11/17/13

So, here are a few more notches to my “I told you so” belt…

1. Egypt and Russia
In my blog, “The Syria Debacle and Its Implications,” I wrote (in section 16, it is a long blog), “No power vacuum. It is an established principle in geopolitics that there is no such thing as power vacuum. If the US withdraws, other players come in. In this case, in the Middle East, they are all BAD actors. Be it the Jihadist, the Iranians, or even the Russians.” I specifically mentioned the efforts made by Henry Kissinger to dislodge the USSR (the predecessor to Russia, for those who do not know) from the bear hug they had on the Arab Middle East. Well it did not take long for the Russians to start the effort of trying to replace the US in Egypt. See this article as an example:

2. Crony Capitalism
In my blog “Obama’s Economy,”  in the section titled “Ambivalent Signals” (another long blog), I explained the reason for the record-breaking run of Wall Street and the very disappointing growth numbers and other statistics regarding the recovery in the general economy—Main Street.

I said there that one of the clear effects of big government is the advance of crony capitalism, both in its purest sense and in its less direct manifestations. It is obvious that big government prefers to deal with big companies. Now comes the article from Andrew Huszar in the WSJ of November 12, 2013,  and clearly calls out the fact that the only beneficiaries of the Fed’s QE were the government and Wall Street. To quote him: “we went on a bond-buying spree that was supposed to help Main Street. Instead it was a feast for Wall Street.” Mr. Huszar should know. He managed the Feds’ $1.25 Trillion mortgage buying program until he got disenchanted and left. The thing is that in addition to making Wall Street players rich, the whole QE panoply of programs enabled President Obama’s administration to act recklessly. Not only did it keep interest rates low, but it actually BOUGHT the surplus debt that the government issued that no one was interested in buying. The frightening thing is that the new Fed chairman designee thinks that it is alright to continue to inject $80 Billion a MONTH to the economy, as long as there is no stronger recovery. It is this program that is responsible for the fact that the recovery to-date has been so weak. To quote Albert Einstein as I have done so many times before: “The definition of Insanity: doing the same thing over and over again and expecting different results.” It seems that she has not heard of that.

You cannot cheat market forces forever. The Communists in the USSR found out about it after 70 years of coercion. The Greeks and Spaniards after 10 years of binging. The US will find that out too, sooner or later. The huge amount of money being printed by the Fed will result in an extraordinary increase in interest rates at some stage. The damage created then, and the recession that this will trigger, will pale into insignificance compared to the benefits that we are getting from this QE program now. Especially as those benefits are so minimal.