Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Monetary System in Crisis, Currency War Is Leading to Trade War

Politics / Global Financial System Nov 03, 2010 - 11:56 AM GMT

By: Bob_Chapman

Politics

Best Financial Markets Analysis ArticleThe UK, Europe, the US and Canada are different degrees of welfare states. By way of regulation, government controls via taxation. The states and their inhabitants send taxes to Washington, which takes its cut and sends funds back to the states with strings attached. You either do what we want you to do, or we cut off your funds. The states and the people are subject to extortion with government using their funds to do so. By using regulations, welfare and extortion, the federal government creates dependency.


Another phenomenon that has developed is a second dependency. People in society, not just in the US, but also in many countries, are dependent on their grandparents and parents and as years progress that situation will worsen. Earning power to maintain a previous lifestyle is no longer available with the staggering tax burden. Including income and VAT taxes in Europe, taxation averages 70%. The ability and opportunity to become successful and wealthy is more limited in today’s societies. Even the college degree has been demeaned. Almost anyone who can hold a pencil today is college material, when 60% of attendees shouldn’t even be there. Adding insult, the jobs once available to college attendees are no longer available, because more often then not illegal aliens hold them. As a result, it is far more difficult to work your way through college and as a result one graduates with a loan for $60,000 that will be paid back in many cases over a lifetime. In most cases that means most won’t be able to afford to buy a house until they are in the 30s or 40, if ever.

Since 1913 the basis for growth in America has been creation of debt out of thin air, a product of the privately owned Federal Reserve and a fractional banking system. It is considered prudent under such a system to lend nine times your underlying assets. Several years ago the figure was 70 and today it is still 40 times. Government and citizens purchase economic goods on credit. Government issues bonds and individuals borrow money.

Today money is only a method of exchange; it is not longer a store of value, especially in an environment of zero interest rates. An important characteristic of money to retain its soundness is gold backing. Today only one currency has any gold backing and that is the euro, which has about 5% gold backing. Ten years ago that backing was 15%, but gold was sold off to suppress the price of gold in conjunction with the US government and many other central banks. As a result we have a world of essentially worthless fiat currencies. The world is left with no sound money and as a result gold has again taken its place as the world’s reserve currency. If for no other reason is that it owes no one anything. Occasionally silver fulfills this role as well - both have for the last six centuries.

Financial operations conducted by government and a privately owned Federal Reserve leads to the extended creation of money and credit exceeding revenues. That leads to inflation, perhaps hyperinflation, and some times eventually deflationary depression. This is especially true when currency is not backed by gold. Having a Federal Reserve makes sound money even more difficult, because it can create endless amounts of money and credit as we have witnessed since August 15, 1971. What the banks and the Federal Reserve have done is use the fractional banking system to steal and expropriate the wealth of dollar owners. Such a system by its very nature is unsound. There is no such thing as full faith and credit, because it is not worth the paper it is written on, whether it is issued by a Federal Reserve or by a government, especially if it’s fiat or unbacked by something such as gold. This money leads to servitude because as it carries less value perpetually and the discovery leads to war and totalitarian government.

A recent manifestation of this profligacy is the urging by government for consumers to consume more with their steadily depreciating currency and to stop paying off debt. At the same time interest rates are lowered to zero to encourage consumption. Needless to say, savers are penalized with poor returns. That is for the most part the elderly. Such policy forces savers to become speculators, unless, of course, they have discovered gold and silver related investments. This process reduces the savings base and forces central banks to create more and more aggregates. It also enrages savers. The entire game has been changed and for the most part few have learned how to protect themselves.

The foregoing allows the Dow to sell at higher levels than previously because a part of those savings go into the stock market and bonds. If you haven’t noticed the bond market is in a bubble created by the Fed. You would think there was some kind of safety in stocks and bonds. Then again, desperate people do desperate things. If you want to see what safety in bonds is, just look at Britain’s bond markets since WWII. This is the sort of result you can expect when you marry corporations and government, and you end up with corporatist fascism.

By the time you read this the US congressional elections will be over and the Democrats will have lost about 50 House seats and probably 9 Senate seats. The American people are outraged over what has been done to them by the last three administrations.

As a result gold has been rising strongly, as the dollar remains under pressure. This in part is due to QE2, as well as the systemic problems facing the US economy. Spending the economy into strength again is not working. The only party increasing spending is the government. They also reflect most of the job growth. Private construction was the weakest in a dozen years.

This is reflected as well in government debt up $1.65 trillion to $13.5 trillion. The government is so deep in debt it cannot sell more debt fast enough to keep up with increases and old debt. The Fed has to purchase 80% of that debt, which cannot continue indefinitely. The result of all this is that the US lurches from one crisis to another.

As always bankers have been borrowing short to lend long, a sure recipe for disaster. That leads us to one of the greatest frauds of the century, the collapse of the real estate market and securitized mortgages. In order to survive banks are borrowing from the Fed at zero rates and lending back to them at 2-1/2%. No one says anything because no one wants the banks to fail. No matter what you call it the result is extending the debt timeline hoping something good will happen

Over the past few weeks we have seen the beginnings of trade war, which in reality had been going on for years. The statements by Chairman of the Fed, Bernanke, and statements as well by Treasury Secretary Geithner, started the ball rolling. The discussion of a possible QE2 set off wild currency volatility with the dollar falling the most and the yen, euro and Aussie dollars being the strongest. The Swiss franc shared leadership with the yen. While this transpired Mr. Geithner told the world the government wanted a strong dollar and that its lower level was just about right.

The significance of currency war is that inevitably leads to trade war. You might call it a backdoor entry. The string of competitive devaluations over the years were overlooked and tolerated by the US because cheap foreign goods held down US inflation and the dollars purchased to subdue domestic currency value were used to buy US Treasuries and Agencies. That benefit was now of limited benefit as nations bought less Treasuries and the Fed had to monetize US Treasury debt. This has and will continue to bottle up inflation to a larger degree in the US, as less hot US dollar flow goes into foreign countries. Countries such as Brazil have already implemented a tax on dollar flows into their country. We can expect more countries to follow and that will be followed by US trade taxes on goods and services. We have already started to see this in goods sold in China and the US. The US wants to increase exports and a weaker dollar makes that happen.

The Fed via stealth has been engaged in QE2 since early June via the bond and repo markets and Wall Street is well aware of that. The easing is talked to in terms of $500 billion over the short term in order to keep the economy level to slightly higher. Some $2.5 trillion will be needed over the next year and another 42.5 trillion the following year. If not forthcoming deflation will rear its ugly head and devour the US and then the world economy. In the meantime the secretive Fed has been surreptitiously lending more funds to Europe to Greece, Ireland, Spain, Portugal and Italy.

The deliberately cheapened Chinese yuan has caused a $260 billion trade deficit with China, or a 20% plus increase. That is a doubling in 10 years from 20% to 40% of its trade deficit. China says it is willing to raise the value of the yuan incrementally over the next several years, but that simply isn’t good enough. We believe trade barriers will become a major issue in the coming session of Congress. The transnational conglomerates know such a move is inevitable. The US has to find a way to solve growing unemployment, which in the real world now stands at 22-3/4%. You cannot have a recovery as long as that many people are unemployed. In addition, those numbers are headed higher, soon to reach 1930’s depression levels. This is something that should have been done long ago, but the elitist forces fought it off as long as possible. The end of free trade and globalization, as we have known it, over the past 20 years will be one of the bigger issues in congress over the next two years. When the yuan is 40% undervalued it becomes a major issue.

The flip side of the immediate problem of QE2 and a lower dollar is higher gold, silver and commodity prices, and an increase in inflation. Mr. Bernanke says we need inflation. Not a lot just a little. Official CPI figures are up 1.6%, whereas real inflation has risen 7% and is headed higher. It’s tough being between the rock and the hard place and that is where the Fed sits. It’s expanded money and credit for banking and Wall Street so no one will be too big to fail.

This issue will hit the streets prior to all the election results being known.

Just as big news will be how much QE2 will be admitted to by the Fed and besides Treasuries and Agencies, how much and what other bonds will the Fed purchase? After we find out how money will be injected into the system we then have to discern how much inflation it will foster.

Theinternationalforcaster.com

Global Research Articles by Bob Chapman

© Copyright Bob Chapman , Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in