They say "silence is golden." So could someone please tell Mr. Paulson and Mr. Bernanke to stop trying to explain how all their actions are designed to help the economy out of the current slump? Every time they speak the market drops like a lead weight. They should just stop talking.
After lengthy speeches by the Fed chairman and the treasury secretary today the markets, after five straight days of gains, lost almost 680 points. Is it the direct result of the complicated comments from the Fed or the disjointed stuttering of the treasury secretary? I don't know. But it happens every time these fellows try to convince us and the markets they are doing their best to fix the problems.
Depending on which numbers you use, the government has committed $4 trillion to $7 trillion of our future tax revenues to fix the ills of the system. Trillions to address the risk of a systemic collapse and trillions to ignite future economic growth. Their monetary policy is firmly in place so there is no need for further explanation.
Now is the time for the government to share with the public the fiscal policy that will follow. Just what is the plan, on behalf of the government, to spend all this money they have created to save the world? Will we just load up helicopters and rain it down on the masses in large areas with dense populations? Is the government going to hire everyone who is unemployed? How about roads and bridges?
Whatever that policy is, would someone please get Mr. Paulson and Mr. Bernanke to stop talking? Their talk is killing the ability of the markets to work. Allow Congress or the White House to speak but please no more Paulson or Bernanke.
At the end of Mr. Paulson's comments today the DOW was down 518 points.
Within 20 minutes it went down another 161 points. I am not sure how
many more press conferences the market can bear. Mr. Paulson is a fine man
who loves his country. But clearly the time has come to let his work speak
for itself.
Currently we are in a deflationary loop that will not be broken until the lending resumes. Trillions of dollars have been created out of thin air but inflation is of no concern until the banks release the money into the system.
The banks will refuse to re-enter the market until they know the rules and are assured those rules will not change. When the banks start lending again we can expect inflation to do what it always does. Our cost of living will increase as the newly printed dollars are flushed into the system by renewed borrowing. Home values, gasoline, food, clothing and you name it will start to increase in value as the dollar decreases in value.
Our system is designed to run a bit of inflation. Given the choice would most American prefer $5 per gallon gas and the equity lost in their home restored or $2 per gallon gas and 30 percent of your home value evaporating? How about the 401K value you lost? Inflation would be welcomed now given the damage deflation is causing.
A brief peek at a chart of the U.S. dollar since 1971 will reinforce the cold hard fact that the long-term prospects of a weaker dollar are all but a certainty. The creation of trillions of new dollars once again will resume the deterioration of the once strongest currency in the world.
This is why many like Jim Rogers are looking clearly to short the dollar knowing this short-term strength we have witnessed in the dollar will be a very short-lived phenomenon in the long-term future of the dollar. There is no doubt dollars will ultimately go lower. There even has been talk about the dollar losing its position as the reserve currency of the world.
But until then I wish, I hope and I pray Mr. Paulson and Mr. Bernanke will stop talking. I beg them. Let the markets go for 30 days without a daily dose of bureaucratic wisdom and let's see what happens. For that is the only process that hasn't been tried to date. Maybe it is time we gave it a try.