More Smelly Emissions From Omaha
by ilene - August 19th, 2009 1:05 pm
More Smelly Emissions From Omaha
Courtesy of Karl Denninger at The Market Ticker
One would think that Buffett would be a bit more circumspect when his holdings have benefited so wildly from the fraudfest of the last few years:
The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”
The "gusher" has done no such thing.
As I have repeatedly pointed out (including in the Tickers of the last two days) the transmission mechanism in our monetary system – the "moneyness" of debt transmission and sale – remains broken.
It remains broken because we have refused to prosecute and remove those who have committed fraud from the system, we have refused to force honest marks to be taken on these so-called "assets", and we have refused to clear the system of the bad debt.
We have instead "gushered" newly-issued Federal Debt into the system.
This is similar to someone presenting in the emergency room with a severed femoral artery. By continually injecting huge amounts of blood you can prevent circulatory collapse and the death of the patient.
However, your ability to continue this path of "treatment" is limited by your supply of blood. If you do not repair the severed femoral artery before you run out of blood supply the patient will die.
We have done nothing about the severed femoral artery.
The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.
There’s the draining of the blood bank. How much longer can we continue to draw on what our policy-makers seem to think is an unending credit supply of accumulated reserves in China and Japan?
This much is certain: There is a finite supply,…