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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

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    The Stage Has Been Set For Another Credit Crisis

    If you think yesterday's market action was something to worry about, you ain't seen nothing yet.

    President Barack Obama getting re-elected sets the stage for another credit crisis.

    When the president came into office in 2008 he had a mandate to fix the banking system, which consisted of too-big-to-fail banks holding America and its economy hostage to their greedy schemes.

    He swept that mandate under the door of Congress and the Federal Reserve.

    The president has no position on the big banks, and it seems he likes it that way.

    By lightening up on his already watered-down rhetoric about making banks toe the line, he got campaign money from them. So did Congressmen. That money came from the Federal Reserve.

    Now that the president has won a second term, he's not about to fight Congress over their pandering to the big banks, since he's got other things to fight with them over; rather, he's going to advocate a lite-touch going forward to allow banks to continue to strengthen their balance sheets so they can fuel an American recovery.

    It seems to be all happening under the cover of darkness. And, it's not going to work.

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  • future credit crisis