Banking Direct: Killed by the cure

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Killed by the cure

75% of oncologists when surveyed said that they would refuse to take Chemotherapy if they were diagnosed with cancer. The treatment kills the body’s’ immune system at exactly the time it needs it most. The oncologists cited the fact that chemotherapy is marginal in its effectiveness and that its toxicity is very damaging to the body generally. It's is a case of the cure being worse than the disease. I believe the same can be said of financial rescue packages. Often, their unintended consequences are much worse than the original problem.

The bailouts in the US and the UK and other countries will have negative consequences that few currently understand. The side effect of printing vast sums to help out the financial system will have the effect of creating inflation and lowering interests to artificially low levels. It will cause the currencies to weaken and will stop the natural healing process of the financial system. Now, there are a few questions we need to ask ourselves. Is a higher inflation rate, an artificially low interest rate and a weaker currency in the nation’s best interest? The answer is obviously no. Tax payers will be protected, but savers and wage earners and those on fixed incomes will pay a heavy price for the bailouts. Anyone who holds savings in currencies where massive bailouts are happening will have the value of their savings decimated through inflation. Food will cost more. Oil will cost more. Disposable incomes will fall. It will be more difficult to save, which is really what the financial system needs. Taken to an extreme, we could see hyper inflation and a situation like Zimbabwe or Argentina where we will all be millionaires...living on bread and water.

A smoker cannot stop smoking because the short term pain is psychologically too much to bear for the undoubted long term gains. The result is that the inevitable pain is put off until the day of reckoning comes and the situation requires a much bigger dose of pain. Like the smoker, we should take the immediate pain for our own good. Let the banks fail, let the unemployment rate go up, let interest rates go to the moon, let the market sort it out...it works!

By having “big Daddy” aka the government soothe us now by interfering in a mechanism that they aren’t supposed to be interfering in, we put ourselves in a position where, instead of a few years of a sharp and undoubtedly very painful recession, we endanger our very economic existence.

This way to the coroner.