Dear John: The Federal Reserve is playing with explosives and it has not been properly trained to use them. Big Ben (Bernanke) believes that dollar devaluation is the only way to get the federal government’s long-term debt under control.
Paying back federal bondholders in cheaper dollars will not work. Not only do we have $14 trillion of already issued debt, the US is now getting ready to fund the balance of its fourth-quarter deficit. That’ll be close to $500 billion.
The bottom line is that the Federal Reserve is the biggest shell game in town. Print money out of thin air and then buy your own bonds! What an idea! D.L.
Dear D.L. You mention in your note that you live in Florida. I would have guessed you were writing from Beijing, where many of these opinions have already been expressed by our biggest bondholder, the Chinese.
Yes, yes and yes. I agree with everything you say and hope that we are both wrong. Inflation on top of the weak economy just won’t be very pretty.
Worse, interest rates may rise. If investors like the Chinese think they are buying into an intentionally deflated currency, then they are going to demand higher yields.
And everyone, all around the world, will end up paying more to borrow money.
Higher interest rates. Higher inflation. That equals higher blood pressure for us all, especially since the economy doesn’t seem to be benefiting much from any of the measures taken by the Fed.
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Dear John: What’s your opinion of HR 4646, a bill currently under consideration in the House of Representatives. This bill proposes a 1 percent tax on all financial transactions. J.K.
Dear J.K. I think this idea has about as much chance of succeeding as I have of becoming the first female president of the United States. (By the way, no sex change operation planned here.)
The bill proposes that the federal income tax be eliminated and be replaced by a 1 percent tax on all financial transactions — at banks, credit unions and on deposits.
I don’t know how the numbers work out.
But I do know this: After the Democrats were slaughtered in the midterm elections, there are going to be no major revisions to the tax codes in the foreseeable future.
And this is all a damn shame. New ideas need to be tried, although I’m not sure HR 4646 is one of the worthy ones.
Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or john.crudele@nypost.com.