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47% of US investors dependent on the Fed believe they are victimized by government, who believe they
are entitled to enough liquidity to profit when risk is laid-off onto others, to society, to you-name-it…
On September 13th, the Fed announced
QE3, a policy of open-ended
bond purchases which would add $1 trillion annually to the Fed’s
balance sheet. The Fed’s
decision to provide liquidity ad infinitum, i.e. QE etc, was framed in reasonable and carefully chosen language:
…These actions, which together will increase the Committee's
holdings of longer-term securities
by about $85 billion each month
through the end of the year,
should put downward
pressure on longer-term interest
rates, support mortgage markets,
and help to make broader financial conditions more accommodative…
http://www.federalreserve.gov/newsevents/pres...y/20120913a.htm
The measured wording gave the Fed sufficient cover to mask its increasingly
desperate condition, i.e. how to keep its fatally-wounded
credit and debt ponzi-scheme functioning while searching for a solution that doesn’t exist.
CAPITALISM’S
CONSTANTLY COMPOUNDING DEBT IS THE DEVIL’S WHIP OF GROWTH
In capitalist economies, capital,
i.e. money, is introduced
by central banks into the
economy in the form of loans; and because interest constantly compounds, economies must constantly expand in order to pay down and/or service those loans. This is why economists in capitalist systems are obsessed with growth.
Capitalism is, in actuality, a smoke and mirrors shell game where credit
and debt have been substituted
for money; and, as long as capitalism expands no one is the wiser because the fraud is so
subtle. Capitalism, however, is no longer expanding. It is contracting.
Capitalism reached its peak in
2008 when Greenspan’s
historic credit bubble burst. What investors believed was a finely-tuned balancing act between credit
and debt orchestrated by
Fed Chairman Alan Greenspan turned out instead to be a speculative bubble fed by Easy Al’s
easy credit from the Fed’s 24/7
discount window.
While Greenspan presided
over the greatest credit
expansion in the history of capitalism,
Greenspan also presided
over two of its largest speculative bubbles—the 1996-2000 dot.com bubble
and 2002-2007 US real estate bubble.
Greenspan would later refer to evidence of these bubbles as ‘froth’; to those who lost homes and fortunes, it was blood.
THE 1990
JAPANESE NIKKEI – THE MOTHRA OF ALL BUBBLES
The collapse
of Greenspan’s two
massive bubbles followed
the spectacular collapse of the Japanese
Nikkei. The catastrophic crash of Japan’s stock market in 1990 was the world’s largest since the US stock market had collapsed in 1929.
In Time
of the Vulture: How to Survive the Crisis and Prosper in the Process,
I wrote: …fueled by excessive amounts of liquidity, [the price of Japanese real estate and
stocks] exploded upwards.
Japanese real estate prices increased 70 times over
and stock prices increased
over 100-fold, with the Nikkei reaching
a market top at 38,992 in
January 1990.
As with all speculative bubbles, the Nikkei
collapsed—and the collapse of the Nikkei in 1990 unleashed deflationary forces not seen since the Great Depression of
the 1930s. Prices of stocks and real estate in Japan began a long and steep multi-year descent.
Commercial real estate
lost 80 % of its value in
the next decade and the
Nikkei fell from 38,992 in 1990 to 8,237 in 2003. Deflationary cycles are long and protracted
and if not stopped will become deflationary depressions, an economic phenomenon for which there are no ready answers.
In 1990, Japan escaped a complete deflationary collapse only because Easy Al’s credit bubble was underway
in the West. Rising credit-driven
Western demand combined with Japan’s high savings rate helped slow Japan’s inexorable descent
into deflation. Nonetheless, after 1990, Japan would need
to borrow increasingly
large amounts of money in order
to survive and borrow it did.
 
After the 2008 economic rendering, the central banks of
the US, the UK and Europe have joined Japan in the desperate need to constantly increase money-printing to keep
their economies afloat; and while reviving growth is their announced
goal, the unspoken intent
is to avoid a fatal deflationary collapse in demand.
As Credit Suisse recently noted: …Japan’s titanic struggle with private sector de-leveraging has spread to the rest of the developed world. Rapid succession of asset bubbles (at least 12 since 1980) led to the global private sector de-leveraging causing deflationary “winds”,
regularly stalling global
growth and leading to waves of expansionary public sector response.
While
the extent of an asset price collapse in Japan was far more severe than either the Dot.com or Subprime crises, the
basic dynamic of subsequent
response (i.e., private sector moving from borrowing to net lending, forcing public sector into stimulatory monetary and fiscal policies) was essentially the same in Japan in the 1990s as it has been in the US, the UK or Eurozone
since 2008.
https://www.credit-suisse.com/conferences/...20511_japan.pdf
The
Fed, the Bank of England, the European
Central Bank and the Bank of Japan are all having to print more and more
money to keep their economies functioning
CENTRAL BANKES
ARE NOW PRINTING MONEY AD INFINITUM
EVERYTHING
ENDS; EVEN AD INFINITUM
On September 18th, Ambrose Evans-Pritchard’s
commentary in The Telegraph UK was
titled Japan launches QE8 as 20-year slump drags on. Evans-Pritchard noted that QE8, Japan’s latest round of
quantitative easing, i.e. money-printing, is only the latest
of Japan’s serial attempts
to avoid a deflationary
collapse.
Although Japan has survived deflation’s endgame for over 20 years, the
US, the UK and Europe will not be
so lucky—nor, this time, will Japan. With
all major economic zones deflating
simultaneously, the West’s
demise will be far quicker
than Japan’s protracted agony; and when the West collapses, this
time Japan will collapse with it.
The US, Japan, and Europe are all trapped
in deflation’s ever-widening
net, i.e. a constantly expanding liquidity trap.
We’re trapped too—unless we own gold and/or silver.
QE3: THE BANKERS’ MONETARY DEATH MARCH
In 1949, the Austrian economist Ludwig von Mises wrote in Human
Action:
The wavelike movement affecting the economic system,
the recurrence of periods
of boom which are followed
by periods of depression,
is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final
collapse of a boom brought about by credit expansion. The alternative is
only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final
and total catastrophe of the currency system involved
Von Mises words, written in 1949, are being played out today. In the intervening years, bankers did not abandon credit expansion. They did the very opposite. After WWII, bankers continued expanding credit until what von Mises called a crack-up
boom occurred—where
excess credit and money
drive valuations to all time highs
(from 1982-2000 the Dow rose from
777 to 11,723, a increase of 1400% in 18 years).
The collapse
of financial markets in 2008 signaled the beginning of the end; and ever since then, central bankers have been printing more and more money hoping to stave off a final
collapse.
Money-printing,
however, will not prevent capitalism’s systemic collapse. It will, in fact, do the opposite. Collective central bank money-printing will
trigger a final and total
catastrophe of the currency system as von Mises predicted.
In August 2008, target="_blank" in Gold
and the Collapse of Paper Money , I wrote:
We
are about to see a variation of [the Great Depression], except this time it will be worse
because this time sovereign monetary defaults will accompany the defaulting of debt and the contracting of credit. This
time money itself will be a victim. Fiat paper money systems have always ended in failure. This time is no
exception.
QE3 is the beginning of the bankers’ monetary death march. Central banks in Japan, the US and
Europe are now openly engaged in massive monetary debasement, printing more and more money in the futile hope they can
reverse the deflationary collapse now in motion. They can’t.
They can, however, in trying to do so, instead destroy the currency system.
My video, Wake-Up! The Crisis and
the 2-Party System, is especially
timely. Shot on October 29, 2011, it discusses today’s
relevant issues months before
they happened.
Buy gold, buy silver, have faith,
Darryl Robert Schoon
www.survivethecrisis.com
www.drschoon.com
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