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Quantitative Easing Worked For The Weimar Republic For A Little While Too


By Michael Snyder

Wheelbarrow of Money

There is a reason why every fiat currency in the history of the world has eventually failed.  At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money.  Sometimes, the motivation for doing this is good.  When an economy is really struggling, those that have been entrusted with the management of that economy can easily fall for the lie that things would be better if people just had “more money”.  Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago.  Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt.  Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose.  The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it.  But quantitative easing worked for the Weimar Republic for a little while too.  At first, more money caused economic activity to increase and unemployment was low.  But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today.  This is the path thatthe Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.

It is really easy to start printing money, but it is incredibly hard to stop.  Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit.  The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point…

The danger with addictions is they tend to become increasingly compulsive. That might be one moral of this week’s events.

A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85 billion monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift.

Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.

So why won’t the Fed cut back on the reckless money printing?

Well, as Peter Schiff recently noted, Fed officials seem to be convinced that any “tapering” could result in the bursting of the massive financial bubbles that they have created…

The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.

As I have written about previously, the Federal Reserve is usually very careful not to do anything which will hurt the short-term interests of the financial markets and the big banks.

But at this point the Fed is caught in a trap.  If it continues to pump, the financial bubbles that it has created will get even worse.  If it stops, those bubbles will burst.  But as Doug Kass noted recently, it is inevitable that these financial bubbles will burst at some point one way or another…

“Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”

In essence, we can have disaster now or disaster later.

But most Americans don’t care much about what is happening on Wall Street.  They just want economic conditions to get better for them and for those around them.  And to this day, the mainstream media continues to sell quantitative easing to the American people as an “economic stimulus” program by the Federal Reserve.

So has quantitative easing actually been good for the U.S. economy?

Not really.

For example, while the Fed has been recklessly printing money out of thin air, household incomes have actually been going down for five years in a row

Real Median Household Income

What about employment?

Don’t more Americans have jobs now?

Actually, that is not the case at all.  Posted below is a chart that shows how the percentage of working age Americans with a job has changed since the year 2000.  As you can see, the employment to population ratio fell from about 63 percent before the last recession down to underneath 59 percent at the end of 2009 and it has stayed there ever since

Employment-Population Ratio 2013

So where is the “employment recovery”?

Can you point it out to me?  Because I have been staring at this chart for a long time and I still can’t find it.

So if quantitative easing has not been good for average Americans, who has it been good for?

The wealthy, of course.

Just check out what billionaire hedge fund manager Stanley Druckenmillertold CNBC about quantitative easing the other day…

This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.

“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”

Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”

“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”

Sadly, Druckenmiller is exactly correct.

Since the end of the last recession, the Dow has been on an unprecedented tear…

Dow Jones Industrial Average

Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don’t really care.

Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term.  Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.

We have now entered a money printing spiral from which there is no easy exit.  According to Graham Summers, the Fed has “crossed the Rubicon” and we are now “in the End Game”…

If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.

Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.

Most Americans don’t really understand what quantitative easing is, and most don’t really try to understand it because “quantitative easing” sounds very complicated.

But it really isn’t that complicated.

The Federal Reserve is creating gigantic mountains of money out of thin air every month, and the Fed is using all of that newly created money to buy government debt and mortgage-backed securities.  Over the past several years, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington though the end of the presidency of Bill Clinton

The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBS) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBS than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.

To say that this is a desperate move by the Fed would be a massive understatement.  We have never seen anything like this before in U.S. history.

And look at what all of this wild money printing has done to our money supply…

M1 Money Supply

In many ways, the chart above is reminiscent of what the Weimar Republic did during the early years of their hyperinflationary spiral…

Hyperinflation Weimar Republic

Just like the Weimar Republic, our money supply is beginning to grow at an exponential pace.

So far, complete and total disaster has not struck, so most people think that everything must be okay.

But it is not.

In a previous article, I included an outstanding illustration from Simon Black that I think would be extremely helpful here as well…

Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.

Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.

But let’s assume that it’s an exponential leak.

At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.

Are you starting to get the picture?

What the Federal Reserve is doing is systematically destroying the U.S. dollar, and the rest of the world is starting to take notice.

Why should they continue to lend us trillions of dollars at super low interest rates when we are exploding the size of our money supply?

It is simply not rational for other nations to continue to lend us money at less than 3 percent a year when the real rate of inflation is somewherearound 8 to 10 percent and reckless money printing by the Fed threatens to greatly accelerate the devaluation of our currency.

When QE first started, the added demand for U.S. government debt by the Federal Reserve helped drive long-term interest rates down to record low levels.

But in the long-term, the only rational response by all other buyers of U.S. government debt will be to demand a much higher rate of return because of the rapid devaluation of U.S. currency.

So QE drives down long-term interest rates in the short-term, but in the long-term the only rational direction for long-term interest rates to go is much, much higher and in recent months we have already started to see this.

The only way that the Fed can stop this is by increasing the amount of quantitative easing.

Right now, the Fed is buying roughly half a trillion dollars worth of U.S. Treasuries a year, but the U.S. government issues close to a trillion dollars of new debt and must roll over about 3 trillion dollars of existing debt each year.

If the Federal Reserve eventually decides to buy all of the debt, then interest rates won’t be a major problem.  But if the Fed goes that far our financial system would be regarded as a total joke by the remainder of the globe and we would reach hyperinflation much more rapidly.

If the Federal Reserve stops buying debt completely, the financial bubbles that they have created will burst and we will rapidly be facing a financial crisis even worse than what we experienced back in 2008.

But almost whatever the Fed does at this point, the rest of the world will probably continue to start to move away from the U.S. dollar as the de facto reserve currency of the planet.  This move is just beginning, but it is going to have major implications for us in the years ahead.  This is a topic that I will be addressing extensively in future articles.

Most of the debate about quantitative easing has focused on the impact that it will have on the U.S. economy in the short-term.

That is a huge mistake.

Of much greatest importance is what quantitative easing means for the long-term.

The rest of the world is losing confidence in the U.S. dollar and in U.S. debt because of the reckless money printing that the Fed has been doing.

But we desperately need the rest of the world to use “the petrodollar” and to lend us the money that we need to pay our bills.

As the rest of the planet starts to reject the U.S. dollar and starts to demand a much higher rate of return to lend us money, the U.S. economy is going to experience a tremendous amount of pain.

It is hard to put into words how foolish the Federal Reserve has been.  The Fed is systematically destroying what was once the strongest financial system in the world, and in the end we are all going to pay the price.

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  • Carroll Price

    The Jewish dominated banking cartel that drove Germany to a state of financial ruin, is the same Jewish dominated banking cartel that’s driving the US, and the rest of the Western World to a similar state.

    • Shaun

      Racist, anti-Semite, denier.

    • BonusGift

      Please not so loud, as that sort of truth is not to be mentioned, that is, at least according to those that control the mainstream media (hint: the same people with the same religious affiliation). Here’s another fact from Wikipedia: “Rudolf E. A. Havenstein (10 March 1857 – 20 November 1923) was a Jewish German lawyer and president of the Reichsbank (German central bank) during the hyperinflation of 1921-1923.” And out of curiosity what religious affiliation did the U.S. central bank head(s) (Greenspan, Bernanke, or even the prospective chairman) responsible for our ‘financial crisis’ possess? Wow, what a coincidence and to think that they are less than 2% of the population yet have a lock on that position, and furthermore coincidentally had control during the Weimar Republic hyperinflation and depression! Sarc. off. We really do live in an odd time where the truth is off limits and especially if it implicates the parasites responsible for the economic and societal collapse.

      • straight shooter

        Again–“religious affiliation?” The elite of whom you speak are not religious, at least not in the way you comprehend. Their dominance has absolutely nothing to do with the Jewish religion as we know it, regardless of whatever prejudice you’ve absorbed. If any real change is to be effected long term, we all need to develop a deeper understanding of the true nature of the elite power structure and get past framing this in an anti-Semitic context. To do so is useless and irrelevant, and will not produce anything of value.

        • BonusGift

          So the fact that they all claim to be part of the same religion has nothing to do with anything? That was rhetorical, don’t be so naïve. If you have a point make it but don’t play the game of name calling while not making a concrete point. Facts are facts and that hardly equates to your paranoid view of ‘prejudice’.

    • straight shooter

      The cartel is the problem for sure, but please stop focusing on the Jewish aspect, as it just makes you sound like every other ignorant anti-semite. Technically, many of them are descended from the Khazars, who are not even Jewish. 99% percent of all actual Jews are not part of the cartel, and simply want to live a good life just as you do. There are also plenty of non-Jews in the power elite, and the Jewish ones don’t care an iota about their so-called religion or the plight of other Jews, or anyone else.

      • Queenbee

        The real Khazar Jews are a race not a religion. This quaint, fragrant little religion they hide behind is nothing but a cover. Khazarian Jews are the most caricatured tribe on the planet due to their racial features and every county in the world has booted them out at one time or another based on their race. This tribe are in charge of the worlds banks and the media. Certainly there are a few Kosher Goy helpers but they do not benefit in the long run, only the Jews benefit. It is no coincidence where the evidence about 9/11 leads to and who just benefits from have every country and culture destroyed and slaughtered that is in close proximity to that ‘shitty little country’ All these Jews who want ‘a good life’ are they the ones butchering the Palestinians every day and stealing their land?

        • straight shooter

          No, the Zionists neo-cons are the ones slaughtering innocent Palestinians. Most Jews in Israel (and elsewhere) would just as soon have peaceful co-existence. But that idea cannot be transmitted through the Zionist-owned media, who distort everything for their own gain. One doesn’t have to be a Jew to be a Zionist, by the way–Joe Biden proudly claims affiliation, for instance. We need to start making a distinction between the Zionists–who are exploiting the plight of Jews everywhere for their own gain, and most Jews, who are not running the cartel and are no more in control of anything than the rest of us.

      • PJ London

        The fact that 99% of the Jewish population are not part of the cartel is irrelevant. The point that 99% of the cartel is Jewish, makes it a Jewish cartel.

        “There are also plenty of non-Jews in the power elite” That may be true at the second or third tier, but not amongst the financial-power-controlling-elite.

        Writing this does not make me anti-semitic.

        Andrew Jackson, US President from 1829-1837, was so enraged by the tactics of bankers (Rothschilds) that he said: “You are a den of vipers. I intend to rout you out and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.”

        • Tessa

          Anti-Semitic? That is pertaining to a ‘race’, the Semites (Palestinians). You cannot carry on shouting Semite and then squawking “we are only a religion” the two cannot co-exist. Hitler, in Mein Kampf described them as a race. The Germans booted them out on the basis of race and within a year their country was in full recovery. The recovery was so profound, that Germany had to be destroyed in case others noticed and it set off a chain reaction.

          • PJ London

            Did you actually read my comment, or are you just ranting off?

            Please read the first sentence, (that is the part before the full stop) and then spend a little time in contemplation of that which I wrote.

            Now; “Semite” does not relate to “Race” so please try to not show your ignorance. I have lived and worked in “Semitic” countries, i.e. they spoke a semitic language. Whilst Palestinians may indeed be Semitic, so too are many (most) people living in the whole of the middle east. The term Semite means a member of any of various ancient and modern Semitic-speaking peoples originating in the Near East, including; Akkadians(Assyrians and Babylonians), Eblaites, Ugarites, Canaanites, Phoenicians(including Carthaginians), Hebrews (Israelites, Judeans and Samaritans),Ahlamu, Arameans, Chaldeans, Amorites, Moabites, Edomites, Hyksos, Arabs,Nabateans, Maganites, Shebans, Sutu, Ubarites, Dilmunites, Bahranis, Maltese,Mandaeans, Sabians, Syriacs, Mhallami, Amalekites, Palmyrans and Ethiopian Semites. (Wikipedia)

            Anthropologists of the 19th century aligned linguistic groupings with ethnicity and culture, appealing to anecdote, science and folklore in their efforts to define (create) a racial character

            I do not need a nonsensical history lesson from you or anyone else. The Germans did not “Boot them out” but restricted their governmental and commercial activity. They treated those who did not leave, better than the Japanese were treated,who had the misfortune to be in America in 1943.

            There were 150,000 Jewish soldiers in the Werhmacht.

          • Bromide

            Originating from the Middle-East, races of people, exactly as one might describe Aryan races from Europe or Negro races from Africa. Races can make up many different sub groups. Your conformist copy and paste from the Marxist Wikipedia does you little credit. The Germans did ‘boot them out’ through a network of transportation and labour camps heading to the East, whence the Khazarian race originally came from. pre-war they were sent anywhere in the world to countries that would take them, unfortunately not many wanted them as they have a history of being unsavoury types. There were Jews in the German armed forces, but a small percentage when compared to the amount that were transported out of the Reich. What a post-war lefty you are. Are you genuinely trying to put forth the Negro race is the same as the European race? I know you lefties are disgusted by race and you want a world devoid of individuality, culture or heritage. Basically a pointless herd of disposable, bovine, spiritualess degeneracy dispossessed of all individuality. You could model it on one of the most diseased environments in history, America, a cesspit of dysfunctional backwardness, servile to the Jewish banking system. Wouldn’t it be nice to go anywhere in the world just to see that? This is why the Middle-East is being destroyed by the Jewish mafia, so as to destroy their cultures and customs, defile them with immigration and sexual deviance. The post-war lefty is the most murderous, evil, maliocious and destructive force the earth has ever had to deal with. Since the end of the second world war the lefty has wrought untold damage to the world and nearly destroyed it in less than three-quarters of a century. What misery and loathing left-wingers illicit, how they hate nature and anything wholesome. By far the biggest m ass-murderers in history as well, destruction oozes from their pores.

        • straight shooter

          Yes, I know the quote well, and Jackson was, in my view, among the best presidents ever for that reason. My point is that the Rothschild-backed Zionist/neo-con/military industrial complex pulls all the strings but is more than happy to stand in the shadows and watch while most just blame “the Jews” for all the ills of the world. It’s just way too simplistic a view in my opinion, and I will shed light on the distinction whenever I can.

  • Truthist

    ahhh… so I click the ‘vote up’ button on Carroll’s post about Jewish banksters and it shows a -1, yet when I up vote my own it works fine…. what gives?

    • Eat at Joe’s

      I had same problems on another site that uses Disqus.
      Found that if you hold left click rather than tap it- that works.
      Sometimes just keep clicking and it registers.
      If none of that works I usually just slap the monitor screen good- that usually does it

  • Steve3

    Deliberate take down, and transfer of the wealth to the uber rich.

  • PJ London

    I may be mistaken but in my view there is a fundamental difference between the Weimar (and Zimbabwe) pumping of money and the QE of USA, EU and UK.

    In Weimar Germany and Zimbabwe, the money was put into general circulation by the governments to pay on going expenses, salaries and infrastructure. This led to an excess of currency compared to goods, thus price inflation. In QE, the money has stayed on the balance sheets of banks, and a portion used to gamble on equities and derivatives, to cover their losses on mortgages, and of course a small percentage has gone to bonuses (which then, mainly, were put into stocks and bonds). The remainder sits in the Reserve bank as Liquidity, to preserve the fiction that the banks can pay their debts.

    If they pull the money, or merely stop pumping, then at the beginning, the “Plumber Joes (PJ)” in the street would hardly notice, but those invested in equities and bonds will carry huge losses, when the bonds and treasuries default. The banks could not cover their client’s deposits and “Bail-in” will strip PJ of his savings. Of course his private pension, will also disappear, as the government had decreed that the only “Safe Haven” is in government and tier one banks, forcing pension investors to heavily hold these, now worthless, assets.

    Unless they find a way to distribute the QE to the masses (a la S Korea) I expect to find that there will be deflation and total loss of household/commercial asset value. Banks, possibly from overseas, will snap up all these assets from starving owners, as per Germany 1920-1930.

    Thomas Jefferson

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    Ernest Hemingway
    “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” –

    • Michael Evans

      Over half of the QE created money is going directly to the Federal Government to pay for the T-bills. This money is being circulated. However we are still experiencing some asset deflation which is offsetting that money. This will go on for a couple of years at most and then we are Weimar Germany. You will know when QE is increased. It will never decrease until the currency is destroyed.

  • C101

    You’ve been doing your home work. Now if only people like are friend Carroll here could learn their history and stop blaming the Jews we’d be one step closer at exposing the culprits. What looks like a Jew, smells like a Jew and acts like a jew isn’t always a jew.

  • Deutcher Konig

    We’re on easy street. First step, shut down all the water canals leading to Israel while simultaneously seizing the assets of all central bank share holders. All members of AIPAC, ADL, JDL etc. also moved into fema style camps. Feed them well…all the Manischewitzand & latkas their little Hymie hearts desire. All the gold stored underground in Tel Aviv, give it to the Germans for reparations for all the death and theft due to their setting up the Reich.

    So, Congress forgives all debts, gives China a note and pat on their little nip heads, shut down the IRS, DHS, DOE, DEA and provide incentives to bring back manufacturing to the states. Easy as pie once we get the leeches off our proverbial backs. BTW, all congress critters fired and replaced by a lotto system of registered voters. (like community service but paid for 2 years) Restore Glass/Segal and again, push local small government with self reliance…KILL CENTRALIZATION OF GOV!!!

    • AusKiwi

      Don’t be so hung up on the racial/religious identity of those who control the system. Look at the system itself dispassionately and compare it with the isolationist money-printing of Zimbabwe (which by the way is incredibly racist in comparison as it confiscated land from the white farmer/landowners while handing out free money to the rest of the population).

      The key feature of our economic system is that it forces ordinary people to work hard for our money due to the incessant escalation of debt and rising prices. This effectively acts like a “scavenger pump” sucking up money from the lowest reaches of society and placing it in the hands of bankers who can then reinvest it in whatever part of the global economy is paying them a good return.

      Let’s face it, you can’t solve poverty by handing out large amounts of money to people who are not doing anything productive. If people don’t produce there is nothing to buy, starting from the most basic commodity food, which actually is produced by a very labour intensive process in many countries. Our system may be painful for the average worker but it works. Would you rather live in that communist paradise of North Korea where capitalism is forbidden but people starve because they have no incentive to work?

      Let’s face it, debt is a voluntary obligation. If you sign on the dotted line they you are agreeing to pay out the loan. Some people (and governments) commit themselves to more debt than others. Debt in itself is not evil, but maxing out your credit card to buy expensive clothes and electronic toys in lieu of paying your rent and finding yourself on the street as a result, is the choice that some people make. Is it right for those people to then blame the bankers for their plight? There are two sides to every story.

      Capitalism does not produce paradise any more than communism does, but it does offer an opportunity to live a productive life if one practises financial discipline. At the end of the day however, human beings are not perfect, so this is why we have regular “system resets” (aka financial crashes) which allow the debts racked up to be redistributed from the bankers who have been piling up cash and not spending it for the good of society. If I am not mistaken we will see another one by 2015 as they seem to happen every 7 years lately (2001, 2008…). This is probably not a coincidence as the Jews believe in the biblical principle of the Sabbath or rest year where all debts are theoretically forgiven – this has never happened in practice but a financial crash is the nearest we have come to it, where some sort of financial justice is dealt to the purveyors of QE for their profligate money-printing.