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Illusion of prosperity

By Staff | Jan 28, 2010

To the editor,

David Kruse, with his incredible knowledge of markets, is shockingly ignorant of common sense economic theory in his column, “Stimulus was right.” Call me an anti-government ideologue if you want, but the government is entirely to blame for the present financial crisis.

The housing bubble and other foolish spending was encouraged by government policies stimulating people to take out loans they couldn’t pay back.

The private sector that Mr. Kruse so vehemently hates, would never have made the malinvestments causing the bubble if The Fed’s inflationary policies had not kept interest rates artificially low.

To look at it in the view of a farmer, let’s compare it to the recent USDA crop production report.

Corn yield was raised from 162.9 bushels per acre to 165.2 bpa. That’s a 1.4 percent increase. How did you like what that did to your $4 corn? In the case of The Fed, the supply of dollars was increased over 100 percent.

What do you suppose that would do to the value of those dollars; dollars that prudent and responsible people have saved and invested for the future? For years we have been spending dollars that didn’t actually exist.

They were dollars that appeared out of nowhere from the devaluation of the dollars that already existed to benefit big banks and politicians. When a central bank can create money from nothing, the relationships money represents are no longer accurate. At some point there has to be a reckoning.

A true free market with a commodity-based currency would regulate itself with more stability than a market manipulated by a committee out to please political contributors.

Of course that could only be possible if there were no government reports available to manipulate the gold market the way they manipulate the corn market.

Any government intervention in markets -unless to prosecute fraud – makes them less relevant, less accurate and more likely to bring booms and the inevitable busts.

-Fritz Groszkruger


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