Jim Willie, publisher of the Hat Trick Letter, writes that the current policy of quantitative easing is essentially hyperinflation to oblivion, especially considering that the US government really has only one of two options:
- Quantitative easing is stopped and liquidity is pulled from the system due to political pressure and other factors, leading to a very rapid collapse of stock markets and asset prices, likely around the entire globe. (This is a scenario recently discussed by Chris Martenson in The Coming Rout)
- Quantitative easing continues, resolving nothing, as has been the case for the last two years. The only benefit will be to those who receive the easy money from the Fed. This will continue to drive prices through the roof, eventually leading to hyper-inflationary price rises.
Mr. Willie, who in 2009 penned an essay about economic hitmen, discussing the Third Parties Rumored to be Attacking US Dollar, Treasury Bonds and Suppressing gold, analyzes where we are nearly two years later, well on our way to the disaster he forecast in prior commentaries.
The Hitmen Cometh: Capital destruction is the main byproduct of monetary inflation, a concept totally foreign to the inflation engineers at the USFed and its satellite central banks. They are agents of magnificent systemic devastation. In the wake of each QE round are discouraged creditors who turn away in disgust. The damage and inflation feeds upon itself in stages of intense wreckage. The motive, need, and desperation for QE3 is being formed here and now, to be announced by late summer probably. Prepare for QE to infinity, endless hyper-inflation, a process that cannot be stopped, as the urgent needs grows. Any attempt to halt the process results in almost immediate total annihilation. So continuation of QE rounds serves to manage the deterioration process and guide the financial structures gradually and orderly into oblivion.
The United States has become a Weimar nation with gradual global recognition. Instead of a recovery, it slides into the Third World. Thus the need for the US Fed to cover the next US Treasury auction in full, or almost in full. It is deeply committed to monetizing the entire USGovt debt. Call it Weimar, Third World, Banana Republic, whatever!!
…the inflation effect has crossed from the monetary side to the price systems, hitting the entire cost structure in a profound way. The moron bankers strive to cut off the process from handing higher wages to the workers, so that they can afford a higher cost of living. The leaders thus strive to bankrupt the Middle Class, hardly a pursuit in commitment of economic recovery. The cost squeeze is deeply felt by both businesses and households, businesses that cannot hold their workers as profits erode badly, and households that cannot maintain their spending patterns as incomes are devoted increasingly to food, fuel, clothing, insurance, and everything else. Tax revenues from wages and corporate profits and capital gains are descending into the gutter, not available to cover the US Govt deficits. Witness the death of the US Economy in hyper-drive, pushed by the US Fed Quantitative Easing.
The entire population is aware, except for the US Fed, the Wall Street master, and banking elite. Actually, they are aware, but they cannot speak about the scourge they unleashed since they would invite criticism and turn the blame onto themselves for destroying the United States financially, economically, and systemically. The moral fiber is long gone among leaders, as the US nation is being recognized as a fraud king playpen. The end result is that in the cycle, movement from US Treasuries to the US Economy is not happening during this death spiral, as it normally does. Instead, the next bubble is in the entire commodity arena. Beware that such a trend is highly destructive, since it erodes the profit margins and disposable income, thus causing deep recession if not systemic collapse.
The next bubble in commodities will be negative, harsh, and highly destruction, as they will lift costs without a corresponding rise in wages. That event has already been triggered.
Some advice. As the movement swirls, as the next QE program details are revealed, as the central bank model is shattered in discredit, as the global monetary system crumbles before your eyes, as sovereign debt worldwide loses its exalted safe haven security, as your personal budget finances erode beyond your worst nightmare, invest what is left of your life savings in Gold and especially Silver. In time, they will be the primary portions of your portfolio with surviving value. Each will rise, but Silver will do a moon shot!!
As we previously discussed in our commentary on Chris Martenson’s analysis The Coming Rout, we would not be at all surprised to see a pullback in global equity and commodity markets as the Federal Reserve comes under pressure, politically and from Main Street, going forward. The American population – at least some of us – are realizing that all of the monetary actions of The Fed thus far have yielded no results other than to send prices on essential goods like food and energy soaring. The outcry can already be heard, and as gas prices continue to rise, the voices will only get louder.
The Fed and US government may attempt to control those rising asset prices by blaming speculators (as they did in 2008), implementing regulatory and trading rules (as they did in 2008), and removing some of the liquidity in the system (temporarily pausing the policy of quantitative easing), but doing so will prove that the so-called recovery stemming from green shoots in 2009 is nothing but a farce.
Our view is that the policy of the Federal Reserve, US Treasury, Obama administration and central banks of the world, will quickly revert back to one of quantitative easing as soon as asset prices take a hit and the banking establishment, especially those banks doing God’s work, face the threat of being exposed for their complete and total insolvency. They will panic and force the issue as they have done for the last several years.
Monetary easing and the Federal Reserve buying US Treasury dent is now policy. There may be a temporary pause to Fed action in the near future, but we expect no change in how the “crisis” is approached in general.
As suggested by Jim Willie, the event has already been triggered. We will, more than likely, experience a financial and monetary collapse this decade so severe that the United States’ economic, financial and political systems may very well be unrecognizable by 2020. The matter essentially rests in the hands of those nations that determine our credit limit, such as China, Russia and Japan. They are fully aware of the inherent problems with US monetary policy, so there is no realization that they need to come to – they simply need to act on that realization, at which point the game is over.