- Created on Tuesday, 18 December 2012 16:55
- Published on Tuesday, 18 December 2012 16:55
- Written by Bill Bonner, Chairman, Bonner and Partners
- Hits: 1790
Here's the front-page story from the Dec. 12 edition of the International Herald Tribune. It's about Kosovo, which is selling off its telecom system:
One bid is from a fund founded by former U.S. Secretary of State Madeleine K. Albright. Lobbying for another was James W. Pardew, the U.S. special envoy to the Balkans in Bill Clinton's presidency.
Zombies never retire. In "public service" or in the "private sector" they are always working for themselves... trying to secure a special privilege... a break... a freebie... an edge.
And now they've got the world's most powerful central bank - not to mention others - in their corner.
The Fed is printing up $85 billion each month. What will happen to all this new cash? Will it go to people trying to make ends meet? To teachers... taxi drivers... and cable guys?
Nah... It will go to the zombies. The well-connected zombies, like Pardew and Albright.
The Bigger the Better
Well, OK. We'll spell it out...
You want to start a business? You need $100,000... $500,000? You'll be lucky if you can find a bank to lend you a dime.
Why? Because there's a good chance you won't pay it back.
The big lenders prefer better deals... bigger deals... and deals with plenty of upside.
Like a telecom deal, for example.
The Fed is now printing up $85 billion a month to buy securities - U.S. Treasury debt and agency mortgage-backed securities.
This keeps interest rates on loans ultra-low. Take away this source of nearly free financing and many of these fat deals lose their juice.
Then, instead forecasting a 14,000 Dow or even a 16,000 Dow for next year, traders would be expecting the Dow to drop under 10,000.
Then the rich wouldn't be so fat and sassy. The zombies wouldn't be so well fed either. (We can prove it... Stay tuned until tomorrow!)
The Strange Story of Leszek Balcerowicz
Is there a central banker in the entire world who isn't a zombie-enabling, semi-delusional incompetent?
The answer, according to The Wall Street Journal, is YES!
What's the secret?
Well, it helps if you grew up in a Soviet-style country. Then you'd have a clearer idea of what central planning can do for an economy.
Which is why one Mr. Leszek Balcerowicz is way ahead of the Bernankes, Kings, Draghis and Fischers of this world.
Balcerowicz was born in Poland 65 years ago. He got a doctorate in economics, but not from MIT. And he got to see... as a member of the Polish communist party... how central planning really works. Then when Poland turned away from communism, he led the transition team with a cold-turkey plan that forced the country down the capitalist road quickly.
When the financial crisis shook the world in 2008, Balcerowicz took charge again. In the 1990s, he had pushed through a law imposing a debt ceiling. So when the crisis hit, Poland was not weakened by debt, unlike so many other European countries. (Partly as a result, Poland dodged recession and has been Europe's strongest economy ever since.)
What does Balcerowicz think of his peers at the Bank of Bernanke? All we know is what he told the WSJ.
They're in "uncharted waters," he remarked. And "while the benefits of non-conventional [monetary] policies are short lived, the costs grow with time. The longer you practice these sorts of policies, the more difficult it is to exit."
Of course, neither the Fed nor most economists are worried. They look at ultra-low interest rates. The U.S. has no financing problem, they explain. So, why sweat it?
Balcerowicz knows why...
"They can maintain large deficits at low current rates. [They] can just refinance their loans [...] get a lot of cheap financing to finance bad policies [...] dangerous to the world and perhaps dangerous to the U.S."
He didn't mention zombies. So we will plug the hole...
The Fed is financing zombies. Zombie banks. Zombie industries. Zombie companies. Zombie investments. A zombie government with zombie employees. Little ones. Big ones. Short ones. Tall ones. Smart ones. Dumb ones. All determined to live at someone else's expense.
The more live flesh the Fed feeds them, the more zombies we have... and the harder it will be to return to an honest, productive economy.
How will it end?
Badly. Ask Balcerowicz.
Editor's Note: Is President Obama Ignoring This Crisis?
One disturbing, little-known law is about to turn America on its ear.
A best-selling author says it will cause the biggest stock market crash in history.
Yet the Obama Administration hasn't mentioned a single word about it to the American public.
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