Zimbabwe Economics Formally Adopted; Unintended Consequences

“Poetry comes nearer to vital truth than history.” ~ Plato

“Ben Bernanke is going to buy $40 billion of MBS until the job market starts to improve”

I’m sorry, what’s the relationship?

Bernanke announces the expected QE infinity, albeit earlier than I thought. It’s limitless because Bernanke is linking the amount of printing to unemployment rates, but printing money does not create jobs. Otherwise, Zimbabwe would have had full unemployment, same with Brazil, Turkey, or….the Roman Empire

The implications are pretty clear; it’s good for stocks, real estate, and any non-faith based asset, regardless of how the real economy performs.

“Ben Bernanke anoints Obama President” ~ Obama up 11% on Intrade to 65%

Let’s move beyond the obvious and start thinking about other consequences.

 The IMF says each 10% rise in food prices doubles the rate of social unrest in low income countries.  Among high risk countries, Iran, Saudi Arabia, and China would have the most immediate risk for financial markets.

We should also watch for retaliation from foreign governments, either in the form of trade sanctions, and once credit bubbles in emerging markets burst, competitive devaluation.

Long term, misallocations of capital and bubbles are a given of course. The stock market is my bet for another bubble, since this is what the planners want, just like they wanted and got a real estate bubble to replace the internet bubble.

The Fed’s inflation expectations indicator remains subdued 5/5 YR Breakevens ~ twitter

Gold prices say something much different about inflation expectations

China:

Shadow Bankers Vanishing Leave China Victims Seeing Scam ~ Bloomberg

Patrick Chovanec: China’s Solyndra Economy ~ WSJ -

The administration and its supporters want the power of China’s communist government so they can engage in big spending programs without oversight. Chovanec covers 

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