The Last Bail-Out

Debt liquidation and price deflation are the economy’s natural mechanism for cleaning itself – a process that if we do not manage proactively, then it can be insurmountable pains to all. Think ahead and connect the dots – more than three hundred million people, banking system in shambles, no jobs and no money. It is staring us in the face and so far, we have been too busy saving the big institutions and failed to anticipate the magnitude of the human tragedy ahead!

I cannot accept this defeatism and will never accept it and I want to lay down the foundation with a basic principle of choices of between (a) deflation and depression, or (b) hyperinflation and destruction of currency. So far, I hardly see any serious debate whatsoever as to which is the lesser of the evils.

The deflation road is extremely arduous but ultimately leads to recovery. The hyperinflation road can provide a temporary palliative, but ultimately leads to the destruction of our society and culture. A strong currency – the nation’s social and political anchor and a failed currency will be a nation’s albatross.

Key risk is the cancer of mistrust. First, it was mistrust in sub-prime mortgages, then spread to almost every private financial institution in the world. If we are not handling this matter carefully, the next stage – the fatal stage – is the mistrust in the US government itself. It happened in the 1980 under Carter presidency and the mistrust was so intense and so widespread that the government could not sell long term government bonds and the end result could be crashing bond markets.

This is the last government bail out, and it must be to save the government itself.