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The question being asked all across the world of business news is “will QE2 be successful?” Because this policy is literally economic suicide, the question becomes “will the Federal Reserve be successful in the assisted economic-suicide of the U.S. government?” I find this an utterly appalling question – which highlights the intellectual bankruptcy of government policy-makers, and the bankers which goad them onward.

“Quantitative easing” is nothing more than a euphemism for printing money “out of thin air”. Its one-and-only purpose is to destroy the currency being printed. It is pure dilution, and absolutely no different than a corporation vowing to improve its fiscal performance simply by printing-up a lot of new shares.

We can illustrate the inherently evil nature of this monetary abomination by working through the “mechanics” of this policy. First, the explicit goal of “QE2” is to increase inflation. By now, all readers should be familiar enough about “inflation” to know that it is literally nothing more than the speed with which our currencies are being destroyed.

In the case of the Federal Reserve, we understand all too well how “successful” it has been in creating inflation. Since it was invented in 1913, the Federal Reserve has been directly responsible for the U.S. dollar losing 97% of its value  (i.e. inflation has raised prices by more than 20 times what they were in 1913) – despite the official mandate of the Federal Reserve for “price stability” (i.e. protecting the dollar). Now, Ben Bernanke (the Fed’s latest and most potent dollar-destroyer) is vowing to “succeed” in destroying the remaining 3% of value of the world’s reserve currency.

Here is how printing-up money accomplishes Bernanke’s “goal”. First of all, as with any kind of dilution, printing-up new dollars makes all of the ‘old’ dollars worth less (worthless?). So, right there, the Federal Reserve is already 100% guaranteed of “success”. In fact, the Federal Reserve has already been “very successful” in creating inflation – in the real world.

Visit Shadowstats.com, operated by respected U.S. economist John Williams, and you will hear that U.S. inflation has been in the range of 8.5% - 9.5% all this year. Williams performs his calculations using the exact same methodology used by the U.S. government a generation ago, before the U.S. government intentionally incorporated various statistical lies into this measurement.

Understand the enormous “rewards” which a government receives for lying, by grossly under-stating the rate of inflation. Pay-outs on $100’s of billions of U.S. government benefits per year are indexed to the rate of “official” inflation. By grossly understating inflation (and cheating all of the recipients of those benefits), the U.S. government can get an instant, multi-billion dollar windfall from that one lie, alone (every year).

Secondly, every quarterly and annual GDP report must be “deflated” by the real rate of inflation. The raw data must be stripped of all inflation, in order to accurately represent real, economic growth. By grossly understating the rate of inflation, the government falsely inflates the rate of GDP “growth” by several percentage points – et voila we have a “U.S. economic recovery”.

Immediately, we see Bernanke exposed for the charlatan that he is. He claims there is U.S. “economic growth”, when all that “growth” actually represents is an illusion of doctored numbers. He claims the Federal Reserve has “failed” to create enough inflation (i.e. to destroy the U.S. dollar fast enough), when in fact the real data shows that Bernanke has been doing a wonderful job of destroying the dollar.

However, the ultimate “indictment” of “QE2” as failed policy comes from the fact that “QE1” never ended. Of all the fraudulent shams perpetrated by the U.S. government and the Federal Reserve, none of them are as obvious as the U.S. government’s manipulation of the market for U.S. Treasuries.

Here are the facts. Previously, the U.S. government was able to find (real) buyers for its Treasuries, due to the need of other governments to recirculate/reinvest the money from their trade surpluses and fiscal surpluses. Thanks to the Wall Street-engineered “Crash of ‘08”, the vast majority of those surpluses have disappeared.

At the same time, the U.S. government is cranking-out much more “supply” than at any other time in the history of the United States. Thus, we are told by the U.S. government (and the Federal Reserve) that there are more “buyers” for U.S. Treasuries than at any time in history – despite the fact those buyers have no money. But that is literally less than half of this farce.

Not only are we being told that buyers-with-no-money are purchasing more Treasuries than at any other time in history, we’re also told that these buyers are joyfully paying the highest prices in history (by a large margin) for these debt instruments. However this still doesn’t capture the absurdity of this scenario.

Buyers-with-no-money are (supposedly) buying far more Treasuries than at any time in history, at the highest prices (by far) – while publicly, all of these “buyers” are expressing severe doubts about the creditworthiness of the U.S. (i.e. its ability to ever make good on this $trillions in new bond debt). Would any sane individual buy the greatest quantity of anything (at the highest prices in history), while publicly expressing severe doubts about the value/quality of that “good”?

Don’t answer that question yet. Since “quantitative easing” must (and does) destroy the value of a currency, for every 1% the dollar loses in value, all of those $trillions in U.S. Treasuries (which are denominated in U.S. dollars) lose the same amount of their own value.

Thus, with U.S. bond-prices at their highest level in history (and at their maximum, theoretical price), it is 100% inevitable that those prices can only fall. This means that buyers-with-no-money are supposedly buying the most “supply” of Treasuries in history, at the highest prices in history – while being 100% certain of losing money on those Treasuries due to their inevitable fall in price and the loss of value of the U.S. dollar.

Clearly, there are few buyers for U.S. Treasuries. Instead, “The Three Amigos” of debt (the U.S., UK, and Japan) are playing the bond-market equivalent of “musical chairs”. The UK “buys” U.S. Treasuries, Japan buys-up UK debt, and the U.S. government buys Japanese bonds - and all with the “quantitative easing” funny-money they are printing out of thin air. Then all three governments pretend their bond-auctions are “covered”.

This brings us to the final element of this charade: U.S. bond market “auctions”. At the same time that the U.S. government reported the “economic miracle” of buyers-with-no-money buying more of something they don’t want (at the highest prices), just so they can lose money, the U.S. government removed all “transparency” from these bond-auctions. Even bond-traders with decades of experience report that they have no idea of who is actually buying these bonds. This is like an amateur magician who is so clumsy in performing his “magic” that he needs to turn out the lights while executing his tricks so that the audience doesn’t immediately spot the ineptitude of his fraud.

Why has the Federal Reserve been so adamant about fraudulently concealing its actions in the U.S. bond-market, and the quantitative easing that makes that fraud possible? First, in printing-up money, but not acknowledging it, the Federal Reserve is literally counterfeiting trillions of dollars of U.S. currency. Should that fact be discovered, not only would the U.S. dollar immediately collapse in value (even more than the Fed wants it to), but asset-prices for all U.S. debt (and all U.S. banker-paper) would immediately collapse.

Since a fall in bond prices is exactly the same thing as an increase in bond interest rates, discovery of the Fed’s counterfeiting would cause U.S. interest rates to skyrocket, squashing all remaining life out of the U.S. economy, and bankrupting the U.S. government (through much, much higher interest payments on its $trillions in debt) in a matter of months.

With the obvious fact that the U.S. government never stopped its quantitative easing, this brings us to the current scenario. The entire reason why the Fed is “announcing” something which it is already doing is because even doctored U.S. government statistics can’t hide the fact that the U.S. economy is once again collapsing.

Obviously, quantitative easing is not, does not, and cannot “fix” any of the U.S. economy's problems, which (ironically) have all been caused by too much new debt, and new money-printing. So why is the Fed “coming out of the closet” (even just temporarily)?

Simply, with the intensifying weakness of the U.S. economy, the Federal Reserve (and the U.S. government) feel an intense need to be seen to be “doing something” (even something it was already doing) – and neither the U.S. government nor the Fed have any other ideas. There is nothing more frightening than the thought of a serial-deceiver like Ben Bernanke being so utterly bereft of policy-options that he resorts to telling the truth.

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written by Jeff Nielson, November 02, 2010

No, the Treasury Department GIVES the Treasuries to the Fed - in return for all that fancy paper that Helicopter Ben prints up. And Americans get the privilege of paying the PRIVATE BANKERS of the Federal Reserve interest on all of the money it prints up.

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written by asfhgwt1, November 02, 2010

I guess I'm not clear on this. If the Treasury issues new bonds to lend money to the Fed, some other entity is buying these, taking $ out of circulation, yes? If the Fed then buys them back, that money is now back in circulation with no net effect, right? Other than the fact that there is now 1) brand new additional government debt, and 2) the Fed can buy crappy, worthless assets and pay full value, thus bailing out its favorites.

Am I right about this? Forgive my ignorance....

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written by Jeff Nielson, November 02, 2010

Abperusdisvet, the "insiders" have been dumping so much for so long, I'm surprised that they have anything left to sell. It just shows how much stock (and options) these crooks have been stuffing into their pockets.

Asfhgwt1, here's how our scam-monetary system operates. NORMALLY, money is created through debt (such as simply issuing new Treasuries) because in the warped world of the bankers, if you create an OBLIGATION attached to the money, this makes that money an "asset" (LOL!).

Actually, if the Fed (and other central banks) could CONTROL their money-printing, then it would be much BETTER to create money as Bernanke is doing: simply printing it out of thin air - but WITHOUT any obligation to pay BANKERS interest on that money.

It's only because the bankers ALWAYS print too much money that they have convinced our idiot-leaders that economically enslaving ourselves to the bankers with our debt-based money-printing is the "better" way to go.

Of course, in a gold-backed system, you don't NEED to create debt to PRETEND that the currency has value...

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written by asfhgwt1, November 02, 2010

There are those who say that the Fed is borrowing from the Treasury rather than printing.

Example:

"If the Fed borrows money from the Treasury (with the Treasury issuing bonds to make that loan), the money is not “new money.” It is just recycled through the
system from one balance sheet to another. Or, if the Fed entices banks to hold more reserves (because it pays interest on those reserves), then the Fed is just
using the systems’ money, it is not creating new money.... Analyzing the
... data shows that 90.3% of the expansion in the Fed’s balance sheet reflects borrowing from the Treasury, or from banks...." [http://www.ftportfolios.com/Commentary/EconomicResearch/2008/12/23/fed_balance_sheet_expansion_is_not_hyper-inflationary]

If true, then debt would increase, but not the money supply, correct?

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written by apberusdisvet, November 01, 2010

Jeff: I agree that a lot of QE is back scratching with other central banks. It also is disguised under POMO to assist the TBTFs in their balance sheet problems and, I suspect, to purchase stocks to keep the DOW and S&P in happy face mode. The entire stock market seems to be built on delusional euphoria with the "bots" in and normal investors out. The key for me in that insiders are selling at least 6:1 over buying and have been for several months; do they know something we don't know?

For QE going forward, you just know that BAC and quite possibly JPM will be bailed out; so little real reporting on the issues affecting both, so it will be see no, speak no, hear no evil.

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written by Jeff Nielson, October 31, 2010

Null, I'm firmly in the "camp" of those who believe the U.S. OWNS very little gold.

Keep in mind that how much gold is STORED in U.S. vaults and how much is OWNED by the U.S. are two very different subjects - given that the U.S. has openly acknowledged storing gold belonging to other nations.

I always fall back on the point that the U.S. DEFAULTED on its international gold obligations in 1971. How can the nation which defaults on its gold obligations OWN more gold than everyone else.

Yes, you're right that the U.S.'s supposed hoard of gold is there to back the dollar. So what if other nations let it HOLD the gold (to prop-up the dollar), but most/all of that gold actually belongs to the U.S.'s creditors?

I don't believe for a second that either the U.S. government or the Wall Street bankers have any "back-up plan" - except to print-and-steal even more.

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written by Null, October 31, 2010

Very good article Jeff. I am wondering about this wild card of how much gold the US actually has. There is a line of thought that the reason the US is being so reckless with its monetary policy is because it knows it is inevitably doomed and it now seems to be making that end come as soon as possible. But if they have a backup plan and they know that they can fall back on their gold reserves and resurrect a new currency out of the ashes after everything crashes and burns, then that may be a way out. The US supposedly has about 250 million ounces of gold, about an ounce per person. As far as I know this is still more than any other country (officially). So if gold was to be seriously revalued then this would retain a lot of wealth for Americans.

The question is: does the US still have its gold, and if it does, then is it unencumbered? In a previous commentary you suggest that it doesn’t, and that the gold reserves haven’t been audited for a half a century. Others think that the gold is still there. Who knows.

The other week Ted Truman made the public suggestion that the US should sell its gold reserves, and so many commentators were throwing up their arms at how such an established figure could say such a stupid thing, not realizing that maybe this guy wasn’t being straight … maybe it was just a ploy to get people to sell more of their gold out of fear of a flooded market. If this is the case, then this shows how desperate the US government via the Wall Street banks is to get its hands on gold and keep investment demand down. Harvey Organ now believes that the IMF has sold all of its gold reserves this month, so now who else is there to supply the world’s demand for gold? 8000 tons of US gold? Does it actually exist? All central banks are now buyers. We may now be entering the period where there simply is no more gold or silver to buy beyond fresh mine supply.

Adrian Douglas pointed out how the US selling its gold (assuming it still has it) would be a zero sum game. Since US gold is supposedly there to back the US dollar (even though it hasn’t been convertible for 40 years, but we’ll assume it’s there for the sake of argument), if the US sold its gold to generate revenue to help “balance the budget”, then there would no longer be any gold backing the US dollar and it would go to zero.

https://marketforceanalysis.com/article/latest_article_102510.html

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