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New Script Calls For More U.S. Quantitative Easing

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B.S. Bernanke has been in a quandary, ever since the Federal Reserve’s “QE II” was universally castigated as a reckless (and selfish) escapade by the U.S., aimed at doing nothing more than propping up the value of the “financial assets” of the Wall Street crime syndicate.  Bernanke never understood that criticism, since all of the money-printing done by the Federal Reserve is for the specific intent of propping-up the value of Wall Street’s financial assets. How else do you stop Ponzi-schemes from imploding?

Be that as it may, the one thing which B.S. Bernanke did understand is that there was little tolerance (and certainly no appetite) in the global community for more U.S. quantitative easing. To understand this requires actually taking a moment to define quantitative easing, since though the mainstream media uses the term a million times a month, they never explain it.

Quantitative easing” is nothing but a 21st century euphemism to replace a 20th century euphemism: “monetizing debt”. Those with any understanding of language realize that euphemisms are expressions we create when we want to (more or less) lie about a subject – because telling the plain truth is too unpalatable.

In this case, quantitative easing (aka “monetizing debt”) is nothing more than printing money out of thin air to (pretend to) pay one’s bills. This brings us to the multi-trillion dollar Ponzi-scheme known as the Western financial system. To illustrate how far Western finances have deteriorated requires  providing some historical context.

Following Canada’s previous, disastrous experiment with the Conservative Party (during the last half of the 1980’s, and early 1990’s); the reckless fiscal incompetence of the Mulroney regime had saddled Canada with one of the highest debt-to-GDP ratios in the entire Western world. Peaking at 70%, Canada’s indebtedness was regarded internationally as nothing less than an economic crisis. The Liberal government which inherited Mulroney’s mess, engineered a remarkable fiscal turn-around – going from record deficits to a budget surplus in little more than two years – and produced a decade of surpluses after that.

Today, with a new Conservative Prime Minister at the helm, all those years of surplus have been squandered and once again Canada’s debt-level has hit a new record high of 83% of GDP, while once again Canada is saddled with record deficits. Yet instead of being labeled as a poster-child for fiscal irresponsibility as it was in the 1990’s, today it is hailed as a paragon of fiscal prudence – because most of the rest of the West is even more obviously (i.e. hopelessly) insolvent.

Not only are the individual debts of most of these Western debtors totally unsustainable, but collectively there are no “buyers” for the vast majority of their debts. So the only way that the West’s Ponzi debt-markets can be kept from immediately imploding is for it to keep conjuring larger and larger quantities of (worthless) paper out of thin air, and then using their own paper to buy-up their own debt.

As I’ve written in the past, there is an obvious personal analogy to the Western financial system: ‘kiting cheques’. This is where some deadbeat writes someone a bad cheque, and then to  “cover” that bad cheque he writes another (even bigger) bad cheque. And then to cover the second bad cheque he writes a third, and so on. It makes absolutely no difference, in principle, whether that scrap of bad paper is called a “cheque” or an “IOU” or a “U.S. dollar”.

Creating one piece of un-backed paper to “cover” the obligation of another un-backed piece of paper is cheque-kiting (or a Ponzi-scheme – take your pick). It is nothing more than the most desperate of measures to temporarily delay bankruptcy. That is what is meant by “monetizing debt”, and now “quantitative easing”: a desperation measure to temporarily ward-off bankruptcy.

The quandary for B.S. Bernanke when it comes to (officially) cranking-up his printing press again is that he is unable to admit this desperate imperative for more money-printing. In the fantasy-world of the mainstream media, the U.S. has a growing economy and a “AAA” credit-rating – hardly what one would expect for a deadbeat kiting trillion-dollar cheques to temporarily delay its own bankruptcy.

Meanwhile, as I detailed in a recent commentary, rather than “growing” the U.S. economy continues to plummet deeper into Depression. The charts in that commentary showed a housing sector that has totally collapsed, construction activity is negligible, energy use has collapsed to the point where the U.S. is now a “net energy exporter”, and there are the fewest people in the U.S. workforce in thirty years.

Hence, while B.S. Bernanke desperately needs to print more money (and as soon as possible), what he needs just as much is “political cover”: a pretext for that money-printing where he doesn’t have to admit all of his previous lies about the U.S. economy, or be seen engaging in just another gratuitous (and inflationary) hand-out to his Wall Street masters. As a result, we have seen months of dithering by Bernanke where he assures the market again  and again that he is “finished” with his money-printing (most recently yesterday) – but then he qualifies that promise every few weeks, by noting he would change his mind tomorrow if a great enough need arose.

Enter Christine Lagarde, the French money-printing trollop who went from Finance Minister of France to head of the IMF, after making it clear from her rhetoric that she had never met a paper currency which she didn’t want to see more of – much more of. Just as eager to please her banker-masters as B.S. Bernanke, she has graciously provided Bernanke with the political cover he so desperately needs, by begging him to print-up a fresh, new batch of U.S. dollars.

Next in this clumsy script will be B.S. Bernanke, the Reluctant Money-Printer; stepping in front of a podium to announce that as much as it pains him to do so that “for the good of the world” he would crank-up his printing press yet one more time – and kick out another trillion or so scraps of this fantasy-paper.

For precious metals investors, this provides us with two reasons for buying more gold and silver today: the long-term reason, and the short-term. Long term, kiting cheques to delay the bankruptcies of our governments can only end in one possible way: Greece. The only question remaining is whether these $10’s of trillions in Western bonds will be devalued/written-off by 50%, by 75% (like Greece), or (most likely) a complete 100% bond-burning party?

Note that if even 10% of the chumps holding this doomed paper have the foresight to exchange it for precious metals before it goes to zero (or somewhere in that vicinity) that by itself these trillions of dollars would be enough to send gold and silver prices to many multiples of present levels. Meanwhile, all of the new money-printing is itself an equally strong driver of higher gold and silver prices (as we have seen for the last 10+ years).

Short term, we now have the Prince and Princess of Paper signaling that more money-printing is on the way. Christine Lagarde gets a pat on the head from the bankers for soliciting more paper. B.S. Bernanke gets to play the role of “the cavalry riding to the rescue”, rather than the Evil Villain tying the economy to the railroad tracks.

It’s about as close to a “perfect script” as the propaganda machine is able to cobble together – without either admitting all of its past lies about our economies, (deliberately) crashing all of our economies again, or starting another war. So perhaps we should all be hailing this latest deceit as representing the lesser of evils?

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Jeff Nielson
...
written by Jeff Nielson, April 09, 2012
...Will buy my first oz. of gold May 1st, as I've given preference to silver up until now. Realizing having compact wealth has advantages, though both are immeasurably preferable to paper.

Do you prep outside of the metals, Jeff? I have modest stores of food, water, and weaponry set aside, but part of me still hopes it never comes to such a drastic, dismal endgame.


Dalkrin, more general emergency preparations are definitely on my "to do" list. As a former Scout, I believe in the mantra "be prepared". At the same time, living in Canada my belief is that we Canadians will have at least a bit of warning BEFORE we have to start stocking up on food-and-water - i.e. the collapse of U.S. society would/will precede that event in Canada.

But your comment which preceded your question ("Realizing having compact wealth has advantages...both are immeasurably preferable to paper.") is also part of my answer.

While it's TRUE that "you cannot eat" gold or silver, for as long as we have been refining these metals, anyone who has had one or the other has ALWAYS been able to buy food.

Some people are stocking up (i.e. hoarding) as a response to inflation. However, here your remark about "compact wealth" obviously applies. Unless one has LOTS of space in their domicile, the most efficient method of protecting ourselves from inflation is to convert that portion of our wealth to (compact) gold and/or silver rather than (bulky) food.

However, IF (when) we see things get decidedly worse in the U.S. then I will be doing some serious stocking up myself. Indeed an "emergency preparedness" company is now a sponsor on our site (Providence Supplies). I think it's only natural that people focused on insuring their WEALTH (by converting it to gold and silver) would also be people likely to think about taking other precautions as well - given the ominous world we live in.
Dalkrin
...
written by Dalkrin, April 08, 2012
Another hard hitting piece here Jeff, you are unstoppable! smilies/grin.gif

I would be open to being a patriotic American and buying bonds if only they offered us some interest rates commensurate with the risk we are taking: I'd say 1000% might get me to dip my toe in the pool, for a lark.

Media efforts seem to be barely maintaining some complacency amongst the 99%, yet the one realm where this excessive currency debasement cannot be smothered is in commodities, especially gasoline. The whole fiasco reminds me of trying to inject ever more jelly into a donut, and then acting surprised when it splurts out the opposite end.

Will buy my first oz. of gold May 1st, as I've given preference to silver up until now. Realizing having compact wealth has advantages, though both are immeasurably preferable to paper.

Do you prep outside of the metals, Jeff? I have modest stores of food, water, and weaponry set aside, but part of me still hopes it never comes to such a drastic, dismal endgame.
Jeff Nielson
...
written by Jeff Nielson, April 07, 2012
Jeff: the FED is totally opaque and is unencumbered by any oversight whatsoever. Just like the $20 Trillion given to foreign banks and certain corporations in 2009, who's to say that QE hasn't been ongoing? FED minutes are kept secret for 5 years


"Who's to say...?"

I'm to say, that's who. Don't forget what I've been writing for over a year:

"Maximum Fraud In U.S. Treasuries Market"
http://www.bullionbullscanada.com/us-commentary/23599-maximum-fraud-in-us-treasuries-market

I didn't have the space to go into THAT whole issue here, so I simply IMPLIED it when I wrote:

"The quandary for B.S. Bernanke when it comes to (officially) cranking-up his printing press again
..."

UNOFFICIALLY, I have been very emphatic that Bernanke continues to run his printing press white-hot, COUNTERFEITING greenbacks...
Null
...
written by Null, April 06, 2012
Yeah I was being tongue and cheek in that first part...

Apberusdisvet, that’s why I can’t take too seriously any analysis that uses official numbers.

The former Fed minutes from the US housing bubble show them totally oblivious but I wonder if those minutes were doctored to make it seem that way? We can’t take anything they say seriously, whether numbers or minutes. They could be pumping out trillions in QE as we speak and the only thing we’d have to go by to know this is by inflation, and the fact that the banks aren’t going under.
apberusdisvet
...
written by apberusdisvet, April 06, 2012
Jeff: the FED is totally opaque and is unencumbered by any oversight whatsoever. Just like the $20 Trillion given to foreign banks and certain corporations in 2009, who's to say that QE hasn't been ongoing? FED minutes are kept secret for 5 years
Jeff Nielson
...
written by Jeff Nielson, April 06, 2012
I think it might be a good idea to wait until they announce the next round of QE before buying physical, because they will be standing by ready to hammer the price right afterwards in this age of backwards economics where you probably would do better by investing COUNTER to what fundamental analysis would suggest, simply because the Fed is out there manipulating markets to such an extent.

Regarding America's supposed new found "net energy exporter" status, that's actually another lie put forth by the media to convince people that another round of economic growth is on the horizon. But the US still imports over half of its crude, just like always. What's happened is the economic depression has killed demand so much that the refineries are sitting idle, and since they are some of the best in the world at what they do (nobody refines and burns oil better than the US...), what they have been doing is taking a small portion of that imported crude, refining it, and sending it back out. The US has become a net exporter of REFINED FUEL PRODUCTS, not oil, and not energy. This is even more profitable because many refineries pay a lower price for their crude (West Texas Intermediate, or stranded North American produced crude), versus Brent crude which is the worldwide global price. This is because demand has been softening in the US so much and so much is being taken out of the Bakken formation right now.


Thanks for the thougts Null.

With respect to the first half of your comment, I understand your caution. However, the problem is that this market is SO compressed that when it does break out it will likely occur so quickly that trying to "buy on news" will mean paying AT LEAST 10% more for your silver, and 5% more for gold - assuming that you act QUICKLY. Hesitate a bit and you'll pay even more.

Regarding the second half of your comment, yes, the U.S. is STILL the world's energy glutton in terms of all the crude oil it imports. However, I'm not interested in that side of the propaganda. All that matters to me is that this shows that domestic energy CONSUMPTION has collapsed - not because Americans don't INTEND to be oil-gluttons, but because they can no longer AFFORD to buy all those petroleum products...
Null
...
written by Null, April 06, 2012
I think it might be a good idea to wait until they announce the next round of QE before buying physical, because they will be standing by ready to hammer the price right afterwards in this age of backwards economics where you probably would do better by investing COUNTER to what fundamental analysis would suggest, simply because the Fed is out there manipulating markets to such an extent.

Regarding America's supposed new found "net energy exporter" status, that's actually another lie put forth by the media to convince people that another round of economic growth is on the horizon. But the US still imports over half of its crude, just like always. What's happened is the economic depression has killed demand so much that the refineries are sitting idle, and since they are some of the best in the world at what they do (nobody refines and burns oil better than the US...), what they have been doing is taking a small portion of that imported crude, refining it, and sending it back out. The US has become a net exporter of REFINED FUEL PRODUCTS, not oil, and not energy. This is even more profitable because many refineries pay a lower price for their crude (West Texas Intermediate, or stranded North American produced crude), versus Brent crude which is the worldwide global price. This is because demand has been softening in the US so much and so much is being taken out of the Bakken formation right now.

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