As the Czar can attest, I've long been a proponent of some radical central bank moves. I believe the Fed should continue doing what their doing, printing money at full capacity! Although I differ with the denominations we're printing, instead of 1's, 5's, and 10's, I think we should be printing 100's, and we need to bring back the Cleveland (that'd be 1,000 for all the youngsters out there) and print copious quantities of those.
But what should we do with all that fresh currency? Send it to China of course, in exchange for their T-bills, notes, and bonds. As much as I love the austerity measures the Europeans are currently implementing, it's not for me. I don't like high taxes (although I'm willing if we must such as times of war, or perhaps for a good cause), and I really could care less if we have a strong currency, in fact, I'd prefer a weak one. China currently has a currency that has been projected to be 40% over-valued. So by debasing the dollar, we'd really just be leveling the playing field with our Malthusian-limited brethren to the east.
I do not normally use this space as a soapbox, but there seems to be some recent traction to these ideas, so I thought I'd speak up and ride the wave. Bill Gross (CEO of bond giant PIMCo) seems to be of similar mindset when he stated:
"Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates."
Rationally from his view, this is a bad thing, after all he manages billions of bonds. But I view it as a good thing, a bastardized cleansing of our national balance sheet, a way to start fresh in a way only the money-producing agency could do. Some ancillary benefits of this debasement:
1) Reduction in the real value of our national debt to a more manageable nominal value
2) Rapid inflation of the currency would cause the long-term fixed rate securities currently underwater to turn around, making mortgage payments more manageable for America's families, i.e. BUY LAND!!! But only if you can acquire a 30-year fixed note for less than 5%, notice I did not say homes, BUY LAND!!!(agricultural land)
3) Levels the playing field. America's wealthy have become too powerful, it's time for the proletariat to monetarily rise, or the bourgeois to comparatively fall, this would create new opportunities for the masses, hopefully. . . and
4) Our nations youth that is over-burdened by student debt would see a similar reduction in the real value of their payments (this effect is the one I care least about)
In order to prepare to the impending debasement and accompanying inflation, PIMCo has been “selling Treasuries because they have little value within the context of a $75 trillion total debt burden.” If this $75trillion comes as a shock to you, it is the (PIMCo Calculated) sum of the explicit and implicit federal government obligations. Some items this includes that you may not know about: Our implicit backing of Fannie and Freddie, Our explicit responsibilities to our underfunded entitlement systems, and many other items such as agency debt.
Anywho, I'll step off the soapbox now. Soon I'll blog about my spring break, I traveled, it was fun.
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