by Barry Dennis

Created on: January 20, 2009

The Federal Reserve in effects "prints money" by providing funds to the banking industry, which in turn lends these funds to companies and individuals. In the current mess, the Fed is creating more money in a shorter period of time than ever before. When too much money chases too few goods, the price goes up, in this case, way up. If the Fed and Treasury and the new administration accomplish their goals, we will shortly have rampant inflation; maybe not on the order of Zimbabwe, but to such a degree that the Dollar, the world's currency for 40+ years, will be seen by investors foreign and domestic, to have substantially reduced value. Maybe even a dollar run, although China (500 Billion + dollars invested, Saudi Arabia-0ver 500 Billion invested, and many others) will have to make a decision about how low they want to force the dollar in order to sell their dollars and buy other assets or currencies.

A financial advisor used to say "Owe a lot, not a little. They will love you more and value you more if you owe them so much they can't afford to demand repayment."
Almost any rapid increase in "printing" money is axiomatically followed by increases, sometimes rapid, in inflation. The Bubble is coming.
No matter how you define the problem or propose solutions, the market must be allowed to seek equilibrium.
This means that losses must be realized at the point of origination, and in the case of all these downstream investors, backtracking to the source.
While difficult, not impossible.
In the end, after losses are taken, government can then step in to either nationalize (for later distribution/resale to the public), or re-capitalize the system with the kind of debt/equity that allows the taxpayers to be paid back and to include a nominal rate of return, which convertible securities could offer, along with Convertible Preferred and equity investment allocations as advisable.
(Let me note here that as part of this solution, I have recommended that these government investments be pooled into an Investment Trust as part of restructuring the Social Security system.)
All in all, after 40 years of investing in all kinds of markets, and starting new businesses thereafter, after working 80+ hour weeks in startups, I have observed that the free marketplace can work, if allowed to.
Having said all that, I still allow for government intervention, because I see that as a way to avoid or minimize the depressing effects of a financial system out of control. The role of government

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