War as an economic theory

So here’s the US in no-man’s land.

While all around us are falling economically, the Fed defiantly stands on its Dec. rate hike.

Never mind that the most relevant measure of that strength — GDP — was just lowered to 1.9% from 2.5% for Q4 by the Atlanta Fed’s GDPNow.

We are in no-man’s land, because the Fed and just about every other economist can’t cite one monetary or economic theory that hasn’t been perverted by the Fed’s actions over the last 7 years.

Being at zero for so long (with untold liquidity being injected) has taken the market out of its primary function: allocation of capital and risk. And since that injected liquidity will never be sterilized (allowed to be circulated into the overall economy) there cannot be any meaningful growth.

My biggest fear is that the Fed and Treasury officials look to the later half of the 1930s and see anemic growth despite huge capital injections into make-work projects and say the only way we can extract ourselves from this malaise is to create a war to lift all boats.

Let’s face it, these people are clearly out of ideas on what to do. Other nations are clearly thinking the same way as China takes control of islands in the South China Sea and Russia puts its troops and planes into Syria.

Unlike the run up to WWII, today’s war would not have the economic boom (battleship and tank manufacturing), by nature of how it would be fought, but that would not stop the military-industrial complex from making the money grab that has gone to Wall Street for the past 7 years.

Given the debt spiral and currency wars over the last decade, I would be surprised if China, Russia or the US did not have the war card on the table should the global economy turn to another Great Recession.

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One thought on “War as an economic theory

  1. Pingback: Buffett gets on the right side of war | GRAY'S ECONOMY

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