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. 

Brexit fallout, Bitcoin rise

In recent days, the blogosphere has been abuzz with the news of Britain leaving the European Union.

While the UK claiming its economic freedom and independence can be seen as a positive in an abstract sense, the reaction in global financial markets has been volatile to say the least.  For one, European bank stocks saw their greatest two day loss in history.

Of course, in today's global financial marketplace, the shockwaves that have only just begun to emanate from Britain already seem to be causing chaos around the world.  U.S. stocks saw a steep selloff early this week, although they have since rebounded somewhat.  See CNBC.com for current global stock market indexes and commodity pricing such as oil and gold.

In addition, former Federal Reserve chairman Alan Greenspan has come out with his usual fear-mongering perspective, predicting this to be the start of a fresh financial crisis.  As Bloomberg puts it:

" That decision led to a “terrible outcome in all respects,” Greenspan, 90, said in an interview with Bloomberg Surveillance on Monday in Washington. “It didn’t have to happen.” 

“The EU is fundamentally a very good idea,” Greenspan said. “It’s a free trade-zone structure, which we need an awful lot of, so that the choice of Britain to stay in the EU and yet out of the euro zone was, I thought, the most sensible action that could be taken.” "

It seems logical Greenspan would want the EU to encompass as many nations as possible, given that he was once a central banker himself.  A prime player in the modern power structure, his reaction appears predictable.  

I find it fascinating to see how the people of Britain vying for economic independence creates uncertainty and turmoil in global markets.  On the one hand, it can be seen as a positive - people awakening to the tyranny of central banking and the myriad ways in which such a macro event effects their lives on a micro scale.  Yet at the same time, as we have seen, the marketplace does not deal well with such destabilizing events.  Uncertainty creates chaos.

Order always comes out of chaos, however.  And although this may be the most shocking event in world financial news since 2008, it ought to be seen in a positive light, all things considered.  

The event has certainly boded well for holders of Bitcoin.  The  non-fiat digital currency has seen its market cap increase by a  whopping $3 billion USD over the past several weeks, totaling over $10 billion today.  This amounts to a nearly 50% increase from its previous $7 billion, which has led to a corresponding price rise in USD terms approaching 50% - from about $450 in May 2016, to about $640 in June 2016.

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.]