Posted by
Steve on Thursday, September 22, 2011 1:03:18 PM
For the past two days, there has been a massive selloff on Wall Street and around the world. It was started when Ben Bernanke came out and said that this poor economic climate could last for years. This is different than most selloffs. Most of the time, people sell stocks and put their money in bonds. This time, people are selling stocks and sitting on the resulting cash. That is particularly terrible for the economy. Buying bonds and gold would be preferable to holding cash for the economy.
Things are set up so that we have the same economic conditions in play that were in play in Germany during the Weimar Republic. That means that we can expect either hyper-inflation or wage and price controls. Both would be destructive to the United States and our way of life. Hyper-inflation would destroy the dollar and possibly usher in a dictatorship. No good can come from hyper-inflation. Wage and price controls are not any better. That would totally wipe out our current economic system.
Ben Bernanke is looking at the economy as if Democrats will be running the show for the next few years. If that is the case, then he is correct. If the election in 2012 puts Republicans in charge, I expect major changes to the economy. That would mean a return to prosperity for all. The climb from this gigantic hole to prosperity would not happen overnight. It would happen over time because you have to restart the economic engine that is the United States economy. Right now it has been shut down for a number of years. Restarting it could take a year or so. After that, it is Katy bar the door because we will have a return to the economic policies that unleash the economic engine.
This selloff the past two days has even hit gold. Gold is down $75 the last I heard about 9 am. That means that if you have cash, you have some opportunities to purchase things in the next few days at a greatly reduced price. The value of some of the stocks cannot have dropped that much. Even the bluest of the blue chip stocks are down in this selloff. Those blue chip stocks would still be valuable to hold, so picking them up at these reduced prices would be fantastic. The problem is you have to have cash to do that.
Wage and price controls basically would turn our market based economy into a centrally planned economy. That would totally destroy our economic system. Putting the ship right after some time under wage and price controls would be difficult and risky. The buildup of pressures would be enormous the longer we would have the wage and price controls. That is because wage and price controls artificially change the market conditions. A few months under wage and price controls would not create too much instability. A year or more would create a lot of instability when the wage and price controls are removed.
My best guess is that the Obama administration would feel that wage and price controls would be the better option during an election year. That way they can artificially keep the prices low and make everyone think that economic conditions are better than they really are. For the uneducated and uninformed, wage and price controls could convince people that Obama and his minions really know how to get our economy going. They might even be tricked into voting for the fraud that is the Obama administration.