“The damage from the subprime market has been largely contained. Fortunately, the financial system and the economy are strong enough to weather this storm.”~~Richard Fisher, Federal Reserve Bank of Dallas President, Apr 4, 2007
This is now:
"Tonight, I want to talk about a different matter…I have been scanning the horizon for danger signals even as we continue working to recover from the recent turmoil. In the distance, I see a frightful storm brewing in the form of untethered government debt. I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct…"
The government is trying to shore up a system teetering on a massive financial storm. Purists can say what they want but no administration is going to allow the system to fail and watch the calamity that follows. Higher interest rates might shore up the dollar but if you kill the economy then what good is it? My company is making good money exporting our products and even in this era of inflation our sales are likely to increase 20% y/y. If my inflation rate is 5% then crudely stated I am still up a great deal.
I won’t deny that government interference in the market has caused many problems but collective self interest is killing us as well. One day when the economy does come crashing down and the tax revenues with it people will come to find that their Sugar Daddy is no more.