Free Money!

No, not from the Nigerian Royal Family.  Or a lottery win from a soldier overseas.  No siree.  But, I would argue, a scam just the same.

The “free money” is courtesy of the printing presses of the Federal Reserve.  And the consequences of the uncontrolled flood of dollars into the world economies, especially the so-called “BRICs”, has not been good, and is about to get worse.  The Telegraph explains.

The Fed has a duty of care to emerging markets, since its own hands are hardly clean. Zero rates and quantitative easing were the cause of dollar liquidity flooding these countries. It was the biggest reason why net capitals flows into emerging markets doubled from $4 trillion to $8 trillion after 2008, much of it wasted in a late cycle blow-off.

Yes, China, Brazil, India and others handled the liquidity bath badly. They ramped up credit without generating much worthwhile growth.

The Federal Reserve’s monetary policy of printing currency is a major player in the destabilizing of large but immature markets that relied almost solely on labor competitiveness for their seeming economic explosion.  With that all but gone, and profligate borrowing because of artificially available cash ratcheting up debt in significant emerging economies, stand by for heavy swells.

 

2 thoughts on “Free Money!”

  1. I’m afraid we will be extremely lucky to get only heavy swells. There is a huge malinvestment and currency bubble to blow off and that’s going to determine how serious things become. The last time we had anything approaching what we have now we got the depression of ’29-’41.

    1. Well that depression would probably have been over by ’36 if we didn’t have a progressive President dead set on mucking things up. It’s a good thing we avoided that this…aw, CRAP.

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