Speculation, Liquidity and the Cost of Living

With the bailout of the Eurozone by the central banks, Fed included, liquidity is supplied by the central banks to the big European banks. That is the good part, as long as the assets the Fed gets back, held to maturity, are paying a reasonable return.
The bad part is that this international banker cartel refuses to put a damper on speculation in commodities that will increase with this liquidity unchecked.
It is one thing to bail out the banks with the reserve currency, the dollar, for the purpose of getting banks to trust one another again, and make the money markets sound. It is quite another to allow rampant speculation in commodities that must be stopped if main street, especially in the United States, is to have a financial chance at recovery. With proper regulation of the big banks, bailouts would become more infrequent and much less necessary.
Already, before the November 30 Euro bailout, Thanksgiving dinner in 2011 was the most expensive in 20 years. And with the bailout of the Eurozone, oil is up 2 percent right out of the gate to over 100 dollars per barrel. Treating important commodities like oil and food as if they were toys in the hands of the investment banks is madness. This is what Will Rogers warned against. This is what will start another bubble in these essential substances that will just really hurt main street USA.
The housing market replacement costs will increase and this will continue to freeze the new house market. The folks that build houses should be advocating the restraint in commodity prices. You can't replace the cost of an existing house without cutting corners when the supplies to build the houses goes through the roof. This action to essentially skyrocket building supplies will have the effect of insuring housing bubbles in the future because no one will be able to afford the houses. The more they go down in value, the more that the replacement costs will increase.
Builders and the real estate people will no doubt call for easy money lending as the only fix, the only way to jumpstart the new house market. The scam of the business cycle will claim even more victims who think they "own" their houses with a dollar down. As of now little credit is available to main street. The bankers would prefer to speculate on commodities than lend you a dime. That is until they are able to get the government guarantees they are after, so they can forget about your creditworthiness like they did in the last bubble.


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