Charles Hugh Smith: Taking Away the Punchbowl

06-03-2011 • OfTwoMinds.com/blog

As long as the Treasury can borrow money this cheaply, there is no visible limit to how much the Federal machine can borrow. And Wall Street likes it that way--a lot. If you read between the lines of this story-- Moody's sounds alarm over U.S. debt limit and deficits, then you see what correspondent Kevin M. observed when he sent the link to me: This underscores your point about the unholy alliance between Washington and Wall Street. On the surface, one might expect Wall Street to be in opposition to federal borrowing because it crowds out investment in private offerings, like stocks. But clearly Wall Street has abandoned it's traditional view of business and the economy, and is now pinning it's hopes entirely on government liquidity. This is truly scary. The force of interests pulling in opposing directions has always served to bring balance to the economy. That no longer exists, as if all of the forces are crowding on the same side of a sinking ship. In effect, the income which should flow to savers and owners of surplus capital in an economy that isn't centrally managed (a.k.a. the People's Republic of America, complete with A Natural Security Apparatus, unaccountable Central Bank, kangaroo-court judicial system (just look at ForeclosureGate) and phony elections where the choice is always between hand-picked stooges of the Ruling Elite) is diverted to Wall Street and the "too big to fail" banks. The one thing uniting the nation is dependence on the Federal punchbowl. But as I noted yesterday ( Can We Please Stop Pretending the GDP Is "Growing"?), there is a unique dynamic to this "recovery"--Federal deficit spending just keeps rising as the economy "recovers."