parties are guilty of this sin against future generations.
By putting off the pain of a market correction and bailing out “too big to fail” institutions, we’ve only made a bad situation much worse. When the pain finally comes, and it will, the shockwave will be felt around the world. Wall Street and Main Street will finally mirror one another, and the public will finally be forced to face the bitter truth about the shape of our economy. Only then can a true recovery begin.
How long do you think we have? Feel free to leave a comment.