Once the contagion starts spreading, loose money won't put the fires out.
As the nation's political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: "If money doesn't loosen up, this sucker will go down."
Eleven years into the loose money recovery, this sucker is finally going down for reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.
We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural problems--unsupportable pensions and entitlements, unsustainable dependence on debt to fund everything from infrastructure to a new iPhone, a sickcare system that is bankrupting the nation, a higher education system that is looting an entire generation for diplomas with marginal market value, a runaway National Security State that burns trillions on unwinnable wars and lies about it--are left untouched because they're, well, difficult, and it's so much easier to say that looser money will solve everything.
Alas, loose money has created a new set of metastasizing problems that will bring this sucker down: widening wealth-income inequality, the only possible result of our system of creating and distributing new money to banks, financiers and corporations; soaring systemic leverage that few see, much less understand; and perhaps most perverse, yet equally unnoticed, loose money has widened the gap between the real economy and the top layer of arcane finance to the point there is literally no connection at all.
The happy story about debt-dependent capitalism is that thriving companies borrow money from our wunnerful banks to invest in new factories, research, software development, etc., hiring millions of top-notch people--top-notch!--at generous salaries to boost productivity and make the entire nation wealthier.
Alas, it's all a fraud. What actually happens is banks "invest" the new money in faster High Frequency Trading (HFT) computers so they can skim even more profit from the rigged "markets." Productivity increase: zero. Social benefits: zero. Economic benefits to the nation at large: zero.
Virtually all the loose money created by the Fed is socially useless financial activity, enriching the few at the top of the wealth-power pyramid who own the financial machinery of repo's, derivatives, FX swaps, leverage, and all the other tricks of the financial trade that has completely disconnected from the real-world economy.
The conventional media constantly hypes the fantasy that trade deals matter, holiday sales matter, employment numbers matter--none of that matters. The big money is made by gaming the financial system, buying regulatory approval, i.e. legalized looting, funneling a few measly millions to craven politicos who have zero understanding of how the nation's financial system actually works, and then running a monstrous skimming operation behind the complexity thickets of "modern" finance, which all boil down to the same toxic concoction that's destroyed economies throughout history:
-- The unlimited greed of those at the top.
-- No real oversight or limits on financial gaming of the system.
-- Abundant central-bank loose money to fund speculative activity in rigged markets.
-- 100% socially useless financial activity.
-- No limits on leverage, so every $1 of financial legerdemain can spawn a $100 dollar bet.
-- Total dependence on debt to fund the government, consumer spending, corporate buy-backs-- everything.
This sucker is going down, and sooner than we think. The Fed can create trillions out of thin air and give it to banks, financiers and corporations, but they can't force them to actually invest in the nation's real economy or even buy the assets the Fed so desperately wants them to buy, i.e. stocks.
The banks and financiers have used the Fed's trillions to enrich themselves for eleven years, and nothing will stop their legalized looting except a collapse of the entire machine. The great karmic irony is they've rigged and gamed the system so rapaciously, absolutely confident there's no end to the loose money, that they've overlooked the increasing fragility of the entire system they've ruthlessly exploited.
Once the contagion starts spreading, loose money won't put the fires out. The idols and false gods (The Fed et al.) will fail most spectacularly, and the karmic fury will not abate until the every last skim and every last con has been consumed.
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