Watching Your Money Disappear
Can this go on forever? No, it certainly cannot. This will end, it will end badly and probably soon.
Why soon? – Because around the world we have pretty much reached the endgame: Policy rates everywhere are now at zero and central banks around the world are using their own balance sheets to prop up banks and select asset markets. Again, the Bank of England is among the most eager money-printers and can rightfully claim the title ‘Queen of QE’. The BoE has already monetized about a third of Britain’s public debt. But forget the little differences between central banks that keep the editors of the FT busy: Fact is, ALL central banks use their own balance sheets to keep the financial system from contracting.
The major centrals banks have now a combined balance sheet in excess of $13 trillion dollars, which is up from $3 trillion only 10 years ago. Global central banks’ assets now comprise a quarter of all global GDP – up from only 10 percent in 2002. It is self-evident that these assets would trade at very different prices if they had to be placed in the free market.
Without these massive interventions the market would do what it always does when a credit boom has gone too far – it would liquidate what it considers unsustainable.
What is the endgame?
Only two outcomes are logically possible: Either monetary authorities stop their interventions at some point, stop the money printing and the manipulation of interest rates and asset prices, and allow the market to set prices and risk premiums freely. We would certainly go through a period of correction, of deleveraging, default and most certainly deflation, but at the end of this process the economy would be back to something that resembles balance and that is sustainable. However, this is today considered politically unacceptable, and no politician wants to have this happen on his watch.
The second alternative is to keep intervening in markets, but it is the law of intervention that once you fix some prices you have to fix others. Intervention begets more intervention. We already see this in monetary policy everywhere: There is no exit strategy. There is no end to quantitative easing. This policy will continue ad infenitum.
This policy will undermine money’s purchasing power without ever solving the underlying problems of the economy. Eventually, inflation concerns will materialize, money will become a hot potato and confidence in the system will evaporate. We then face an inflationary meltdown and economic chaos.
Erroneously believing themselves the cause of their good fortune, Americans continue to deny a changing world
In 2006, when I began writing my book on the coming economic collapse, I didn’t know what the Fed would do regarding liquidity. At the time, whether the Fed would raise or lower interest rates was a soon-to-be multi-trillion dollar question.
In the past, central banks walked a tightrope between higher and lower interest rates. Raise rates too high and economies would slow and/or contract. Keep rates are too low and inflation would result.
Today, the central bankers’ monetary tightrope has become a gangplank.
DROWNING IN AN OCEAN OF LIQUIDITY
On December 12th, Fed Chairmen Ben Bernanke announced the Fed would be doubling down on its bond buying program. Ostensibly in order to create more jobs, the Fed would now buy an additional $45 billion a month of US debt.
The bond buying announced today will be in addition to $40 billion a month of existing mortgage-debt purchases. The FOMC said asset buying will continue “if the outlook for the labor market does not improve substantially” and hasn’t set a limit on the program’s size or duration.
The reason for the Fed’s accelerated bond buying has only a tenuous connection with the US labor market. The real reason is that unless the Fed is the dominant buyer of US debt—which it now is—market forces (remember those?) would cause US interest rates to rise, eventually bankrupting the US Treasury.
RUNNING THE PRESSES
More and more central banks are opting for the endgame ‘solution’, a fatal descent into ‘monetary easing’, i.e. today’s laundered term for running the printing presses. The Swiss National Bank, the European Central Bank, the Bank of England and the Bank of Japan have all joined the Fed in money printing hoping desperately to save their ponzi-scheme of credit and debt.
The 11 Nations With Higher Sovereign Debt Ratios Than Greece
Japanese Pension Funds With $3.4 Trillion In Assets Seek Safety in Gold
Ultra loose monetary policies from the U.S. Federal Reserve, the Bank of England and other central banks will provide support, as currency debasement and rising inflation leads to continuing demand for bullion.
These fundamentals are leading to broad based global demand for gold – from retail investors to institutions and pension funds. Japanese pension funds are increasingly looking at gold according to an article in the Wall Street Journal this morning.
Diversification into gold is taking place in order to protect against sovereign risk, debasement of currency risk and inflation risk.
In March 2012, Okayama Metal & Machinery became the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies. Okayama manages pension funds for about 260 small and mid-sized companies in the Okayama area.
“By diversifying currencies, we aim to reduce risks associated with them,” said Yoshi Kiguchi, the fund’s chief investment officer. “Yields become stable if you put small….
David Walker – U.S. Unfunded Liability Increases $100 Billion Per Week
“It is alarming enough that our federal debt has surpassed $16 trillion. But we have actually dug a fiscal hole of more than $100 trillion when you consider our unfunded Medicare, Social Security and other retirement obligations. This amount goes up more than $100 billion a week on autopilot.”
Economist John Williams of Shadowstats discusses the coming collapse of the U.S. dollar and 5 Trillion yearly deficit
Take immediate steps to protect your wealth . . . NOW!
That’s exactly what many well-respected economists, billionaires, and noted authors are telling you to do — experts such as Marc Faber, Peter Schiff, Donald Trump, and Robert Wiedemer. According to them, we are on the verge of another recession, and this one will be far worse than what we experienced during the last financial crisis.
Marc Faber, the noted Swiss economist and investor, has voiced his concerns for the U.S. economy numerous times during recent media appearances, stating, “I think somewhere down the line we will have a massive wealth destruction. I would say that well-to-do people may lose up to 50 percent of their total wealth.”
When he was asked what sort of odds he put on a global recession happening, the economist famous for his ominous predictions quickly answered . . . “100 percent.”
Faber points out that this bleak outlook stems directly from Federal Reserve Chairman Ben Bernanke’s policy decisions, and the continuous printing of new money, referred to as “quantitative easing” in the media.