Future historians will mark today as the most important turning point in the financial history of the United States since the Great Crash of 1929.
This is the day that marks the beginning of the end. Today's announcement of the conservatorship of Fannie Mae and Freddie Mac is the beginning of the end of several very important things . . .
. . . the end of the post-World War II financial system
. . . the end of the U.S. dollar's hegemony as the world's reserve currency
. . . the end of short-term U.S. Treasury debt as the ultimate safe haven for global finance
. . . the end of the United States as the world's sole superpower.
All of these things must now come to an end because the assumption of Phoney and Fraudie's financial obligations will require the U.S. government to issue massive amounts of new debt to supply these GSEs with enough capital to stay afloat. The new debt will need to be issued at much higher interest rates than the 4% or so currently available on 10year T-bonds, just to make it attractive to foreign central banks already loaded to the gills with GSE debt. With Helicopter Ben unwilling to raise the Fed funds rate, the yield curve will quickly steepen.
This new debt is eventually going to be inflated away by Helicopter Ben's printing presses. Mark my words.
Hello, massive infation. Goodbye, U.S. dollar hegemony.
Secretary Paulson will have to fire his bazooka after all, and its backblast will blow the U.S. economy out of the water.
This is the day that marks the beginning of the end. Today's announcement of the conservatorship of Fannie Mae and Freddie Mac is the beginning of the end of several very important things . . .
. . . the end of the post-World War II financial system
. . . the end of the U.S. dollar's hegemony as the world's reserve currency
. . . the end of short-term U.S. Treasury debt as the ultimate safe haven for global finance
. . . the end of the United States as the world's sole superpower.
All of these things must now come to an end because the assumption of Phoney and Fraudie's financial obligations will require the U.S. government to issue massive amounts of new debt to supply these GSEs with enough capital to stay afloat. The new debt will need to be issued at much higher interest rates than the 4% or so currently available on 10year T-bonds, just to make it attractive to foreign central banks already loaded to the gills with GSE debt. With Helicopter Ben unwilling to raise the Fed funds rate, the yield curve will quickly steepen.
This new debt is eventually going to be inflated away by Helicopter Ben's printing presses. Mark my words.
Hello, massive infation. Goodbye, U.S. dollar hegemony.
Secretary Paulson will have to fire his bazooka after all, and its backblast will blow the U.S. economy out of the water.
