Once the contagion starts spreading, loose money won’t put the fires out.
As the nation’s political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: “If money doesn’t loosen up, this sucker will go down.
“Eleven years into the loose money recovery, this sucker is finally going down for reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.
We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural problems–unsupportable pensions and entitlements, unsustainable dependence on debt to fund everything from infrastructure to a new iPhone, a sickcare system that is bankrupting the nation, a higher education system that is looting an entire generation for diplomas with marginal market value, a runaway National Security State that burns trillions on unwinnable wars and lies about it–are left untouched because they’re, well, difficult, and it’s so much easier to say that looser money will solve everything.
Alas, loose money has created a new set of metastasizing problems that will bring this sucker down: widening wealth-income inequality, the only possible result of our system of creating and distributing new money to banks, financiers and corporations; soaring systemic leverage that few see, much less understand; and perhaps most perverse, yet equally unnoticed, loose money has widened the gap between the real economy and the top layer of arcane finance to the point there is literally no connection at all.
The happy story about debt-dependent capitalism is that thriving companies borrow money from our wunnerful banks to invest in new factories, research, software development, etc., hiring millions of top-notch people–top-notch!–at generous salaries to boost productivity and make the entire nation wealthier.
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