Real Effect: Harvard Agrees With the Real Effect

Thursday, October 07, 2010

Harvard Agrees With the Real Effect

Good to see that the colleges are getting a Real education by borrowing a page from our book -

Weaker than expected reports on private payrolls and planned layoffs Wednesday refueled expectations the Federal Reserve will soon embark on another round of stimulus, a.k.a. "QE2".

More Fed purchases of financial assets is "good for the bank," says Jeffrey Miron, a Harvard economics professor and a senior fellow at the Cato Institute. "But I don't see it having a very big affect in tricking down in terms of getting more investment, more lending."Miron is among a growing number of economists and market experts who believe the Fed is pushing on the proverbial string, i.e. can't do much to help the "real" economy.

The Real Effect
From the July 21st update U.S. Blows Trillions Trying to Push a String -

...the government is going to have to service this new debt (boulder) with new debt at either a higher amount of debt borrowed or higher rate . Yet, the market is saturated with debt both private and public viciously competing for whatever available liquidity is left. (The wall) In order to succeed in averting further crisis, the boulder needs to be kicked through the wall.

Is this possible? As long as there are gullible willing senior citizens clients to buy ever more debt, the boulder can be exchanged for a bigger one and successfully kicked through the wall.

At some point though, demand for U.S. debt will cease to an extent (2011?) and the bills will come due. At this point the government is going to have to figure out a new trick to take care of the debt fiasco. If that trick is money printing, (hyper-inflation) lookout as everything you think you own will suddenly belong to some man down the road named Chen.

Now,we didn't even have to make it to 2011 for the demand of US Treasuries to fall of dramatically. Once the European smokescreen subsided, the dollar crashed and the Fed became the buyer of last resort effectively monetizing the debt.

But wait, what's that!?! Is Greece on fire again!?

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