“Asset prices are falling because they were overpriced to begin with—overpriced for the better part of two decades, thanks to the Fed’s easy money policies. When the bubble in asset prices finally popped, not only did asset prices fall, they also dragged down the rest of the economy—this is more or less what we’ve been experiencing for the last three-four years.” — Gonzolo Lira
This coming May 16, the U.S. Federal government debt ceiling will be breached; that is, the national credit card—currently topped at $14,294,000,000,000—will be maxed out. (Yeah, I know: It’s one thing to read “$14 trillion” and quite another to see the actual number, written out with all those zeroes.)
Shortly thereafter, the Federal Reserve’s policy colloquially known as Quantitative Easing-2 (QE-2)—whereby the Fed created $600,000,000,000 of new money, and used it to purchase Treasury bonds—will end.
These two issues seem to be miles apart—notice, seem to be. But they are as intimately related as yin and yang—Mickey and Minnie—Ritz crackers and cheese.
Both policies aim to prop up the sliding U.S. economy, each of them coming at this effort from different directions—one from the demand side, one from the supply side. And the suspension of either policy will result in the exact same thing—government shutdown, and default on the U.S. sovereign debt.
The devaluing is also meant to push money out of safe investments and increase the risk trade. Commodities have been steadily rising, since Bubbles Bernanke gave an ‘August Glimpse’ that he was prepared for another QE sequel. Ben is so concerned with “deflation” he is attempting to re-inflate the beach ball; using the world reserve currency. Our biggest concern is that he want’s inflation so bad, we will end up getting a rather large dose and then he will need to slam on the brakes. (the same as Volcker). Source: Gonzolo Lira (1)
What is QE really?
QE is devaluation, but the Fed has never targeted currency pricing – that is supposedly the responsibility of the US Treasury. The Fed is a private bank. It really is not as interested in the real economy as many are led to believe. It is more interested in banks and their position in the economic hierarchy.
Certainly the Fed has the power to push the dollar down with QE – but that would be taking on a lot of risk for a very fleeting result. More than likely they are aiming at the equivalent of negative interest rates to let the banks earn money on the dead corpse of a former first world country. The zombies must feed first.
The strategy currently unfolding was clear to many two years ago and is exactly what they’re doing, they’re inflating like crazy to make the US federal reserve and US bank’s balance sheets whole again from the housing debacle. The inflation will essentially rob every saver and pensioner and anyone who holds US dollar denominated investments in order to pay for the crimes committed by the US government, federal reserve, Wall street, AIG and banks etc. It’s a no brainer.
Fiat currencies are almost history. It is not precious metals that are replacing paper money, it is energy costs, and more specifically oil.
Brainwashed to think inflation is bad
We have been brainwashed to believe that there is no upside to inflation. When you have a country which has acquired public and private debt that cannot possibly be repaid, there are only two options, either inflate or default. Wide spread default would most likely lead to a collapse of the banking and financial system.
A trade war was waged and lost years ago when the US pursued a strong dollar policy and the Chinese pegged the yuan to the dollar. Good paying manufacturing jobs were traded for cheap chinese manufactured goods. a bad arrangement all round.
Money as energy?
Money is just our interpretation of Energy. The sooner that we start basing our economies on energy, a ‘substance’ that can do work, build and heat homes, move cars and materials, produce fertilizers and transport food and water, the better off we will be. If a group of people have lots of energy even mining or otherwise obtaining great quantities of precious metals is not difficult.
Canada’s currency is essentially a ‘petro-dollar’ now, and the USD has been in decline primarily because they import so much energy (oil). Why keep on kidding ourselves? Why don’t we convert the international currency base unit to the Joule or KWh?