Phillip  Bartling

Were Shakespeare alive today, he might be tempted to stage the setting of Macbeth on Wall Street, or perhaps within the confines of the Federal Reserve.

For much as The Three Witches in Macbeth worked their dark magic on the mortals around them, concocting a toxic brew consisting partly of “Root of hemlock digg’d i’ the dark” and “liver of Blaspheming Jew”, so do our control-freak central economic planners attempt to impose their will on market forces.

A stimulus here, a series of Quantitative Easing there, the spell is ongoing. The result is a build-up of both inflationary and deflationary pressure, with an uneasy equilibrium holding sway.

As the pressure mounts with each market cycle and each new ingredient tossed into the cauldron, the balance gets harder and harder to maintain. Even big corrections in the markets only vent enough steam to temporarily stave of the inevitable event that will take place when either the inflationary or deflationary pressure reaches critical mass and overwhelms its counterpart.

Which is why you hear so much about “asset bubbles”—they are the most obvious signs and symptoms of the equilibrium slipping away.

According to Sharmin Mossavar-Rahmani, chief investment officer for Goldman Sachs investment strategy group, “We don’t have bubble troubles yet.”

Mossavar-Rahmani may not be worried about bubble troubles, but I certainly am. Not a bubble in the stock market, that’s not the issue, nor a real-estate bubble or even a bond market bubble. The bubble to watch is a double-bubble, and it definitely spells toil and trouble for the US economy—it’s the cash/debt bubble.

The bad news is there’s a lot of debt out there. The US Government debt alone has grown almost exponentially, from2 trillion, to 4 trillion, to 8 and then quickly now to over 17 trillion dollars.

If that doesn’t classify as a bubble, then I don’t know what does. And that’s not to mention consumer and business debt.

The good news is that there is also a lot of cash out there.

So far, so good; there’s a lot of debt, but also a lot of money out there to cover it.

The really bad news however, is the disconnect between the cash and the debt—the people and entities with the cash aren’t the ones who owe the debt. That’s a serious problem.

Look for example at company like Apple Inc. , which pays little to no taxes while at the same time accumulating a massive hoard of cash, estimated at between 100 and 200 billion dollars.

And that’s just one company.

It doesn’t take a genius to figure out that if all the money is getting sucked up by people and entities that don’t owe the debt, that’s just not sustainable.

And the really sick part is how Obama and his money people seize on this truth and twist it with populist rhetoric about “spreading the wealth around” on the one hand, while on the other they keep accelerating the policies and practices that have led to the concentration of wealth in the first place.

There is a simple and 100% effective way to balance this out before it’s too late, and inflation or deflation breaks through the opposing force causing a true meltdown and not just a painful correction; it’s called free-market capitalism.

President Obama acknowledged—and then dismissed—that theory in his masterpiece of propaganda, the speech delivered in Kansas on December 6, 2011.

In that speech, Obama performed several miracles. For one, he was somehow able to liken himself to Teddy Roosevelt; if you follow his reasoning down the garden path, Barack and Teddy are kindred spirits; patriotic and populist visionaries unfairly branded as radical socialists, both fighting the good fight against the sinister, greedy capitalists.

Which lays the groundwork for another Obama miracle, re-writing history.

“But here’s the problem” Said President Obama. “It (Free markets/Capitalism) doesn’t work. It has never worked. (Applause.) It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ‘50s and ‘60s. And it didn’t work when we tried it during the last decade. (Applause.) I mean, understand, it’s not as if we haven’t tried this theory.”

I commend president Obama for his public speaking skills, his incredible power to persuade. He can make some people believe anything, that Teddy Roosevelt was really a communist, that spending more money is the way to deal with a debt crisis, that it wasn’t capitalism that made the United States the richest most powerful nation on earth.

President Obama is a genius at saying things people agree with, where he intends a different meaning from that which most of his audience understands. You see, President Obama is sincere about “spreading the wealth around”, the only problem is, he doesn’t mean share the wealth of rich Americans with poor Americans, he means share the American wealth with the rest of the world.

Something wicked this way comes? Why wait for it to get to us, let’s rush to it! Lead on, MacDuff!

Phillip Bartling

Forex Investment Management LLC is run by Phillip Bartling.

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