As all of you know by now, I’ve been calling checkmate on the US Fed for 7 months now. In fact, I think it’s safe to call checkmate right now and it appears the folks over at Barclay‘s and RBS would agree.
As such, I’m now making another call – Big Ben’s days are numbered. To be fair, he didn’t have a chance. He inherited a pretty perilous credit/sub-prime situation that required forced him to keep rates low despite watching the inflation train coming right at him. I say “forced” for two reasons:
- White House pressure from an administration that didn’t want to see epidemic foreclosure and subsequent homeless rates;
- Wall Street pressure from a parade of bankers on CNBC that demanded lower and lower interest rates to save their hides.
Now, he has an inflation problem to add to the housing/credit/banking crisis that he could not solve despite super human efforts. Inevitably, one or both of these dominoes are going to tumble (no, they haven’t tumbled yet) and everyone is going to point the finger at Ben.
He won’t completely deserve it – but somebody has to take the blame. Ben will be replaced by the next US President.
Regards,
George
p.s. Gold closed at $941 today, with a high of $947.
A.M. thanks for the comments. Yep, most people will agree that continuing to drop rates only served to delay the inevitable. Bad borrowers are bad borrowers at just about any interest level. It would have been best to let the real estate market crash and naturally re-build. Remember, a crash isn’t so bad as people get a chance to buy homes at cheap rates….but that would have taken a lot of guts and I’m not sure the White House would have allowed him to do so.
In the meantime, he kept fanning the inflation flames and now he has another problem on his hands.
Regards,
George
I agree that while the situation he walked into wasn’t the most fruitful or prospective, he still made a couple of costly decisions:
I think his most costly move (or lack thereof) is his unwillingness (or lack of ability) to try to reverse the credit crunch. By keeping credit out on the market I feel he has added to the American Epidemic at the moment rather than trying to put a stop to it.