The Fed Is Trapped, Gold Is the Exit
by Darryl Robert Schoon
US investors dependent on the Fed believe they are victimized
by government, who believe they are entitled to enough liquidity
to profit when risk is laid-off onto others, to society, to you-name-it...
13th, the Fed announced QE3, a policy of open-ended bond purchases
which would add $1 trillion annually to the Fed's balance sheet.
The Fed's decision to provide liquidity ad infinitum, i.e.
QE etc, was framed in reasonable and carefully chosen language:
actions, which together will increase the Committee's holdings of
longer-term securities by about $85 billion each month through the
end of the year, should put downward pressure on longer-term interest
rates, support mortgage markets, and help to make broader financial
conditions more accommodative... Read here.
wording gave the Fed sufficient cover to mask its increasingly desperate
condition, i.e. how to keep its fatally-wounded credit and debt
ponzi-scheme functioning while searching for a solution that doesn't
CONSTANTLY COMPOUNDING DEBT IS THE DEVIL'S WHIP OF GROWTH
economies, capital, i.e. money, is introduced by central banks into
the economy in the form of loans; and because interest constantly
compounds, economies must constantly expand in order to pay down
and/or service those loans. This is why economists in capitalist
systems are obsessed with growth.
is, in actuality, a smoke and mirrors shell game where credit and
debt have been substituted for money; and, as long as capitalism
expands no one is the wiser because the fraud is so subtle. Capitalism,
however, is no longer expanding. It is contracting.
reached its peak in 2008 when Greenspan's historic credit bubble
burst. What investors believed was a finely-tuned balancing act
between credit and debt orchestrated by Fed Chairman Alan Greenspan
turned out instead to be a speculative bubble fed by Easy Al's easy
credit from the Fed's 24/7 discount window.
presided over the greatest credit expansion in the history of capitalism,
Greenspan also presided over two of its largest speculative bubbles
the 1996-2000 dot.com bubble and 2002-2007 US real estate
bubble. Greenspan would later refer to evidence of these bubbles
as 'froth'; to those who lost homes and fortunes, it was blood.
on images to enlarge)
JAPANESE NIKKEI THE MOTHRA OF ALL BUBBLES
of Greenspan's two massive bubbles followed the spectacular collapse
of the Japanese Nikkei. The catastrophic crash of Japan's stock
market in 1990 was the world's largest since the US stock market
had collapsed in 1929.
of the Vulture: How to Survive the Crisis and Prosper in the Process,
I wrote: ...fueled by excessive amounts of liquidity, [the price
of Japanese real estate and stocks] exploded upwards. Japanese real
estate prices increased 70 times over and stock prices increased
over 100-fold, with the Nikkei reaching a market top at 38,992 in
all speculative bubbles, the Nikkei collapsed and the collapse
of the Nikkei in 1990 unleashed deflationary forces not seen since
the Great Depression of the 1930s. Prices of stocks and real estate
in Japan began a long and steep multi-year descent.
real estate lost 80% of its value in the next decade and the Nikkei
fell from 38,992 in 1990 to 8,237 in 2003. Deflationary cycles are
long and protracted and if not stopped will become deflationary
depressions, an economic phenomenon for which there are no ready
In 1990, Japan
escaped a complete deflationary collapse only because Easy Al's
credit bubble was underway in the West. Rising credit-driven Western
demand combined with Japan's high savings rate helped slow Japan's
inexorable descent into deflation. Nonetheless, after 1990, Japan
would need to borrow increasingly large amounts of money in order
to survive and borrow it did.
After the 2008
economic rendering, the central banks of the US, the UK and Europe
have joined Japan in the desperate need to constantly increase money-printing
to keep their economies afloat; and while reviving growth is their
announced goal, the unspoken intent is to avoid a fatal deflationary
collapse in demand.
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