QUANTITATIVE EASING THE KILLER SOLUTION
By Darryl Robert Schoon
By Darryl Robert Schoon
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On September 20, 2008, the Wall
Street Journal wrote:
When government officials surveyed the failing American
financial system this week, they didn't see only a collapsed investment bank or
the surrender of a giant insurance firm. They saw the circulatory system of the
U.S. economy—credit markets—starting to fail.
A similar crisis had happened before
and bankers understood that if the circulatory system, i.e. credit markets, [continued]
to fail, a deflationary collapse in demand even more severe than the Great
Depression would happen.
In 2008, aggregate levels of debt were
far higher than in the 1930s and the consequences would be also. If the 2000
collapse of the US dot.com bubble was an economic heart attack, the 2008economic collapse was a stroke, a
stroke so severe that the usual central bank response, to lower interest rates, did nothing to
revive economic growth.
Fed Chairman Ben Bernanke utilized
Milton Friedman’s ivory tower solution to fix the real world problem that
Greenspan’s Fed had created. At the University of Chicago, Friedman had
theorized that during a severe deflationary contraction, central banks should
expand the money supply to reverse the contraction.
Friedman’s solution, however, didn’t
work. Powerful deflationary forces awakened by the collapse of Greenspan’s two
speculative bubbles, the dot.com and US real estate bubbles, negated Bernanke’s
attempts to expand the money supply.
In capitalist economies, bankers
substitute credit and debt for money; and when large speculative bubbles
collapse, credit disappears leaving only the constantly compounding shadow of
its former self, debt, in its place.
Central bankers are then forced to
inflate the monetary base to keep the now slowing circulatory system of the
economy—credit markets— from collapsing.
WHEN
ALL ELSE FAILS: QUANTITATIVE EASING
Quantitative easing (QE) is an unconventional monetary
policy used by central banks to stimulate the economy when standard monetary
policy has become ineffective.
Lowering interest rates to increase
the circulation of credit and debt is the response of central banks to slowing
demand; but, in 2009, despite Bernanke’s almost zero percent rates, demand
continued to slow forcing Bernanke to implement a highly unorthodox strategy to
keep credit and debt circulating.
Quantitative easing, QE, is another
form of money printing; and while lowering central bank interest rates costs
central bankers nothing, quantitative easing is costly. Monetary aggregates, M2
and M3, are lent into existence by commercial banks through fractional reserve
system;
but
M0 is money
directly created by the FED by borrowing.
The absence of monetary leverage
differentiates expanding the money supply through QE instead of lowering interest rates.
Lowering interest rates to increase M2 and M3 costs bankers nothing; it indebts those
that borrow. Quantitative easing, however, created byFed borrowing, M0, indebts central
bankers themselves.
In 2009, the Fed’s balance sheet
began filling with US Treasury and toxic mortgage debt,e.g.
Maiden Lane LLC, offloaded onto the Fed from AIG which had the requisite greed and
stupidity to insure subprime mortgages; and rather than let AIG fail, the Fed
then rescued AIG by buying its debt and the US Treasury bought its shares.
THE
TREATMENT IS KILLING THE PATIENT
...iatrogenic deaths—i.e. deaths induced inadvertently by a
physician or surgeon or by medical treatment or diagnostic procedures— in the
US annually is 783,936. By comparison, approximately 699,697 Americans died of heart
[disease] in 2001, while 553,251 died of cancer... the American medical system
is itself the leading cause of death and injury in the US.
Gary Null, Death by Medicine, www.webdc.com
On January 29, 2014, in Is A
Currency Crisis Knocking At The Door? Todd Harrison observes that quantitative
easing increases the possibility of a seismic currency ‘readjustment’:
As governments take on more risk --
as they price assets on behalf of the market and transfer debt from private to
public -- the common denominator, or release valve, becomes the currency...and
if we inject drugs that mask the symptoms rather than medicine to cure the
underlying disease, the likelihood of a seismic readjustment increases in kind.
This happened in the 1920s when the
Reichsbank, the German central bank, resorted to currency ‘fixes’ to ‘solve’
underlying systemic stresses in the German economy:
...experimenting with the currency
was like walking a knife-edge. A moderate degree of inflation does not remain moderate
for long. At some point the public loses confidence in the authority’s power to maintain
the value of money, and deserts the currency in panic. p. 126, The Bankers Who Broke The
World, Liaquat Ahamed, 2009
In my 2009 article, Why Gold And Why
Gold Now, I wrote that in combination with adeflationary depression, a monetary
crisis of epic proportions will happen in the US and that gold is the chosen
refuge:
Economic cycles of expansion and
contraction are the inevitable result of central credit flows. So, too, are
deflationary depressions and hyperinflations. Though far less frequent, the
destruction caused by deflationary depressions and hyperinflations more than
make up for their infrequency; and, today, after perhaps the longest absence of
each in recent history, we are now about to experience both—perhaps this time
in tandem.
This will not be just a deflationary
depression, it will be deflationary depression accompanied by a monetary crisis
of epic proportions.
In my new youtube video, Deconstructing
Money and Reality, I address the issues that are now playing a part in the
revolutionary changes moving through our world. See
On February 21/22, I will be
speaking in Las Vegas at the Liberty Mastermind Symposium, February 21/22. For
details see http://libertymastermind.us/
.
The economic crisis is only part of
a much larger and far more significant paradigm shift. Gender, cosmic
polarities, institutions, cultures and consciousness will all be affected. These
are dark times but it is also true that it is darkest before the dawn.
Buy gold, buy silver, have faith.
Darryl Robert Schoon
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Darryl Robert Schoon | Liberty Mastermind Symposium | Las
Vegas ... libertymastermind.us/darryl-robert-schoon/
www.survivethecrisis.com
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