These are the kinds of days that the stock market can make you scratch your head. The news is overwhelmingly negative. Yet the DJIA headed higher by 104 points.
There is so much to say about today’s news. I’d love to hit it all but don’t want to get lost. Today, I start and stay here, on a nerve, with these two Wall Street Journal headlines:
Fed Wants to Bet the House, Again (10/22/2011), and
Home Lending Revamp Planned (10/24/2011)
Let's take them in order.
When the US government took-over Fannie Mae and Freddie Mac in 2008 they assumed a lot of debt, asset-backed securities – and title to approximately $6 trillion of American land.
Land – God isn’t making any more of it.
In the wake of the 2008 "financial crisis", the Federal Reserve responded with a tactic called "quantitative easing" – the process of printing new money to buy back outstanding debts. Since the "crisis," the Fed has purchased an additional $2 trillion of mortgage debt – also backed by titles in American land. Unlike the Louisiana Purchase, these land grabs (amounting thus far to $8 trillion) have been conducted covertly and under guise of proper monetary and fiscal policy. Nothing could be further from the truth.
And now they’re thinking about doing it again.
As I write this piece the Federal Reserve is contemplating more "quantitative" action in hopes that it will lead to lower interest rates and thus help the struggling housing market.
Are they kidding?
High interest rates are not the reason for the troubled housing market. Interest rates are already at historic lows and still money isn’t moving and banks aren’t lending. Fractional changes in interest rates from here cannot be expected to produce the viable, long term economic growth required to correct the unemployment situation.
FYI: The only way to fix the housing market is to fix unemployment. Money games can’t do it – and the Fed knows it. But again, that’s really not what they’re trying to do.
Instead, with this monetary action, the Fed will print more money to acquire more American land in which to use as collateral in order to borrow more foreign currency (i.e. from China.) In other words, they’re taking our land to leverage it in the world marketplace to obtain more capital – to spend beyond their means.
Doesn’t this all sound quite familiar – say like, the "subprime mortgage crisis"? Is it me – or doesn’t this seem like déjà vu all over again?
Like its predecessors, this money game won’t work either. Besides, America doesn’t need more debt, a third mortgage, more inflation, and a weaker currency. Printing more money will do just that.
Today, in a very appropriate place to launch another shell game, President Obama unveiled his new solution to the housing market fiasco in Las Vegas, Nevada. It, like the Federal Reserve plans mentioned previously, is incompetent, unappealing, and too small in thought. In fact, one Goldman Sachs economist projects that the President’s new housing plan could generate a mere $24 billion of additional economic activity (a.k.a. spending.) Again – who cares!
Twenty-four billion isn’t a fly on a multi-trillion dollar elephant’s ass – and that’s exactly what America has right now. A few billion won’t change a thing. Listen, sooner or later we have to stop these people (US governance) from taking our money and stealing our land with a devalued currency. This is getting ridiculous.
It appears that not only is it time to: Lose Your Broker Not Your Money – but also time to: Lose Your Politician Not Your Independence.
There’s more to talk about – and all of it is bad for investors. Stay tuned…