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Kudlow and Company: Fed rate cut? Are you serious?
By By Joshua Robbins,
josh@bluecollarinvestment.com
Erich Fromm, a famed philosopher and psychoanalyst said it best, “Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.” Now you might ask what I mean by this and if you don’t know the obvious, you should probably quit reading this article now because they have you where they want you. Just prepare to lose all that you have and then some.
I can speak freely here unlike Kudlow as I have no political or economical ties to any major corporations such as he. I find it hard to believe that Kudlow, a American conservative, supply-side economics enthusiast could look past the fact that by cutting interest rates, we will destroy the worth of the dollar. He of anyone, in my opinion, should know this. Yet, he gets on television everyday, practically in tears, begging for a rate cut and completely destroying the ideology of laissez-faire and free market capitalism. Wait, I got it! As long as the “big boys” don’t have to pay, then lets wave the banner! But when the bell tolls for these guys, oh boy, watch out, incomes the fed?
So, I have decided that if Kudlow is so convinced that a rate cut is needed, well I am going to have to give him a quick lesson on economics. You ready Lawrence? Let’s say you have a bank account that has $5,000 dollar in it. Now, we all know you have much more than that, but lets just pretend. In this account, account basically represents the accounting equation: assets = liabilities + owners equity. So we can safely say that the owners equity $ 5,000 is the owners equity and this would fall as cash in the assets. Well then we take a huge flippin loan, lets say like $100,000. That would fall underneath the department of liabilities and would change the cash value but add no value to the owner’s equity. Therefore we have more debt and no way to pay it back.
What your pitching to your fans, listeners, or whatever they are is that this is a good thing. That if the Fed cuts the rates, pushes more money into the system, so people can acquire more debt and spend more, that all will be rosy because at least the retailers will hit the expected earnings call. The problem is, this money that we are lending doesn’t exist and needs to be printed. I am sure I don’t have to explain to you fair Lawrence what happens when you have to many greenbacks in circulation that hold no worth. Ah yeah, the great depression.
I can’t help but to think that of thing when I think of you Lawrence; Piccadilly Palare. It is just silly slang between me and the boys in my gang. But I wonder, why do you smile when you think of Earls Court?
