Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Close with Modest Losses but Miners Gain on the Week
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 24 2017
By: Ira Epstein

Life Under Manipulation
By: Theodore Butler

Legendary investor names his top junior resource stock picks right now
By: Peter Spina, President, CEO of GoldSeek.com & SilverSeek.com

Silver Miners’ Q3’17 Fundamentals
By: Adam Hamilton, CPA

Deflation must be embraced
By: Alasdair Macleod

Gold’s 47-Year Bull Market
By: Steven Saville

Taxes, Macro Signals, Seasonality, US Stocks and Gold Miners
By: Gary Tanashian

The Key to Profitably Ending Precious Metals Price Suppression And Other Markets Manipulation!
By: Deepcaster

The Precious Metals Bears' Fear of Fridays
By: Dimitri Speck

 
Search

GoldSeek Web

 
Quantitative Easing - The Killer Solution


 -- Published: Monday, 10 February 2014 | Print  | Disqus 

By Darryl Robert Schoon

 

On September 20, 2008, the Wall Street Journal wrote:

When government officials surveyed the failing American financial system this week, they didn't see only a collapsed investment bank or the surrender of a giant insurance firm. They saw the circulatory system of the U.S. economy—credit markets—starting to fail.

 

A similar crisis had happened before and bankers understood that if the circulatory system, i.e. credit markets, [continued] to fail, a deflationary collapse in demand even more severe than the Great Depression would happen. In 2008, aggregate levels of debt were far higher than in the 1930s and the consequences would be also.

 

If the 2000 collapse of the US dot.com bubble was an economic heart attack, the 2008 economic collapse was a stroke, a stroke so severe that the usual central bank response, to lower interest rates, did nothing to revive economic growth.

 

Fed Chairman Ben Bernanke utilized Milton Friedman’s ivory tower solution to fix the real world problem that Greenspan’s Fed had created. At the University of Chicago, Friedman had theorized that during a severe deflationary contraction, central banks should expand the money supply to reverse the contraction.

 

Friedman’s solution, however, didn’t work. Powerful deflationary forces awakened by the collapse of Greenspan’s two speculative bubbles, the dot.com and US real estate bubbles, negated Bernanke’s attempts to expand the money supply.

 

 

 

In capitalist economies, bankers substitute credit and debt for money; and when large speculative bubbles collapse, credit disappears leaving only the constantly compounding shadow of its former self, debt, in its place.

 

Central bankers are then forced to inflate the monetary base to keep the now slowing circulatory system of the economy—credit markets—from collapsing.

 

 

 

WHEN ALL ELSE FAILS: QUANTITATIVE EASING

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.

http://en.wikipedia.org/wiki/Quantitative_easing

 

Lowering interest rates to increase the circulation of credit and debt is the response of central banks to slowing demand; but, in 2009, despite Bernanke’s almost zero percent rates, demand continued to slow forcing Bernanke to implement a highly unorthodox strategy to keep credit and debt circulating.

 

Quantitative easing, QE, is another form of money printing; and while lowering central bank interest rates costs central bankers nothing, quantitative easing is costly. Monetary aggregates, M2 and M3, are lent into existence by commercial banks through fractional reserve system; but M0 is money directly created by the FED by borrowing.

 

 

http://www.scribd.com/doc/197397458/Monetary-Tectonics-Inflation-vs-Deflation-Chartbook-by-Incrementum-Liechtenstein

 

The absence of monetary leverage differentiates expanding the money supply through QE instead of lowering interest rates. Lowering interest rates to increase M2 and M3 costs bankers nothing; it indebts those that borrow. Quantitative easing, however, created by Fed borrowing, M0, indebts central bankers themselves.

 

In 2009, the Fed’s balance sheet began filling with US Treasury and toxic mortgage debt, e.g. Maiden Lane LLC, offloaded onto the Fed from AIG which had the requisite greed and stupidity to insure subprime mortgages; and rather than let AIG fail, the Fed then rescued AIG by buying its debt and the US Treasury bought its shares.

 

 

 

THE TREATMENT IS KILLING THE PATIENT

…iatrogenic deaths—i.e. deaths induced inadvertently by a physician or surgeon or by medical treatment or diagnostic procedures— in the US annually is 783,936. By comparison, approximately 699,697 Americans died of heart [disease] in 2001, while 553,251 died of cancer… the American medical system is itself the leading cause of death and injury in the US.

Gary Null, Death by Medicine, www.webdc.com

 

On January 29, 2014, in Is A Currency Crisis Knocking At The Door?  Todd Harrison observes that quantitative easing increases the possibility of a seismic currency ‘readjustment’:

 

As governments take on more risk -- as they price assets on behalf of the market and transfer debt from private to public -- the common denominator, or release valve, becomes the currency...and if we inject drugs that mask the symptoms rather than medicine to cure the underlying disease, the likelihood of a seismic readjustment increases in kind.

 

This happened in the 1920s when the Reichsbank, the German central bank, resorted to currency ‘fixes’ to ‘solve’ underlying systemic stresses in the German economy:

 

…experimenting with the currency was like walking a knife-edge. A moderate degree of inflation does not remain moderate for long. At some point the public loses confidence in the authority’s power to maintain the value of money, and deserts the currency in panic.

p. 126, The Bankers Who Broke The World, Liaquat Ahamed, 2009

 

In my 2009 article, Why Gold And Why Gold Now, I wrote that in combination with a deflationary depression, a monetary crisis of epic proportions will happen in the US and that gold is the chosen refuge:

 

Economic cycles of expansion and contraction are the inevitable result of central credit flows. So, too, are deflationary depressions and hyperinflations. Though far less frequent, the destruction caused by deflationary depressions and hyperinflations more than make up for their infrequency; and, today, after perhaps the longest absence of each in recent history, we are now about to experience both—perhaps this time in tandem.

 

This will not be just a deflationary depression, it will be deflationary depression accompanied by a monetary crisis of epic proportions.

 

In my new youtube video, Deconstructing Money and Reality, I address the issues that are now playing a part in the revolutionary changes moving through our world. See http://youtu.be/PrSoJHfGIug

 

On February 21/22, I will be speaking in Las Vegas at the Liberty Mastermind Symposium, February 21/22. For details see http://libertymastermind.us/ .

 

The economic crisis is only part of a much larger and far more significant paradigm shift. Gender, cosmic polarities, institutions, cultures and consciousness will all be affected. These are dark times but it is also true that it is darkest before the dawn.

 

Buy gold, buy silver, have faith.

 

Darryl Robert Schoon

www.survivethecrisis.com

www.drschoon.com

 


| Digg This Article
 -- Published: Monday, 10 February 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.