NEW YORK ( TheStreet) -- Federal Reserve Chairman Ben Bernanke has convinced financial markets that easy money policies will continue as long as needed. That may be forever, and these policies place U.S. prosperity and sovereignty at grave risk.
The economy is as sick today as it was before the financial crisis and Great Recession. Both were caused by fundamental dysfunctions that remain unfixed.
China, Japan and Germany -- the three largest economies after the U.S. -- pursue cheap currency and protectionist growth strategies. Each amasses trade surpluses with the U.S. to prop up domestic employment.
U.S. consumer dollars that buy their products but do not return home to purchase U.S. exports tax demand and push up unemployment. But for easy money, this would throw the United States into a depression.During the Bush prosperity, China printed yuan to purchase dollars and U.S. securities. This drove down interest rates on bank loans and mortgages, helping bankers trade in derivatives, inflate housing prices and keep consumers piling up debt until the house of cards collapsed. Nowadays, the Fed helps Beijing pass out the drugs. It buys $85 billion in Treasury and mortgage-backed securities each month. This finances Wall Street speculators in the housing market and another epidemic of derivatives trading. Sooner or later the new housing and derivatives bubbles will pop, and the U.S. will be back in the soup -- but it will be a lot hotter this time. Cheap credit is driving up prices for farm land and propping up businesses that should fail -- securities dealers are hoisting junk on retired investors who can't get any interest on CDs. The Fed's printing press is propping up an already anemic economy. Since October, GDP growth has barely averaged 1%. Americans are taking on too much debt to buy cars -- the Detroit Three can credit their financial recovery to replacing cars worn out during the Great Recession with options-laden, expensive replacements. President Obama has pushed down unemployment by persuading young people to earn degrees that provide no gateway to good jobs.