Then, more internal Fed meetings took place. Again, it is unusual to have so many top level meetings during such a short time. Even the Europeans' central bank participated. It all had the feeling of a war game session.
Despite the unusual nature of a Presidential visit of the Fed, we are still left without any sense of direction over what could be happening.
We know that this is an election year and that any economic issues would most certainly affect the results coming November. Still, not much to go on other than the fact that things are probably serious enough. But what could be so serious as to demand the President's involvement?
Well, how about things being in such dire straits that Barry, our fearless leader, has to make an unpleasant house call. We know he hates to share smiles with those he dislikes, which is pretty much anyone who wouldn't vote in favor of his Nobel Prize.We also know that the Saudi royal family has previously skipped a meeting with our President as a sign of their discontent with his footsie sessions with the Iranians.
What if the Saudi's sent an important message to say Citi's CEO. We all can remember that the Saudi's bought large positions in the bank and that they were responsible for its rescue during the 2008 liquidity crisis. Surely Mr. Corbat, Citigroup's CEO, would have an open door policy for such important stakeholders. Then, as a 'too big to fail' institution, any message from Citi would find no resistance on its way to Fed Chairman Janet Yellen's desk.
And what exactly could the message be? Well, how about one that would make Citi, the Fed and Obama jump off their seats. How about a suggestion that perhaps the Saudi's will dump their fat collection of US bonds? Can you imagine? What would you do if your credit card company calls and says that they are ending your loans. What if your loans are so big that finding willing lenders may be near to impossible?
To clarify, if large lots of US bonds suddenly come onto the market for sale, it would be a very bad thing for all of us Americans. The Treasury would have to print large amounts of money in a swift and uber-inflationary move. The Federal Reserve would then take the newly printed money and would have to use it to lend money back to the institution that just printed it. Crazy!
And what do you think could happen if Barry gets an interest bill much higher than he has been accustomed to? Well, Barry will probably have to announce that we are broke. That we can't spend on the kinds of goodies he likes to dish out. Things like food stamps may become a luxury.
And if this was not enough, most of the 'too large to fail' institutions like Citi will also fail. You see, the Fed has been forcing bank owners and savers to carry the risk of an out-sized investment in US bonds. In essence, the government used their mighty power to force its citizens to lend it money. So when the Arabs and Chinese stop lending to our government, we are all sure to lose our shirts and our beloved food stamps.
|The SDR vs. the Dollar|
But wait a minute. All these thoughts are sure to be no more than fear-mongering on my side, right? Well, perhaps.
But even if I am wrong, it is still worth considering how close we are to a scenario similar to my fictitious narrative. Our debt is out of control. Our international presence has also deteriorated at the exact time we need our former partners to hang on. Our future is at stake like never before. Moreover, the pain during the process may be unbearable. The question is not whether this will happen but when. Let's hope I am wrong on timing and that we will have a second chance to correct our spending addiction.