German Chancellor Merkel spoke out against the policy of the Central Banks of the United States (Federal Reserve), Great Britain and the EU. When a German Chancellor speaks out against the policies of the Central Banks of the world we would be wise to listen.
Aides say Ms Merkel’s concern about the expanding remits of the Fed and the Bank of England is genuine. She does not blame the implosion of the subprime mortgage market for the economic crisis. She does not see securitisation as the culprit. Rather, she thinks the loosening of monetary policy under Alan Greenspan’s Fed chairmanship fuelled the creation of asset price bubbles and encouraged excessive leverage within and beyond the financial sector.
This risky policy, she thinks, was supported by a US government that also rejected any calls – including from Germany when Berlin was chairing the Group of Eight industrial nations in 2007 – for tighter regulation of financial markets. Ms Merkel "sees the huge amounts of liquidity being pumped into financial systems with some concern. She is worried that some of the unconventional action being deployed by central banks cannot be easily reversed," says one confidant. "We do not want to be fuelling a new bubble. Another crisis like this one and the west will be wiped out." FT.com / UK – Merkel makes a mark
Why is she so worried about loosening of the monetary policy under the Fed? INFLATION! The Germans have an intimate knowledge of what happens when inflation ravages a country.
The Feds actions are driven by exactly the same sort of short range thinking that has destroyed specific sectors of the US economy. GM signs a labor agreement 50 years ago because they didnt wonder what might happen down the road if they had some rough spots. And now a 100 year old company is taken over by the Government. Short Range Thinking will be the death of us.
Sometimes you simply have to accept some pain to avoid the death blow. GM should have said no then and dealt with the inevitable strikes then and they would be alive now. We should have never allowed the Government to remove the shackles we had around it in the form of our currency being backed by gold. At the point we allowed that, it was irresistible that the Government would inflate its way out of debts and one day destroy this country. We as a people demanded more and more from the Government and corrupt politicians who knew better were more than willing to give it to us. We demanded that taxes NOT be raised and corrupt politicians were only too willing to not raise taxes. Well now the butchers bill has come due.
There is no free lunch.
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