As the world economy falters and sinks into the abyss of fiscal deflation, the banksters need a new game plan to rescue their debt created monetary system. Notwithstanding, the Federal Reserve would be hard pressed to introduce negative interest rates in the United States as has been tried and tested abroad. Maybe under circumstances of a total meltdown such desperate measures would be forced upon the public, but as conditions presently exist, another dose of quantitative easing is more likely.
When will the masses wake up? The actual mission of the Fed is to keep and protect international finance solvent with unlimited zero cost money. No doubt the true price of this tactic is to pump up the big banks, starve out local financial institutions, provide liquidity for acquisitions of undervalued companies and force the general public into a downward spiral of their net worth.
In order to understand this quagmire view the primer, QE3 Finished. QE4 Coming Soon! Trillions of Debt Being Covered Up By the Fed!
Growing the economy has become anemic. The myth that adding more debt and monetizing the Fed’s balance sheet to buy up free- falling stocks or using the Plunge Protection Team to speculate in the future markets is pure insanity.
The Money Enigma states in QE4: High Risk, Low Reward the lame response that repeats the same negative results.
“So, why did the Fed become so aggressive in subsequent rounds of QE? The view of The Money Enigma is that the Fed had to up the ante because of diminishing marginal returns to monetary base expansion.”
As for a future QE4 what can be expected?
“The only scenario that may offer a higher near-term reward to further monetary base expansion would be one in which the markets fall precipitously over the next few months. In this scenario, it may be the case that QE can once again be used to “put a floor” under the market and arrest a decline in economic confidence. However, even in this scenario, it is not clear that further rounds of monetary stimulus would work.”
Using logic in analyzing the markets has proven deficient. With the destruction of honest investment or trade in equities, the exchanges have become dens of thieves and vehicles of gambling.
The interminable question is how long can such abuses continue? Zero Hedge provides a stark viewpoint in the article, Forget Rate Hikes: Bridgewater Says QE4 Is Next; Warns World Is Approaching End Of Debt Supercycle.
“That’s where we find ourselves now—i.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.”
Just what does it means when the end of the debt cycle is reached? According to Mac Slavo who quotes Peter Schiff in Everyone Preparing For The Wrong Outcome, points to a very specific outcome.
The Fed has little choice at this point but to print ever-greater quantities of money, and inflate the stock market and the broader artificial appearance that all is normal and well. According to Schiff:
“The Federal Reserve caused all the problems that led to the 2008 financial crisis, and now they’ve made them all worse. So all they can do is keep interest rates at zero.
They’re setting up for another round of quantitative easing. People who think the Federal Reserve is finished printing money – they’re just getting started.”
As stated in the opening, the primary risk is monetary deflation. Since the velocity of money is so curtailed, the consumer economy is struggling at best.
Seeking Alpha offers a different assessment in Fed’s Serious Inflation Risks From Extreme QE Money Printing. However, the deflation vs. inflation equation is not the simple one or the other option in this central banking controlled environment. The SA summary follows:
- The Federal Reserve has nearly quintupled the monetary base in just 7 years since 2008’s stock panic. This extreme money printing can’t be unwound without wreaking havoc on markets.
- So the Fed really has no choice but to let the money supply remain near its vastly-inflated levels today, a harbinger of serious price inflation.
- Such vast amounts of new money really lower the purchasing power of existing money. With relatively more money chasing relatively fewer goods and services, higher general price levels are guaranteed.
There is a straightforward reason why inflation is not the primary phenomenon. Back during the Jimmy Carter era interest rates were so high that many bonds were paying more than 17%. In the zero rate conditions of today, savers are not able to earn a positive return. Yet as borrowers know all too well, the cost of borrowing on a credit card carries an outrageous penalty.
This imbalance has ruled the day since 2008. The consequences accelerate the deflationary pressures to slow down the economy, even in the face of unprecedented credit expansion by the Fed. Obviously, the beneficiaries of this intentional distortion are the corporatists.
QE4 represents the manner upon which crony capitalism needs to operate in order to complete their task of destroying an independent domestic economy.
For decades the argument used by Seeking Alpha has been made based upon fundamental assumptions and ultimate consequences. Nevertheless, the central bankers have circumvented the natural recuperative forces that seek to wash out abnormalities, where a free market actually exists.
The Federal Reserve is wedded to the QE response for a striking motive. It furthers their objective of the command and controlled economy. When will this ridiculousness end? The most likely remedy can only come with the abolishment of monetary debt origination by a private cabal of banksters.
James Hall – October 7, 2015