'Free Money' About to Cause Big Problem: Welch

Discussion in 'Economics' started by S2007S, May 2, 2011.

  1. S2007S


    Not a fan of Mr. Welch, but I can say I agree 100% of what he is saying here. I have been saying the same thing for the past couple of years, ever since they started pumping money into the market to prop the economy and equities up I have been saying that there is going to be serious problems that are about to start. No one has a clue to the problems that are going to occur due to easy money policies and trillions in worthless dollars being thrown around to keep everything afloat, they think everything is going fine because the markets are up over 100% in 2 years, thats the joke. You can only stimulate an economy for so long, the economy today has become to dependent on this and taking it all away now will just sink the economy further into a deep, deep, deep recession, possibly a depression. So as of now Bubble ben bernanke is pretty much stuck, cant raise rates and cant keep spending....Keep spending and the dollar keeps dropping while inflation continues to skyrocket, if he raises rates the housing market will derail sending prices down where they should be another 40%+....So what is BUBBLE ben bernanke to do in this stage of the game, this is only going to get interesting as time goes by. Bubble ben bernanke is pretty much out of ideas, hahaha.

    'Free Money' About to Cause Big Problem: Welch
    CNBC.com | May 02, 2011 | 09:46 AM EDT

    Too much money in the wrong hands is about to create a serious problem in the US, author and former General Electric CEO Jack Welch said.

    Speaking as Americans celebrate the killing of terrorist leader Osama Bin Laden, Welch said the event is cause for pride and hopes it will be used as a rallying point as the country recovers from the financial crisis.

    But he warned that policies aimed at jump-starting the economy are sowing the seeds for more trouble later.

    "Free money in the hands of very smart people for too long is going to create something that's not very pleasant," Welch said. "I don't know what it exactly is. But every time we get free money to lots of people who are very, very smart and know how to use it you end up with a bubble or a problem that we don't quite see in front of us."

    Policy makers responded to the collapse of the global financial system in 2008 with a combination of government stimulus and monetary easing that saw the Federal Reserve balance sheet expand by about $2.4 trillion and the budget deficit swell to about $1.5 trillion.

    Though the economy has struggled to regain its footing, there are now worries that all that liquidity will create an inflation problem as the dollar has slid and commodity prices soared.

    Welch said the real key to recovery will come from US companies that find ways to bring new products to market and help the economy grow organically and not through government intervention.

    "People have found ways during this recession to do more with less, there's no question about that," he said. "Our job is to innovate, innovate, innovate in everything we are doing."
  2. the1


    Nothing is free. Everything comes with a price tag. The future price we are going to pay is going to be steep either through uncontrolable inflation or a severly depressed housing market. Can it get any worse? Yes. If The Ben Bernank has to raise rates to control inflation it affects the housing market and the economy as a whole.

    You can jump start a dead battery but if you don't replace the battery you'll need to continue to jump start it. Once the jump start is removed the battery remains dead. What happens when the jump start is removed from the economy? It's Checkmate for Bernanke.
  3. pma


    Good analogy :eek:
  4. "Free money in the hands of very smart people for too long is going to create something that's not very pleasant," Welch said. "I don't know what it exactly is.

    A comment like this is scary. Jack Welch has that gut feeling. You can bet, even though he may not know what the problem will be, he'll be the first to recognize the problem. Things just work that way. His radar is up and working.
  5. AK100


    I assume he's talking about Wall Street but I wouldn't describe them as 'very smart'.

    Sure, they look it in a bull market but then so does a monkey. But we all know how they collectively perform when things stop going up and head lower - it all ends up a complete farce. The monkey would probably do better.
  6. TGregg


    Helio Benji can't raise. That's the new side to the ever changing definition of liquidity trap. Raise rates and we can't afford our payments on the debt, just like Japan. Just like the EU. Nobody can afford the true cost of money. Most of the debt-addicted first world governments have painted themselves into a corner, knowing they have a serious problem yet needing ever increases doses just to stay alive. The inevitable end seems to be some sort of full blown global multi-currency-crisis.
  7. Larson

    Larson Guest

    Same as the bankrupt family or business, credit will be cut off sooner or later. In the case of US, the market will exact discipline on it's spending folly. Law of finance and economics can be skirted for only so long.
  8. Never has the world been so interconnected. It is so obvious that within the first 15 years of the existence of the internet the world is going to fuck it up. There is going to be a spark that will set off an inevitable global crisis.

    In the end it is every man for himself.
  9. Indeed, every man for himself is the inevitable outcome when the funding for all the safety nets runs dry.

    Welch is speaking out and following the lead of the likes of Bill Gross and other establishment insiders who feed off of the kleptocratic private and public sector cronyism.

    It appears that even they are distancing themselves from the inevitable perhaps to salvage some sort of professional reputation and not appear to be as hapless as those who are dismantling the entire economy to prop up the shadow banking system.
  10. How many years between WWII and German Marks being as good as gold?

    Not that many really given the depths they found themselves in at the bottom I would say.

    Ofcourse it sucks monkeyballs if you live during the lows of the cycle.
    #10     May 3, 2011