Eutanizing the US Economy

The idea behind Keynesian economics is simple: when the government expands the money supply, the value of the existing currency decreases and those holding it are motivated to maximize its buying power by spending it today as opposed to waiting to spend it with diminished buying power tomorrow. In effect, if forces money off the sidelines and into the economy.

The problem with this manipulation, however, is that it does not create capital but simply redistributes it and it cannot control the laws of supply and demand. This can create a lethal combination of wildly fluctuating prices.

We are starting to see the first signs of rapid price increases in commodities like aluminum and resin. Aluminum seems to have developed anti gravity properties as it is up nearly 40% this year in England and 35% in the United States with INCREASING supply and DECREASING demand. Your trip to the grocery store will start looking very different, very soon as these prices begin to be passed on to the consumer through the aluminum in soda cans (and sugar is short supply...good thing they don't use that any more!) to the plastic used in every wrapper or bag in a grocery store.

After more than two years on the sidelines, major players are coming back off the bench like Blackrock which is putting together its largest fund ever and whose CEO is calling for 1,200 in the S&P by year's end. Although the commercial real estate market is cratering, large equity sources are scooping up distressed and even stabilized assets in the middle of the night. This has all happened with in a matter of weeks. In speaking with a commercial real estate professional with almost 30 years of experience, this past August was described as the busiest he has ever seen.

Although most of the signs seem to be pointing towards a crash this fall, a surprise and epic turn upwards should not be counted out. With the total lack of transparency at the Federal Reserve, there is no limit we know of to the amount of paper and zeroes that can be pumped into the system behind closed doors.

What's this, sounding like a bull am I? The bull(sh#%) may be back but the economy is worse than ever, there are no jobs left and we are staring down the barrel of a hyperinflationary cannon with the potential to blow prices sky high. At least in Weimar, there was a limit to how fast they could print the marks. In this era, it takes but a few strokes of the keyboard to create a trillion here or there.

Like the famous race horse Eight Belles that broke two ankles down the stretch, was forced to finish the race and then euthanized just over the finish line...the US economy is being primed for one final run allowing capital to gather and prepare for its flight out of the country.