by Axel Merk
This post is one in a series from respected guest commentators while Chris is away on vacation with his family & working on his new book. Chris returns next week; enjoy the fresh perspective in the meantime.
Will U.S. policymakers cause another financial catastrophe and destroy the U.S. dollar by focusing on their own short-sighted political interests? Or will economic reason prevail? While we wish for the latter, we fear the former is much more likely. Unless real reform of Fannie Mae and its smaller cousin Freddie Mac (together the Government Sponsored Entities, or GSEs) is implemented, the consequences for all of us may be dire. Investors may want to take this into consideration when making investment decisions. Future implications may put downward pressure on the U.S. dollar; investments into more fiscally-stable and prudent countries displaying sound monetary policy may become ever more attractive.
Politicians may be about to embark on an economic mistake of historic proportions. Social subsidies may make good politics, but all too often they make bad economics. When Fannie Mae was created in 1938, the seeds were planted for the biggest housing bust the world has ever seen; the going was good while the party lasted for the first 80 years, but the hangover after it ended in the financial crisis of 2008 still remains. In 2008, in an attempt to prevent financial disaster, the government embarked on the largest bailout in history: The GSEs were put into conservatorship, making the previous implicit government guarantee just about as explicit as is possible.
Now, it appears the proposed “reform” of these entities only has stakeholders in the status quo; we are concerned that this may ultimately open old wounds, and next time the U.S.
by machinehead 
