I've been concerned for some time about the huge US gubmnt deficits and the huge monetization of their debt that the Fed is carrying out via "quantitative easing" [a euphemism for having the Fed buy up gubmnt debt]. Here, via reader MA is someone else who shares these concerns.
The trouble with this latest US recovery is that it amounts to little more than an economic “sugar-rush”. The recent growth-burst is built on monetary and fiscal policies which are wildly expansionary, wholly unsustainable and will surely soon come to an end. When the sugar-rush is over, and it won’t be long, the US will end up with a serious economic headache. Investors should keep that in mind.
.... It is undeniable ... that the latest wave of euphoria to have spread across corporate America, and into the echo chamber that is Wall Street, is ultimately based on quantitative easing and a series of unaffordable tax cuts.
It seems likely the Fed will fully implement QE2 – the latest $600bn bout of money-printing - following the $1,700bn programme already completed. This is in spite of protests from countries as diverse as Thailand, Australia, South Africa and China, all of them complaining that America’s unprecedented monetary expansion is causing dangerous bubbles in markets going way beyond US equities.
... Global investors are increasingly wondering what happens when the money printing stops and those debt service costs rise. More and more interest is being shown in the fact that America’s total sovereign liabilities, including off-balance sheet items such as Medicare and Medicaid, amount to $75,000bn – no less than five times’ annual GDP.
Very disconcerting stuff!