History Is Uncertain Guide for Fed Chairman - Barrons.com

THOSE HIDDEN ROCKS: History Is Uncertain Guide for Fed Chairman - Barrons.com

As Donlan writes:

"IN AUGUST, 1992, THE CRUISE SHIP Queen Elizabeth II struck a rock in the waters south of the little island of Cuttyhunk, Mass. There are many rocks on the charts of Buzzards Bay and Vineyard Sound; the QE2 found one that was previously unknown, and it cost the Cunard Line $20 million.

The captain and the pilot testified that they hadn't been worried about the ship, 963 feet long with draft of 32 feet below the water surface, because it was crossing an area charted to be 39 feet deep at low tide.

Unfortunately for them and their ship and their passengers, no other ship so big had ever navigated those waters. What was worse for them, the 39-foot sounding had been taken in 1939 by a method that sampled the depth every quarter-mile. The 39-foot sounding on the chart was accurate, but there was a rock at a depth of 31 feet less than a quarter-mile away."

One does ponder the comment, "If it works, the Fed will later withdraw the cash from the economy by selling the Treasury bonds it purchased in QE1 and QE2."

The world (especially many socialist countries in Europe)seem to believe (as of course their public unions do) that you can borrow 3-10% + of GDP each year while growing 1% or less and that this can go on indefinitely.

At some point, one does have to wonder if the magic liquidity to fund this borrowing isn't going to run a bit short!

And, should this happen when Ben decides to sell back to the public all that Treasury paper, one wonders if the interest rates of the 1970's won't look like bargains (yes, we're talking 20% plus).

One then wonders what will happen to our heavily indebted government and our economy - i.e. just one of those potential rocks.