Thursday, 19 September 2013

invisible hand

There are quite a few conflated statements and actions in circulation regarding America's economy and monetary policy. While it is true that raising a debt-ceiling does not in fact increase overall debt, rather just re-calibrates a county's ability to fulfill its outstanding obligations, and despite evidence to the contrary about past fiscal cycles, history and precedence and possibly the very definition of madness in expecting any other outcome, such a correction does not necessarily speak to thrift and discipline. On the contrary, a commitment to not default and continue to match the caretaking and stewardship responsibilities of a government demonstrates a discipline usually understood to be the opposite.

Unfortunately, these overtures came on the heels of the unexpected announcement by the US Federal Reserve cadre to continue its policy of quantitative ease (read printing more fiat money) in order to encourage growth and investment. Interest rates could hardly be any lower to discourage the hoarding of money in savings and encourage growth through investments—being the more attractive place to make one's money work for its keep. Stakeholders, however, cannot be exactly led to water by dwindling attractions, when amounts are large enough to be insulated. Half-a-percent of billions is quite a lot, even when swimming upstream. Bursars the world-around rally, knowing there is enough cushion to offset the lack-lustre dollar with selective prestige projects. Though from separate accounts, it is an awful coalition, a coming together, a flittering programme to back up some eighty-five billion dollars monthly of shaky bonds (debts) with copy-machine collateral compared to the goal of saving eight-billion dollars spread out over a year, with follow-on aims for the next decade, in the name of sequestration—which, I suspect, achieved retrograde success. Already agencies, petty tyrants, are being urged to update contingency plans for a lapse in funding, which will play out the same as the exercise in work-stoppage known as furloughs. Absent cooperation and clear objectives, I am not sure what economies, who have painted themselves into a corner, could do.