November 16, 2010

Obama's Nixon Gambit Will Fail

By Christopher Chantrill
Barack Obama will soon discover that printing money to stimulate the economy won't work for him as well it did for Richard Nixon, with disastrous results for America and his reelection chances. There are two reasons for the Federal Reserve's decisions to print lots of money. The good reason is that the real estate crash still hasn't cleared. That is, too many mortgaged homeowners are still underwater, and the real estate estate market is all locked up with a huge overhang of foreclosures. When too many debtors are under water and can't make their payments, the economy is going to stagnate.  People like to make this complicated, but it isn't. Capitalism works on credit. Credit means faith -- faith that the other guy can meet his obligations in the market. When you are afraid that the other guy is going to stiff you, then you stop trading in the market.The bad reason for the Fed's QE2 policy is that President Obama needs a good economy when he goes to the voters in 2012. When bad...(Read Full Article)