America's "Money Time Bomb": Quantitative Easing is Inflationary
Economics / Quantitative Easing Jan 05, 2011 - 06:09 AM GMTBy: Bob_Chapman
With Ben Bernanke as our Shepard how can we go wrong? He tells us quantitative easing is not inflationary. He says that with assurance because he knows all the CPI statistics are as realistic as a Madoff Ponzi scheme. He also tells us he doesn’t create money out of thin air. He fails to mention that he does so digitally. His job is to further enrich the elitists who own the Fed and want to create a new world order. Prices are up 6-3/4% across the board as official inflation has only risen 1.2%.
Unfortunately, the public does not understand, but they will in time, because a great awakening is taking place. We have made more people understand what is going on in just the past five years, than we did in the previous 50 years. People know something is terribly wrong and their minds are open to the truth. That is something the elitists and their media do not understand.
Yes, there is gullibility among the public as to how finance and economics and monetary policy works, and there should be. Most university graduates don’t know how they work either, nor do they really know what psychological warfare and propaganda are all about. The average American doesn’t know what QE2 is nor have they heard of it. If they had they probably could not connect the Fed’s QE2 with the higher inflation they are currently experiencing. That is not their job that is my job and others like me. Even that in fact tends to be confusing because few analysts and economists agree on anything. Needless to say, much of what is happening is going to be devastating in time. Part of the problem is ignorance and part is denial. People do not want to admit they have been deceived, especially by the leadership of their own country. It is akin to lies and deception by a member of your own family or a long-time friend. Today the world changes very rapidly and so do people and governments. Most people do not or have ever studied history much less economic and monetary history. As you can see there is a major dilemma and there are no quick solutions in the discovery process. That is why education via talk radio and the Internet is a slow process.
Over the past six months MZM money supply has zoomed, up some $475 billion. That, of course, has been accompanied by QE2. Conservatively these two are a one-two money bomb that will explode within the US economy. Yes, it will lift the boats, but the inflationary fallout will be painful in lost purchasing power. It will tend to force up interest rates, an area that is difficult for the Fed to control. During this process the US government has to have major funding, as does European countries, especially in the first quarter. Interest rates will rise and corporate borrowing will be crowded out. That also means European buying of US bonds will slow to a trickle and the ECB, European governments and the Fed will be large buyers of multi-government bond. That means major monetization to go along with increasing MZM. Anyone who cannot envision double-digit inflation is missing the boat. Do governments really think that they can get away with their outrageous lies regarding real inflation? We don’t think so. It is and has been so transparently blatant that even Wall Street in part is questioning official CPI, PPI and employment numbers. What is also very discomforting is that employment will only improve marginally, because of the QE and stimulus 2/3’s os aimed at the financial sector. We hear Wall Street and banking tell us over and over again, give us what we want and need or we will take the financial system down. Well, we have news for them. Go right ahead and do that, because they and we know it’s coming down anyway sooner or later. If they do that deliberately it will be very obvious to all and they will pay a horrible permanent price. Hank Paulson may have gotten away with it once, but it won’t happen again. We know how these people think because we have spent more than 50 years among them. All they care about is money, power and world government. If you can understand that they are just common criminals then you know how to deal with them. Just look at the ongoing scandals one after another aided and abetted by the SEC and CFTC and the legions of lawsuits and fines that do not stop their criminal activities. They can neither admit nor deny, they pay a fine and the next day go out and do it again. Very few ever go to jail. Their biggest sin is getting caught in their criminal endeavors.
Most professionals do not understand what is underway and where this is all headed. They only see a positive affect on the stock market. They do not understand that this avalanche of liquidity will also give us 14% inflation this year, damage the dollar and strengthen gold as the only real money. The Fed has abandoned its legal responsibilities to maintain strong employment and to fight inflation. The Fed is in a panic mode struggling to save the financial sector, which is not what its main mission is. It is not supposed to be bailing out the players who caused the problems. They should not be rewarding the malefactors, some of whom own the Fed. This is nothing less than financial incest. Any tightening of monetary policy or strongly higher interest rates could bring the whole creaking edifice crashing down. That leaves the Fed only one course and they have taken that course already, create money and credit until they cannot anymore. This is where this is all headed.
The Fed’s perception, and that of its masters on Wall Street, is higher commodity prices reflect growth, not coming inflation and a flight to real assets. Inflation officially is 1.2% and the Fed wants it higher. The Fed knows inflation is 6-3/4% and by the end of 2011 it will be 14%. Government will only admit to 5-1/2% and that omits food and energy. If that is so, as they profess, why have government and the Fed for many years suppressed gold and silver prices? The answer, of course, is obvious both government and the Fed perpetually do not tell the truth. The illusion projected by these criminals is that they are saving America when in fact they were the ones who created this mess, and tell us that if we won’t allow them to do what they want they will destroy the system. These denizens of Wall Street, Washington and the Fed as you can see care little for the average America, who has to deal with inflation – some on fixed incomes, as their purchasing power is snatched away by these same people. Thus, the policy of credit and money creation continues unabated as the fed remains ensnared in a trap of its own making.
Americans may not have much interest in gold and silver, but the rest of the world certainly does. India, China, Russia, the Middle East and Europe are gobbling them up and this strong off take has been going on for the past three years. Gold has risen some 20% per year annualized for the past 11 years. Obviously there is consternation across the world pertaining to fiat currencies without gold backing. It has now been seven years since all currencies began falling versus gold. As you can see this is no accident or shot in the dark. This is a trend not seen for many years that will turn out to be the greatest bull market in history. The entire world has problems - the US, England, the Continent and eventually the remainder of the world.
We notice daily speeches and press conferences in Europe assuring people the euro will survive. European elitists are terrified because they know their creation, the euro, is finally going to fail. Europe is in denial, but that won’t change anything. The euro’s failure could well be the seminal movement that tips over the elitists’ apple cart, and leaves them with an irreparable mess. As we said many months ago when the European bailout of $1 trillion was proposed that in order to accomplish this they would need in excess of $3 trillion and that was before Belgium’s problems surfaced. Now the great fear is if the solvent countries continue the bailouts will they collapse as well? Could England and the US be far behind? As the ravages continue Germany and France are talking about a new bailout plan along the lines of what Iceland successfully did to solve its financial problems.
The play would have bondholders share in the losses. Most of the bondholders are banks, which are already on the edge of insolvency, if not already insolvent. In such an arrangement debt would be restructured probably for $0.30 on the dollar. If the banks refuse to go along with the program many will go bankrupt anyway. Few know it, but when this bailout was being discussed, Greece wanted a restructuring and default at $0.50 on the dollar and the Germans were demanding $0.60. We bet they wish now they had taken $0.50. The Germans are not good poker players. They are logical and linear. All these problems in Europe could come to a head by June, but with a sword dangling over the euro zone, investors are flocking to gold and silver. Most of you are probably too young to remember, but from WWII to 1982 Europeans and their governments were very large gold buyers. Gold flows in the European’s blood stream. The launch was 2-1/2 years ago and now buying on the continent is strongly underway.
Under QE2 the Fed will have to issue $1.6 trillion in money and credit one way or another. That will be stimulus plus QE2 or $2.5 trillion, just as we predicted last May. QE3 will be saved for 2012 and the big US elections.
A goodly part of all these problems that the US has, such as unemployment, a stagnant GDP and a balance of payments deficit is not having tariffs to offset the year of currency manipulation by all other governments. That would put a fast stop to it all. The reason it doesn’t happen is that transnational conglomerates, along with Wall Street and banking, owns our House and Senate, and they have no intention of letting their fat cow get slaughtered. If we had those 42,000 businesses and 8.5 million jobs we lost over the past ten years, we wouldn’t be in the fix we are in. the first step is to stop the President and perhaps the House and Senate from giving these elitist transnational conglomerates another tax holiday for $1.9 trillion, that will cost US taxpayers $600 billion, then force Congress to implement tariffs. That will stop foreign currency manipulators in their tracks.
That will devastate China and help keep the dollar from falling from 80 to 40 on the USDX. One thing Ben is right about is that those cheap currencies are killing us and now those countries are dumping dollars as quickly as they earn them instead of buying Treasury and Agency securities. This in addition has in part forced QE2. It’s a way of watering down the US currency and injuring the Chinese because they won’t let their currency strengthen. Is it any wonder silver rose 84%, gold 30% and commodities were big winners last year? Who wants to own depreciating currencies? Investors are getting smart to what is going on. All of Wall Street and other investors are catching on to market manipulation. It is about time. We have been writing and talking about this since 1988.
When all is said and done borrowing money to pay off debt can never work and that is what is going on will end in tears. That is why following today’s major expansion of money and credit, many people will be in even more trouble than they are now. A herd of investors just put almost $700 billion in bonds and they are not going to be happy if rates keep climbing and bonds keep falling. No one is safe in these markets except those in gold and silver shares, coins and bullion.
Perhaps America should rename itself “The States of America Fraud.” It would certainly be fitting. A revisit to the mortgage fraud is now back in the news. Losses in the trillions of dollars are now history.
Global Research Articles by Bob Chapman
© Copyright Bob Chapman , Global Research, 2010
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