2010-08-15

Malinvestment Begins With Renewed Vigor

So the Wall Street Journal now reports that junk bonds are being issued at a record pace. For over a year, banks have been holding onto the massive amounts of stimulus money the Federal Reserve has been pumping into the economy. Now it seems that the floodgates are being opened.

These junk bonds are not investment grade. In other words, they're bad debts. Remember what got us into this mess? Bad debts. As this money begins to enter consumers' hands, we will see large-scale inflation. It's impossible to know exactly how much inflation we're talking about here, but chances are, it will be pretty significant.

What will these junk bonds give us, in return? Probably more cheap crap from Asia, more empty Chinese cities, more Vegas casinos that no one goes to, and other stuff you neither need nor want. It is called malinvestment for a reason.