EBT Food Stamp Glitch – A QE Metaphor

Stacey Herbert’s excellent metaphor. The EBT system had a glitch where it removed the spending limit on the EBT cards.

Recipients went crazy and bought everything in the store regardless of price. Without the limit they were given unlimited funds.

This is the same as Bernanke’s QE.

In effect the low-interest rates and QE have given the primary recipients unlimited funds to spend.

What do they do?

Buy everything they can regardless of how much it costs.

And what happens when the Fed “help” stops? The same as happened in Louisiana, the assets will be abandoned.

This will take form of collapsing asset and share prices and the Fed knows it.

The other outcome of the QE is that Wal-Mart refuses to accept the EBT/food stamp cards as payment because they do not want to receive the dollar as payment because they believe it is worthless.

In summary. Either the Fed QE will stop, leading to a collapse in asset and stock prices.

or

The world will stop accepting the dollar as payment leading to a collapse in asset and stock prices.

Once you remove the limit on the EBT card and as soon as the recipients realise there is no limit there is only one possible outcome.

A complete crash in markets at some point in the future.

The only thing that can be done is to reinstate the limit as possible before the problem spread to stores other than Wal-Mart.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s