Lethal Dose of QE On Its Way

On Friday, Janet Yellen hinted at the possibility of unprecedented monetary stimulus.  What form this might take remains unclear.  Yet only a few options exist - mainly, negative interest rates and helicopter money.  Japan has already instituted NIRP (negative-interest-rate policy), as have many European countries.  Japan has hinted at the possibility of helicopter money being necessary, seeing the ineffectiveness of NIRP. 

A healthy economy needs interest rates.  As Peter Schiff has noted in his writings, savings are the bedrock of capitalism.  People use savings and interest income to invest.  Without a positive interest rate, the whole economy stalls out.  That’s what has been happening, as evidenced by the plunging velocity of money, something I have written about previously.

How anyone believes that NIRP can be a good thing lies beyond the scope of reason.  The only way it can be considered positive involves looking at the obscene amounts of debt in the system.  Interest rates must go ever lower in order to sustain more and more debt.  Imagine you have a credit card and keep charging more and more.  That’s fine, so long as your interest rate keeps on plunging, you will never have to make much of a payment.

Of course, everyone knows that’s just not how it works.  So it’s silly to think this charade can go on forever.  At some point things must reach a breaking point.  Years of stagnation seem destined to precede that breaking point, as we have seen in Japan. 

The Fed’s balance sheet has ballooned to over $4 Trillion USD.  The next dose of QE may be in excess of $2 Trillion.  Like a drug addict, more and more stimulus is needed to prop up the economy, until finally….overdose. 

What will be the ultimate outcome of this insane monetary experiment?  What are your thoughts?  Feel free to leave a comment below.

Three points to economic depression

With global stock markets reaching record highs, mainstream media continues to push the narrative that “good times are here again”. 

Yet when one peers beneath the surface of this 1920s-like frothy equity fiasco, a very different picture emerges. 

Objective economic indicators all point toward a grim reality: outright economic depression.  It’s plain enough for anyone to see.  However, most media outlets today do not connect the dots between certain data points, and therefore present a skewed reality again and again.

Which points can show us what’s really going on?  There are three main issues I’d like to mention in this post, all of which demonstrate without a shadow of a doubt that for the great majority of Americans and other citizens, times have never been tougher.  These include the following: 1) Fertility and marriage rates at record lows.  When people live in poverty, they can no longer afford to marry or raise children.  2) Interest rates at record lows, roughly 14 trillion in negative yielding debt.  A healthy economy needs a positive interest rate in order to spur investment based off capital gains.  With no such gains to be found, people pile into risk assets in a desperate ditch for yield.  This raises assets prices and creates the illusion of recovery.  Finally, 3) M2 Velocity of money at record low in America, while Fed’s balance sheet stands at about 4 Trillion USD.  This inconvenient truth never, ever gets mentioned once in the mainstream news channels.  Most people don’t even have a clue what this means. 

Let’s focus first on fertility rates.  Never before in recorded history have people been having less babies.  The significance of this cannot be overstated.  No reason exists for this to be the case other than an utter lack of economic opportunity.  Very few jobs exist that can feed a family, so people forego parenthood.  An entire generation may never have the chance to become parents.  What might the following generation experience?

The previous generation of baby boomers can no longer raise retirement income from fixed-income investments such as CD accounts and government bonds.  Central bank policies known as zero interest rate policy (ZIRP) and now negative interest rate policy (NIRP), have eliminated opportunities for investors.  Grandma and grandpa now have to either subsist on social security or risk it all in the stock markets.   In fact, many seniors have been forced to forego retirement altogether and continue working, further tightening labor conditions for the younger generation.  That constitutes two entire generations who must be cash-strapped, as evidenced by point #3. 

Velocity of money can best be described as the pulse of an economy.  No other single objective indicator can better show the state of an economy.  M2 velocity refers to the number of times a piece of currency changes hands within the real economy.  When things are good, people spend money they earn.  I buy something from a local shop, the shopkeeper then invests some of that money into his business, buying other things and then the process repeats.  However, this normal process seems to have stalled out in modern day America.  The evidence cannot be more simple and clear.  The following chart displays a very frightening image of an economy in free-fall. https://fred.stlouisfed.org/series/M2V  No one can dispute that chart.  The numbers do not lie, and they speak for themselves.  The velocity of money has never been lower, and it continues to reach new lows.  It has fallen every year since 2008, and shows no sign of recovery whatsoever.  Based on this metric alone, it makes more sense to claim we are experiencing an economic depression than some kind of “recovery”. 

Overall, anyone claiming that everything is normal must either be clueless or delusional.  People have stopped having children, interest rates have never been lower, and the velocity of money continues to plummet.  These three points present a solid indication of a zombie economy.  Without low to negative interest rates and massive “quantitative easing” (money creation), who knows what might occur?  And so the central banks, who created this whole mess in the first place, get to pose as the saviors of their own calamity.  Lord Rothschild, one of the world’s foremost bankers, has even declared this to be a monetary experiment the likes of which this world has never before seen.  https://www.rt.com/business/356148-rothschild-experiment-world-economy/

How this experiment ends will be anyone’s guess.  Yet given what has been covered in this post, it seems plain enough that the outcome will be less than positive. 

Bankers' War on Cash - 500 Euro Bill Eliminated

I have written about the war on cash in the past.  And I indicated, as any rational observer must, that it will not end well for the average person.  A war on cash constitutes on war on freedom and individual sovereignty.  That can only diminish our liberties and way of life.

Yet it appears as though the war on cash has begun to accelerate.  Only several months ago, the war on cash was more or less an idealistic interpretation of a bankers' ideal society: one in which banking institutions can monitor and control every single financial transaction on the face of the globe.

And the bankers have now taken one giant step further towards such a tyrannical regime.

As David Stockman notes, quoting Zerohedge:

"Following the denial in February that this action is in any way about reducing cash, The ECB has made its decision on the EUR500 Bill:

• *ECB ENDS PRODUCTION AND ISSUANCE OF €500 BANKNOTE
• *ECB SAYS ISSUANCE OF EU500 NOTE TO STOP AROUND THE END OF 2018
• *ECB SAYS OTHER EURO BANKNOTES WILL STAY IN PLACE
• *ECB: EU500 CAN BE EXCHANGED AT CEN BANKS FOR UNLIMITED TIME

And just like that the second highest denominated European bank note in circulation (after the CHF1000 Bill) is dead…"

This assault on individual sovereignty has progressed with alarming speed.  It usually takes years for such radical ideas to become reality.  The public must acquiesce to them over time.  Not the case here.  No time for programming - must tighten the noose right away.  This reeks of desperation.

It cannot be coincidence that the war on cash has begun to accelerate at a time when "unconventional monetary policy" has reached its ultimate crescendo: Negative Interest Rate Policy (NIRP). 

NIRP has now become reality in about 25% of the sovereign nations on Earth.  Among them, many smaller European nations, along with Japan, the 3rd largest economy in the world.

While mainstream media downplays the significance and impact of NIRP, the direct destruction of capital has now become accepted practice.  This has never occurred in 6,000 years of human history.  Yes, tyrants have always sought to confiscate wealth - whether through inflation, taxation, or direct confiscation.  Yet never before have they ever pursued the direct confiscation method through the inversion of the global financial system itself.

Negative interest rates represent the inversion of everything that allows a credit-based system to function (and never before has such a system been under the direct control of world bankers colluding with one another). All businesses that profit from lending practices and the interest made thereupon can no longer exist. 

As Zerohedge reported several days ago Germany's largest bank has called for NIRP to be extended further still...

"According to DB's Dominic Konstam, now that the benefits QE "have run their course", it is time for the next, and far more drastic step: "the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates." "

So people will be taxed on their deposits, then paid with that same money to buy a house.  The idea sounds like a bad comedy skit.  It really might be hilarious if it weren't so dire a situation.  

The war on cash represents bankers at their worst.  Central banks will stop at nothing and never hesitate to grasp at any straw in order to further degrade individual sovereignty, whether through NIRP or other oppressive policies.  Resist by becoming your own central bank.

[Edit: NIRP has become necessary at this time to due excess levels of leveraged debt within the global economic & financial system.  This subject will be elaborated upon further in later posts.]

Silver Soars; Investors flee from Negative Interest Rates

April 19^th, 2016 will indeed be remembered as a historic day. 

The Chinese have announced their involvement in precious metals markets.  This has caused dramatic spikes in silver and gold in USD terms.  Silver has reached new highs for 2016, touching $17/oz., while gold appears to be holding above the important $1250 mark (4/20/16 Update – gold has since fallen just below that mark).   

Here’s what Zerohedge had to say about today’s moves:

As we reported earlier, the buying accelerated this morning, when ongoing demand for the precious metal pushed it to fresh 10 month highs above $17/ounce. One reason suggested for the buying came from Reuters, which said "that there is heavy buying in silver in Shanghai, and that has triggered buying in gold as well," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

This may just be the beginning as technicians are finally starting to pay attention.

The timing of these moves was not made at random by the Chinese.    Once again the East has proven to be three steps ahead of the West in the game of geo-political chess.

Note that no matter what the motivations behind this move, or whether or not the rally sustains itself, technical levels have been breached in both SLV and GLD.  Therefore, one can expect this to be the beginning of a bigger move, as Zerohedge states.

Indeed, when looking at the 5-year chart for Silver, it seems obvious the downward trend has been broken.  And if you zoom-in and look at the 1-year or the 3-month…WOW.

Just today, CNBC covered “Silver’s Sterling Rally”, and even they pointed out the brilliance of the charts.  This has been one of the most long-awaited moves in history.  And it has only just begun.

For years, silver was so undervalued that demand kept building and building.  As I’ve noted before, in the first quarter of 2016 alone, more American Silver Eagle coins for investment purposes were sold than during the entire year of 1996.

As central bankers take us deeper into the black-hole oblivion of negative interest rates, more and more people will rush into silver and gold to avoid such insanity.

 

The system has begun to come unhinged at the seams.  A global avalanche of epic proportions has been initiated, and nothing will stop it.  One can either stick one’s head in the snow and say it’s not happening, or prepare to jiu-jitsu that monstrous momentum into something beneficial.    

What choice will you make?  Feel free to leave your thoughts in a comment below, and share this post on social media.