The Federal Reserve has announced the end of Quantitative Easing 3. QE is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
Zero Hedge reports that Quantitative Easing which by lowering interest rates and raising the asset values of bonds made the rich $9 trillion richer since 2009. Corporate managers can borrow money at near zero interest to buy their company stock. Buying their stock with borrowed money drives share prices higher. This makes them eligible for bonuses worth millions of dollars. It also allows them to unload their stock options at very high values. An example would be IBM’s “value creation”. Stock buybacks since 2012 $37.7 Billion. Debt issued since 2012 $33.6 Billion
Of course when the Bubble Busts your pensions and your investments will go way down in value. And it will be your privilege to pay the taxes needed to Bail out the wealthy when their investments go sour.
Compare the Federal Reserve to Japan. The Bank of Japan intends to buy $108 billion of Japanese government bonds per month. The BOJ will now buy all of the new bonds that the Ministry of Finance sells in the market each month. This follows Japans 2 -2 -2 policy. Double the money supply in 2 years and hope for a 2% inflation rate.
Alan Greenspan spoke to the Council on Foreign Relations recently. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy. He observed that history shows central banks can only prick bubbles at great economic cost.
“It’s only by bringing the economy down can you burst the bubble,” and that was a step he wasn’t willing to take while helming the Fed, he said. “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner.” (It is possible to end a Bubble painlessly but not with his limited way of thinking.)
Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.
Nobody is even considering paying off the US debt. Someone recently calculated that if we raised taxes to 100% and if the government stopped spending money on everything but debt reduction, it would take 70 years to pay off the debts. But it is not likely that people could live for 70 years without spending money on food, clothes, transportation and shelter.
Total world debt is $223 trillion. $100 trillion is denominated in US dollars.
Credit Default Swaps are depending at your valuation either total $700 trillion or $2 quadrillion.
This cartoon is 100 years old. Americans have been waiting over a century for impartial justice.
Didn’t Eric Holder say, ‘Justice must be impartial, except when it might have a negative impact on the national economy.’ Eric Holder also declined to prosecute his wife and sister-in-law who owned an abortion clinic that had been caught defrauding Medicaid.
Holder might be right about putting crooks in jail destroying this economy. 31% of all new car loans are subprime. We remember Alan Greenspan and subprime home loans. It has always been illegal to make loans to people who cannot pay. And it was illegal for a pension fund to buy worthless bonds and securities. The Bankers used Credit Default Swaps to make it appear that Mortgage Backed Securities were A rated. A CDS pretends to insure a mortgage or a bond. It is not like insuring your car. Normal insurance requires the company set aside funds to pay in case there are car collisions. But CDS are not regulated. You might remember when AIG collapsed taxpayers were forced to bail them out for $187 billion and that they subsequently announced a plan to pay $165 million in bonuses.
Brooksley Born attempted to regulate CDS in 1999. She was the Chair of the Commodities Futures Trading Commission. But Alan Greenspan, Robert Rubin, Larry Summers (Samuelson) and Arthur Levitt paid her a visit and told she was not allowed to regulate CDS.
The US government borrowed $8 trillion to turn over its outstanding debt while adding $1.085 trillion to total debt last year. Gordon Long said, “a third of US GDP is now going to repay interest & principal on loans.”
So what do Bankers think of all this debt? Greenspan did say it was time to buy gold and head for the exits. Bank of America’s Chief Investment Strategist, Michael Hartnett, said that the four “canaries in the coalmine” had died: Commodities, Emerging Markets, High Yield bonds, and Small Cap stocks are four classic “canaries in the coalmine.” They are all dead so where do we go from here?
Ambrose Evans-Pritchard, the chief Financial Editor of the London Telegraph, said if things do not improve that we might have to turn to the Chicago Plan which was first formulated by 8 economists at the University of Chicago in 1933. Their chief spokesman was Irving Fisher.
We have a debt based currency. That means we are not allowed to have money to spend until we go into debt to a bank. That applies to both paper notes and to checking account money. The Chicago Plan says issue a debt free currency like President Lincoln’s Greenbacks.
We have a fractional reserve system which allows a banker to loan out $100,000 or more for every $10,000 in deposits. This adds to demand which causes Bubbles. It leads businessmen to falsely believe that there is real demand for what Bankers have pumped up artificially. And, for example, it can lead home buyers to believe that the price of the home they buy today will go up 10% tomorrow. I should point out that QE was used to buy back trillions of dollars in Mortgage Backed Securities in order to keep Bankers out of jail. MBS was a major factor in forcing the FED to issue $16 trillion in 0.01% loans.
The Chicago Plan does reform the system but we will have to take separate steps to eliminate the corruption.
The Chicago Plan would also issue a non-interest bearing currency. Imagine children playing Monopoly. Suppose the rules were changed so they had to follow the same ones the Federal Reserve forces adults to play with. The kids might object when they learn they have to pay the Banker money every time they did anything. They would quickly learn two lessons. One. These rules aren’t fair. Two. The Banker set the rules up so he wins and you lose.
The question of the day is how do we painlessly prick the multiple Bubbles the Bankers created. One method is the Weimar Republic which used Hyperinflation to devalue debts but since debts are money under our system the ability to buy food was seriously diminished. A second method was 1933 America when foreclosures and bankruptcies cancelled debts but since have a debt based money system it also contracted the money supply. As a result, 3 million Americans starved to death in the 1930s. The longest Depression in American history was in the 19th century. It was called the Great Contraction because the money supply shrank.
Is there a way to cancel debt without shrinking the money supply? Yes there is. It was devised by the Babylonians thousands of years ago. It is called Debt Cancellation. The Romans copied it but abandoned it when they fell away from the Republic. The Bible writers copied it and called it a Jubilee. The plan was to eliminate debt slavery. But the prophet Jeremiah said the reason for the Babylonian captivity was the failure to actually practice the Jubilee. Debt slaves do not make good warriors.
That means to properly cancel debts we have to first convert to debt free money like President Lincoln’s Greenbacks where credit is created without interest as a public utility.
Ambrose Evans-Pritchard in his interview said to a German financial reporter that if things don’t turn around within 2 years, we will have to adopt the Chicago Plan. But notice also that he said it would be inflationary. That need not be. Some think that we might have to issue currency by the railcar load to give people in exchange for their debts.
This need not be. All we have to do is to arrest the Bankers and seize their assets even if that means we have to temporarily invade Lichtenstein, the Cayman Islands and other offshore bank havens. Catherine Austin Fitts said the Bankers stole $40 trillion from us and will steal tens of trillions more. I think she is underestimating the amount of theft. We need to seize those assets including real estate, stocks, bonds and other assets to pay off Unpayable Debts and to fully fund pensions.
Let me conclude with something I have said before:
The Fundamental Fact of Your Existence as a modern man or woman is that the bankers of New York and London want to reduce you to Debt Slavery.
Accept that fact and move on to the solution.
That is their plan for you.
What is your plan for them?