Many Obama supporters are currently crowing over the fact that the unemployment rate has decreased, but as usual, they’re not looking at the bigger picture:
The U.S. recovery is little more than an economic ‘sugar rush’
Liam Halligan @ the UK Telegraph
The recent growth-burst is built on monetary and fiscal policies which are wildly expansionary, wholly unsustainable and will surely soon come to an end. When the sugar-rush is over, and it won’t be long, the US will end up with a serious economic headache. Investors should keep that in mind.
In the immediate aftermath of “sub-prime”, QE helped a wide variety of financial institutions to avoid facing up to their losses, covertly recapitalizing Western banks that were, to all intents and purposes, insolvent. For a while, the rest of the world put up with it.
Now America is being blamed, rightly, for artificially depressing the dollar, so unfairly boosting US exports at the expense of those from elsewhere. At the same time, a lower greenback cuts the real value of the huge debts that America owes overseas creditors – not least the Chinese.
That’s why the Fed must surely call it a day when the current round of QE is due to expire at the end of June. Yes – American price pressures are ticking-up, with long-term inflation expectations as measured by the University of Michigan’s respected consumer survey rising from 2.8pc in December to 3.2pc in March. But mere domestic inflation won’t stop the Fed’s political masters from ordering more money-printing.
The only currency the White House understands is power politics – and Beijing is turning the thumb screws. Xia Bin, a long-standing adviser to China’s Central Bank, recently referred to the unbridled printing of dollars as “the biggest risk” to the global economy. “As long as the world exercises no restraint in issuing dollars,” he wrote, “then the occurrence of another crisis is inevitable”.
Were it to happen, another round of money-printing – QE3 – would cause a major diplomatic protest led by countries America cannot afford to upset.
Aren’t leftists supposed to care about what’s going on internationally?