The Crisis Will Continue

According to Marc Faber the next financial crisis is on the horizon. It all stems from the decades of mal-investment. More recently the problem began when the Federal Reserve lowered interest rates to artificially low levels which encouraged bad investment. The low interest rates led to speculation in housing which created the most recent bubble. The burst led to the current recession.

However, the government is doing the same thing that caused the recession to solve the current problems. The Federal Reserve has lowered interest rates to near zero and politicians have created additional incentives for people to continue to purchase, such as giving new home buyers eight-thousand dollars, and giving car buyers cash for used cars which will be destroyed (yes the government is allowing perfectly good used cars to be destroyed as well as helping organized crime thrive by creating a black market for these cars!).

Instead of creating artificial demand and encouraging consumption, the Fed should dramatically increase interest rates which create incentive to save and politicians should discontinue the silly schemes and allow home prices to fall to their intrinsic values and also allow inefficient companies to fail.

With rates so low there will be another bubble created elsewhere in the economy, yet the media and politicians continue to congratulate Barack Obama and Ben Bernanke and the other thugs they surround themselves with for a job well done, as if they are responsible for solving the problems in the economy. The crisis has just begun. It is not over. There is surely more to come.