To keep their economies afloat, Central bankers, at their annual meeting in Jackson Hole, once again committed to continue or increase the supply of cheap money. However, some of them are starting to recognize that the outcome of their efforts is increasingly uncertain; perhaps some of them realize deep-down that they can do little more than make rich people even richer for a little while longer. They wait in vain for a dazed public and zonked out politicians to do what it takes to restore healthy economies and fiscally sound governments, while continuing to supply them their drugs of choice.
Cheap credit and abundant money are drugs, and we are long since addicted; requiring ever larger doses just to maintain a semblance of normalcy. However, these drugs don’t produce real economic health, rather they create a set of winners and a compensating set of losers; just as drugs make pushers winners and addicts losers. The winners include creditor nations like China and those executives who use their bloated compensations to loot the resources (real and imagined) of behemoth banks and corporations. The losers in our country include private and public pension funds, those with credit card debts and those retired who live off their savings. For the past decade, the losers have had to choose among three unpleasant alternatives: invest in riskier alternatives like the stock market or corporate bonds, demand more capital from current wage earners or face bankruptcy. Pension funds are increasingly, almost precipitously underfunded, and every year more retirees exhaust their savings because of low interest rates or risks that failed.
The winners are organized and effectively represented by well greased media pundits, politicians, lobbyists and wealthy want-to-bes. The losers are more disparate and suffer in relative silence.
We won’t be healthy until we get off this addiction. Since we haven’t the stomach to go through withdrawal, it looks like we’re choosing to stagger into the future addicted to cheap money, eventually to freeze in a blizzard of hyperinflation. At least the winners, warmed by piles of stagnant money, will feel good until the end. The losers are already hurting.
The problem, dear reader, is not in our Feds, but in ourselves that we are addicts. (To fracture Shakespeare for a second time)
Ed Lee
