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Friday, 2 December 2011

Economic disaster averted?

The US Federal Reserve has fooled a lot of people into believing that the grand monetary pump and debt monetization project has been put on hold. The only thing that changed was their talking publicly about it. The money press has been working to the limit, never stopped. The discussion has been kept quiet, but the machinery still operates with vigor. The proof is not statements by central bankers, but the data from the monetary aggregate. The data is compelling. The conclusion to reach is that Quantitative Easing has become the norm, the foundation policy, the emergency action to prevent implosion of the US banking system. Hyper monetary inflation is the New Normal.

The increase in the money supply has gone parabolic
The end is nigh, but not till after the US elections.
The mainstream analysts are only beginning to notice that the credit-based system is collapsing, while the central bankers have been busy turning off alarms, and the inflation engines labor on. Von Mises put it so clearly, that inflation always has been a matter of money growth.It always will be.

Notice in the yearly monetary aggregate chart, where ticks are full years, that the 2010 and 2011 years show a steady linear growth. The money supply never stopped growing in summer 2011. The fictional June deadline came and went, and nothing changed, only the words from the increasingly desperate central bankers. The money supply is still growing.

The data contradicts the premise that the QE program was terminated. Easily explained. The initiative turned global to produce Global QE. The USFed has been accommodating the Europeans and Wall Street banks, so that the teetering insolvent big Euro banks can be propped with more effortless money of diminishing value.

The massive Swap Facility announcement of the 30th November served as an exclamation point, in reaction to a near calamity as numerous big European banks almost failed. The official story omitted that detail.

One must make conclusions without the aid of the financial press. The Euro Central Bank has drawn in heavy volume from the USFed Dollar Swap Facility. Without bond market buyers, the EuroCB has reluctantly filled the void and has been buying the Italian Govt Bonds.

Recall that big Euro banks are huge sellers of sovereign bonds. The USFed never stopped printing money to buy USTreasury Bonds, which ramps up each month as USGovt debt piles up each month. Recall that foreign creditors are net sellers of USTBonds. The USTBond auctions have not failed, and for a reason. The USFed is buyer of last resort.

Where the bids came from has been kept quite secretive. It is the USFed, which never stopped QE, and a few dutiful allied central banks. In fact, Global QE is the mainline policy nowadays, and it has turned into hyper-inflation without the fanfare. Many enlightened people are wondering if QE3 will emerge when QE never ended!!


The big Euro banks are selling boatloads of bonds. But on the other side of the table, the Euro Central Bank is buying only truckloads. The net is still an exodus, thus rising bond yields. Wondering why sovereign bond yields in Spain, Italy, and even France are still rising if the EuroCB has entered the arena with both hands buying the bonds, however reluctantly. Remember the initial pronouncements by the new EuroCB head Draghi, that he did not want to buy government bonds. Their purchase volume is inadequate to meet the task. The European Govt Bond market is in freefall. The only way to stop it is vast recapitalization of the entire US & London and European banks at a cost of $4 to $5 trillion.

When the Powerz and Technocrat generals flip the switch and make the decisions, Gold will then go to $3000 and beyond. Similar for silver, going to $80 and beyond. The enormous required volume makes necessity a gradual approach, moving the amount up in steps, kind of like the amount of MFGlobal money missing (stolen).

The Americans falsely believe they are better off. But within the United States, tremendous multi-$trillions in mortgage bonds must be financed alongside multi-$trillions in state & municipal bonds alongside multi-$trillions in USTreasury Bonds, against a backdrop of war costs that have entered into the multi-$trillions. The United States is many times worse off than Europe, but its condition is concealed by a managed printing press operating in the shadows. The alternatives are systemic failure or hyper monetary inflation, centered in the US and extended into Europe.


Focus on suppressed long-term interest rates and their consequences. They are broad and horrendous. The US captains of the derelict vessel traveling in icy waters filled with icebergs boast that the USEconomy benefits from ultra-low interest rates. They believe that Americans are better off than the Europeans who are in shock from rising rates, a flash of reality during a debt crisis. Take the time to review some powerful consequences of interest rates kept low for years, in violation of permitting them to rise at least to the prevailing price inflation rate. Suppressing the 10-year bond yield has dire consequences. Some but not all of them appear unintended. The Powerz and their henchmen want unlimited easy money for sure. But in doing so, they permit some horrendous developments like feeding a cancer.
1) Savers are given nothing in interest yield, no reward which actually slows the economy since more savings than consumer debt while at the same time causes asset erosion from the higher inflation.
2) Banks are encouraged to continue holding their home inventory which means the housing market decline will continue for at least 2 to 3 years since banks have no incentive to clear their inventory and enable healing.
3) Big banks will continue their USTreasury Bond carry trade schemes to replenish capital which results in emphasis on speculation instead of business capital formation as the largest banks are no longer true partners to the business sector.
4) Investment banks are encouraged to continue their reckless speculation as they only know speculation, and invest heavily in machinations, not machinery which inhibit actual business investment that produces jobs.
5) The USFed believes it can expand its balance sheet to buy toxic assets with cheap money which further cripples the central bank and renders impossible some regular functions and prevents it from revealing its own dead condition.
6) The USGovt is not discouraged from deficit reduction since it believes it has much more time to fix its condition, but daudles instead which will lead eventually to massive inflation, debt default, and systemic failure.
7) When the cost of money is forcibly set near 0%, the entire valuation system is skewed rendering all financial markets as improperly valued, and capital of low worth.

 “Can there be any more drastic attempt at a free lunch than suppressing the market interest rate for 10-years in order to build a more perfect union?"

Drowning in liquidity, the masters of the American chapter of the Fascist Business Model have created a black hole in the form of a gigantic sinkhole. These natural wonders off Belize and in South Africa are incredible anomalies. After the liquidity is drained off during the counter-productive de-leveraging process, the hole will be more visible. However, the more accurate picture can be seen with money juxtaposed within a monetary swirl located at the Dollar control centers.

Always keep in mind the true value of the USDollar. It will revert to the innate value of every fiat currency in history, even if defended to the hilt. Some maintain shallow beliefs that the Dollar Empire will never fade or endure a sunset. They are delusional and poor students of history.

Behold the timeless resilient brilliant enduring beauty of gold bars.


The grand divergence is moving along apace. The physical gold market price lies 10% to 15% above the distorted paper gold market dominated by futures contracts. The MFGlobal event concealed a default failure, whose details will come to light gradually. The physical silver market price lies 25% to 35% above the distorted paper silver market dominated by futures contracts. One can only wonder what the prices would be without the illicit confiscation of private segregated accounts that has recently occurred at MFGlobal. The price divergence will continue to grow and widen until some form of collapse at the exchange occurs. The market always prevails, as societies and regimes come and go, even empires.