February 17, 2013
Source: Lee Rogers, BlacklistedNews.com
As bad as the global economy is right now, it is unfortunately
going to get far worse. Many central banks around the world are now
racing to devalue their currencies through the implementation of debt
monetization programs and low interest rates. Despite statements coming out of the G20 saying otherwise, many insiders and former insiders are fully admitting that there is an on-going global currency war and that this war is accelerating. The Bank of Japan’s recent announcement of a massive bond purchase program
is the latest episode in an already sorry state of affairs. It is a
historical fact that prosperity has never been obtained by devaluing a
nation’s money which makes it all the more insane that the central
planners are actually trying to sell the general public on these
policies. In fact if monetary devaluation resulted in economic growth,
Zimbabwe which recently experienced a period of rampant hyperinflation
would easily be the wealthiest nation in the world instead of one of the
poorest. Ancient Rome had a strong monetary unit when the nation rose
to prominence but degenerated after the ruling powers decided to devalue
its coinage. In more recent times both the British Empire and the
United States reached great heights when they maintained a sound money
system. With this said, you really don’t need to be an economics guru to
figure out that the result of today’s monetary policies will eventually
result in a complete disaster for the global economy.
Despite all of the absurd propaganda from the major news networks,
there is no question that much of the world is in a depression. The only
reason there has not been a total collapse of the system is because of
the fact that central banks have maintained artificially low interest
rates and propped up sovereign bond markets by purchasing bonds with
money that they created out of nothing. Taxpayer bailouts, stimulus
programs and other nonsense haven’t helped matters either. These
policies which were implemented following the crash of 2008 have simply
set the world up for a much larger collapse in the future. There would
have at least been an outside chance to fix the system had the central
planners not intervened but now the situation is becoming increasingly
hopeless. Take for example what happened in Iceland immediately
following the 2008 financial crisis. The Icelandic people voted against using taxpayer money to prop up failed Icelandic banks.
Even though there was a great deal of short term economic pain with
foreign depositors and foreign bond holders losing billions, the country is now on the road to recovery.
On the other hand, Ireland which decided to bailout its banking
system with taxpayer money is still dealing with the after effects of
the crisis. In 2010, Ireland actually had to accept a bailout from the
European Union and the International Monetary Fund because the
government could no longer afford the burden. Just weeks ago thousands of people rightfully filled the streets of Irish cities protesting against the bank bailouts.
Before the bailouts, Ireland had one of the stronger economies in the
European Union with one of the lowest debt-to-GDP ratios in Europe.
After the bailouts, the Irish economy has struggled even being mentioned
in the same breath as Spain and Greece.
Sadly even with all of these monetary stimulus programs, the United
States economy is barely treading water. It was recently reported that the U.S. economy shrunk 0.1 percent in Q4 of 2012 according to official numbers from the U.S. Commerce Department.
Considering economic statistics from the government are questionable at
best, it is quite possible that the real numbers are far worse. If the
U.S. economy is actually shrinking with these types of monetary policies
in place, it is painfully obvious that the Federal Reserve has no exit
strategy from the status quo. Any attempt to defend the value of the
U.S. Dollar by suspending debt purchases and raising interest rates
would send the economy into a tailspin. Ben Bernanke the Federal Reserve
Chairman once famously said that he would throw money out of a helicopter to keep the economy going
so we should fully expect him to continue these activities. In fact, we
already know through the Federal Reserve’s own policy statements that
they will be continuing near zero interest rate policies well into the future.
At this point that’s really all they can do since it is politically
infeasible for them to tighten the purse strings so they just continue
to print more and more money out of nothing.
The Federal Reserve’s bond purchasing programs have effectively
fueled a rally in bonds pushing yields of various U.S. government debt
instruments towards historical lows. This has fooled people into
believing that U.S. government debt is a safe haven play which is
astounding on so many levels. The rate of return on these debt
instruments is actually negative when factoring in the real rate of
inflation. The government and establishment media love to tout the
Consumer Price Index or CPI as the ultimate gauge of inflation. However,
the CPI doesn’t even include food and energy
in its calculation thus making it a completely worthless indicator of
true inflation. Maybe if people didn’t eat, didn’t use oil to heat their
homes and didn’t fill their automobiles with gasoline the CPI might
have some relevance.
In reality, there’s little question that that the CPI is a purposely
manipulated figure designed to mislead people into believing that
inflation is lower than it actually is. The CPI also provides the basis
for cost of living adjustments that directly affects how much money
Social Security recipients receive. This allows the government to get
away with paying far less than if real inflation was used as the
benchmark to calculate these adjustments. The true measure of inflation
calculated using the same statistical models used by the U.S. government
during the 1970s has inflation closer to 10% on an annual basis.
Even if we were to assume that inflation is half of that figure, U.S.
Treasury bond holders would still be getting a negative rate of return
on their investment.
Cleary, this is a dangerous game that is being played by the world's
central banks. Looking specifically at the Fed they announced late last
year that they would be purchasing
$85 billion worth of securities on a monthly basis for an indefinite
period of time until unemployment is substantially reduced. This
adds up to roughly $1 trillion worth of bond purchases per year which is
approximately what the federal government’s annual budget deficit has
been under the Obama regime. The Fed is essentially monetizing enough
debt for the federal government to finance its $1 trillion annual budget
deficit. In other words they are creating close to $1 trillion new
dollars out of nothing and dumping it into the system. The end result is
that you have a larger supply of dollars chasing the same goods and
services which ultimately means there will be higher prices because each
dollar will be worth less.
This policy is essentially an invisible tax on the average person
because it robs them of their purchasing power. Combine this with the
fact that the Obama regime actually raised taxes on poor and middle class Americans as part of the recent fiscal cliff deal
and the additional burden Obama’s universal healthcare plan has placed
on businesses and it is no wonder why the economy is sputtering. Not
only is the currency being devalued but they are financially damaging
the base from which they collect taxes. Evidence of this economic
reality can be seen from
a leaked internal e-mail from a Wal-Mart Vice President who stated that
sales were a total disaster and that February 2013 sales were off to
its slowest start in the 7 years he’s been with the company. Since
average people now have less purchasing power to buy things with, it
shouldn’t be any surprise that we see reports like this.
One would think sanity would prevail and the Obama regime would at
least end the costly foreign wars and make a few domestic spending cuts.
Since we live in a world where insanity seems to be the prevailing
thought process, we are not going to see this happen. At the recent
State of the Union speech Obama actually proposed more spending programs
including a ridiculous multi-billion dollar universal preschool initiative.
With a debt over $16 trillion, unfunded liabilities that some have
argued approach $100 trillion or higher and $1 trillion annual budget
deficits where do they think they’ll get the money to pay for these new
programs? Either this is pure stupidity of the most epic magnitude or
they are intentionally trying to destroy what’s left of the economy.
Regardless of what you believe, these policies are leading us towards
As a result of these crazy policies, huge bubbles are being created
in the U.S. Treasury bond market, the U.S. stock market and most
importantly in the U.S. Dollar itself. Since the Fed is buying an
increasing amount of bonds it has artificially propped up the market
causing investors to venture into the stock market for greater returns
on investment which has resulted in the Dow Jones Industrial Average
hitting the 14,000 level. Contrary to what the talking head clowns on
CNBC say, this is not the sign of a healthy economy but instead an
indicator of gross manipulations by the Fed which has forced investors
to take on more risk to achieve any real rate of return. At some point
the market is going to reject these policies when fewer and fewer market
participants are willing to purchase U.S. Treasury bonds at
historically low yields while the U.S. Dollar is simultaneously
devalued. This alone will cause the bond bubble to burst, yields to
skyrocket and force the U.S. government to pay even more money to
service the interest on the debt. Considering that the U.S. government
is already having a difficult time making payments to service the debt
with historically low yields, any reversal would be extremely
It is comical that there are still ratings agencies that rate U.S.
sovereign debt with a Triple-A status considering the train wreck we are
witnessing. S&P which was the one ratings agency that actually
downgraded U.S. sovereign debt is now being sued by the U.S. government over inaccurate securities ratings leading up to the 2008 financial crisis.
This is not an attempt to defend S&P by any means, but there are a
number of questions as to why they are the only ratings agency being
sued. All of the big ratings agencies were guilty of grossly
exaggerating the quality of different types of securities in the years
leading up to the 2008 financial crash. The only thing that
differentiates S&P from the other ratings agencies is that they had
the nerve to downgrade U.S. sovereign debt. This lawsuit appears to be
retaliation against them for that downgrade and nothing else. If this
isn’t the case, than why haven’t lawsuits been filed against all of the
major ratings agencies? Clearly, each one of them was involved in some
sort of chicanery leading up to the crash. With this said, there is no
reason to trust what any of these major ratings firms are saying about
U.S. sovereign debt. It is highly probable that their ratings of U.S.
sovereign debt are being affected by the possibility that the U.S.
government would threaten legal action against them if they fail to
provide a favorable analysis.
It is also becoming more apparent that the central planners have been
suppressing the gold and silver price as part of an effort to maintain
the illusion that these debt based currencies still have value. The German Bundesbank recently announced its intention to take delivery of over half of its gold reserves by 2020 from the Fed and other central banks. The main question here is why would it take 7 years to complete this process? China has been buying huge sums of physical gold on the open market
and so far have had no logistical problems receiving prompt delivery of
their gold. This gives additional credence to the accusations that
central banks have been leasing out physical gold as part of a scam to
suppress the price. In other words, the gold that Germany is requesting
delivery of is no longer available which is why the gold cannot be
immediately delivered. In all likelihood, this is why an agreement was
struck to deliver the gold over 7 years so the central banks could save
face without having to transparently expose the gold manipulation fraud
they are engaged in.
Either way, it is quite obvious that the gold and silver markets have
both been manipulated for some time now. If you study the daily charts
of gold and silver there are often huge price disruptions to the down
side that have no fundamental explanation. If other countries follow
suit and request physical delivery of their gold, this could put an end
to these suppression schemes resulting in a massive upswing in the price
It is often said that gold goes where wealth is being generated. If
we use that as a measuring stick it is clear that wealth is being
transferred from the west over to Asia. Specifically of interest is the
fact that gold is being purchased in large sums by both the Chinese and
Russian governments. There is even speculation that the Chinese are preparing to officially back the Yuan with gold. We also see huge gold demand from India whose gold imports surged 23% this past January. In fact gold demand has been so strong that India just raised taxes on gold imports to try to reduce demand.
Unfortunately for the west, these countries that are net buyers of gold
are going to be in a very good financial position once the full effect
of these debt monetization and low interest policies are felt. Gold is
real money and stores value unlike the debt based garbage that these
central banks are creating by typing digits into a computer.
There is very little question that the global financial system is at a
point where it cannot be repaired. The policies of unlimited money
creation that are currently being implemented by the Fed and other
central banks are unfortunately going to continue until the entire
system collapses. It is now inevitable that there will be a huge crash
in the U.S. stock market, the U.S. bond market and eventually the U.S.
Dollar. Gold, silver and other precious metals should perform very well
as this scenario unfolds so there are safe havens available for people
wishing to preserve their wealth. It is unfortunate that the only
question remaining now is not if this collapse is going to happen but
when this collapse is going to happen.
Thanks to: http://www.blacklistednews.com