Making Good Decisions in a “Tender” Global Economy-Week 5

Business decisions today have to be made with the expectation that a failed US President has created a world in the worse state of chaos since World War II and thus in any 12 month period there is a significant probability of a catastrophic world event that will negatively affect the global economy.

Central Banks Are Now the Problem

History will judge the combination of Ben Bernanke and Hank Paulson as having been brilliant in preventing a global depression back in 2007-2010. However, history will not be so kind to Mr. Bernanke regarding his failure in 2011 to raise interest rates to attempt to normalize interest rates.

Having written his Ph.D dissertation on the Great Depression, Dr. Bernanke feared causing a second recession by raising rates too soon as occurred in the 1930’s. Therefore he chose to keep interest rates low.

In fact, Dr. Bernanke stepped up his efforts to lower interest rates by starting Quantitative Easing (QE), a euphemism for The Fed buying USA government bonds. Previously only used by Central American Tin Dictatorships which always resulted in economic collapse, this undertaking did propel us into a surreal economy with artificially low interest rates.

The problem is that globally central bankers do not know how to get out of that box. At least The Fed, under Chair Janet Yellen, stopped QE here in the US. But she is obviously afraid to “normalize” interest rates. To me it looks like “Paralysis from Analysis”.

The distortions in the economy are everywhere. Capitalism does not work in a surreal economy where the interest rates are artificially set. Do you remember the children’s game of “Musical Chairs”?

In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term, land is the best investment.

Are you ready?