I spend a lot of time thinking and reading about macro-economic issues but I’ve never formally studied the area, so it feels strange for me to blog about it.  But the more I read, the more I realize that very few people really know what’s going on, so I might as well join the conversation with the caveat that I don’t know any more than the next person.

What compelled me to write about it was what greeted me when I was reading Newsweek online today:

Note the ads.  Have you ever seen an ad from the FDIC before?  How about three ads for the FDIC on the same page?  If we’re at the point where to government feels compelled to start running an ad campaign to calm people down, I think we have a lot to be worried about.

If the failure of IndyMac and the troubles of Fannie Mae and Freddie Mac this week were at all surprising to you, you may want to consider adding some non-mainstream sources of information to your regular diet of media.  For example:

Seattle Bubble Blog: a great source information about the Seattle Housing market.  It’s very illuminating to view the charts and graphs showing the raw data and then read the quotes from realtors and the mainstream press.

Housing Panic: a hair too much alarmist dogma and too little data for my taste, but still quite good.  I find out lots of interesting things here that I never see in the mainstream media.

Bill Gross’ Investment Outlook (July issue)

And, if you can afford $300/year, Dow Theory Letters is well worth it (I’d pay triple that amount if I had to)

By the way, there’s a ton of press right now about taxpayer bailouts.  In the abstract that concept is annoying, but I don’t think people are getting truly angry yet because everyday people don’t see how it’s going to cost them anything.  Just as our government has done a superb job at figuring out how to conduct a war in such a way that the individual citizen doesn’t feel directly impacted, I think our government has done the same with these types of financial collapses.

So, if the government has to bail out a major financial institution, where do you think that money comes from?

Are we all going to get a bill for our fair share?  No.

Are taxes going to go up?  I doubt it…what politician is going to propose that?

Are programs going to be cut?  I doubt it…what politician is going to propose that?

No, instead the government just prints new money.  And, in the basic world of supply and demand, that means that when new dollars drop in from nowhere, all the existing dollars lose value, and you have inflation.  Try going to www.stockcharts.com and typing in $USD to see how the dollar has been doing over the past few years.

Think prices of food, gas, etc. are already high?  They’re about to get higher, but the increases will be so gradual and so disconnected from the news events that cause them that few people will understand what’s going on.

Some press articles are saying the overall cost of the bailout to taxpayers will be in the trillions of dollars.  For comparison, the current national debt is about $9 trillion right now.