CONFUSED AGAIN

I've been thinking long and hard about the almost-certain upcoming announcment of QE II on Friday by Mr. Bernanke. I understand the theory at work and the concerns expressed. I also understand that inflation running well below a target figue may not be a good thing at this point in time. I remain unconvinced that a 15 trillion dollar economy has the mechanism of a Swiss watch which can be set to keep perfect time on a moment's notice, but I am more than willing to accept the fact that Mr. Bernanke is a heck of a lot smarter than me; maybe he can do it.

So why am I confused? Well in thinking about this I realized that I was overlooking the premise upon which all of this is based, namely that this economy, consumer driven as it is must be maintained at all costs. Where the hell is that written.

For years, economists and commentators have been bemoaning the fact that the United States is a country of spenders, not savers. Great concern has been expressed that the debt load carried by the American family is too great and, indeed, unsustainable. The boys down at the coffee shop in Galveston where my friend Paul has his cup of Joe every morning complain that "we don't make nothin' we buy anymore," and borrow to buy stuff made by them damn Chinamen. And of course we tend to lose sight of the fact that in practice there is no debt of the United State government; that monsterous number is the debt of the citizens thereof and keeps going up by the minute.

Another funny thing is if you were to speak to anyone on the street including our politicians you would get little opposition to the facts expressed above, so now perhaps you can understand why I'm confused. If indeed we are facing a structural problem in our economy which I and practically everyone else believes (although stated with terms like "structural defect" may not be fully understood) why is the Fed bound and determined to advance policies that will only exacerbate the structural defect we face? It seems to me that to continue to make taller a building originally built with a design flaw is only to invite a greater future disaster. To have a bid in the market for additional debt from a drunken borrower is guaranteed to promote his future borrowing to satisfy his habit for booze. Think about it. In the real world, a bartender can go to jail for the result of his action of merely serving a drunk another drink. But then again, maybe the world of international central bankers if fantasy land...or fairey coo-coo land. I'm confused.