11.01.2008 0

Reaping the Whirlwind

  • On: 11/26/2008 10:45:20
  • In: Economy
  • By Robert Romano

    “The worst is yet to come.”Olivier Blanchard, International Monetary Fund Chief Economist, referring to the state of the global economy.

    The central planners have created a monster—by design—fully intended to destroy individual initiative and to replace free markets with social engineering. In recent months, they have progressed handsomely towards creating a centralized society wholly dependent upon the state. Only, like the mad scientists in the movies old, these social-engineers may not fully realize what manner of monster they have created.

    The fact is, already the monster is out of control. It cannot be tamed. And it may be unstoppable. It is the rapacious, voracious beast of unbridled inflation. And soon it will reassert itself upon markets, wreaking global havoc and leaving economic ruin in its wake.

    To be certain, the current miasma was created by government, as ALG News has previously reported. The Federal Reserve kept interest rates too low for too long; governments the world over lent out too much money at too high a risk. Congress nationalized the mortgage industry and made cheap credit a matter of national policy. It socialized all risk in the economy with the advent of the Troubled Asset Relief Program. And it then appointed the Treasury Secretary to the command-and-control task of propping up the house-of-cards industries of finance.

    All were problems created by government. And now, as the problems deepen, the government conveniently shows up to bail everyone out. And create dependency. But as the crises multiply, the monster is ineluctably transmogrifying into even more than the central planners really had hoped for. To be sure, central control over the economy was always the goal. But at what price?

    In short, like the apocryphal America general in Vietnam, the central planners may well have “destroyed the village in order to save it.”

    It has been predicted by many that the warning signs of the current economic Armageddon would be global asset price deflation. And clearly it is here (though the worst is yet to come). Home values are still reaching their nadir, the value of the stock markets around the world has seemingly disintegrated, and even global commodity prices precipitously falling from historic highs.

    So predictably, the central planners sense their opportunity to seize power. As Rahm Emanuel recently stated, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” Only, in the process, they inherit ownership of the crisis. Come January, Barack Obama will be President of the United States, and as ALG News reported yesterday, he will be installing yet more central planners into key economic posts.

    Should the economy continue to worsen in spite of everything government has thrown at it—some $7 trillion in taxpayer bailouts—Big Government owns it. And it will continue to finance it at taxpayer expense. There is a sky-high expectation on the part of central planners that governments, through deficit spending, can ease the impact of a recession. But, if as Mr. Blanchard predicts, “the worst is yet to come,” Big Government will have failed to provide the cushion it promised would dull the crash.

    More and more, as the crisis deepens, the perception will come to fruition that it was government that caused this crisis, failed to prevent it, and once it hit, failed to resolve it through the application of free market and sound money principles. In short, they sowed the wind, and they will invariably reap the whirlwind.

    Yes, the central planners will have worked their will by squandering what remains of the people’s wealth. And like the pale rider, “hell will follow after it.”

    The result of Big Government’s massive bailouts, and the deficit-spending and borrowing that is financing them—and those of 2009 should the Obama administration continue down the dead-end road to serfdom—will eventually be out-of-control inflation. The likes of which have not been seen in decades.

    And it will come right at the moment where the financial crisis appears to have abated. Right at the moment when economic growth appears to be reasserting itself. It will come at a moment when it is least expected by most. Many, perhaps, will even have credited the new President with saving the economy, and the world will ostensibly prosper.

    But then the truth will be revealed—when prices start to sky-rocket.

    This monster that has been created will eventually show the full force of its ugly face. And only then will the central planners see the abomination they have spawned took the economy from the precipice of disaster to the depths of the Abyss.

    Robert Romano is the Editor of ALG News Bureau.

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