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Permadove Chuck Evans Speaks, Precious Metals Soar

Tyler Durden's picture


Gold and Silver and surging this morning as the Fed's Charles Evans talks on CNBC of the need for more accomodative policy by the Fed. His 'infiniter' easing seems to have sparked this move as he clarifies the seeming psychopathy of the Federal Reserve's actions. His message clearly is that the amount doesn't matter (nor the unintended consequences), the printing and flooding of money into an already stuffed banking system will continue until morale improves.


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Mon, 10/01/2012 - 08:49 | 2844499 johnnymustardseed
johnnymustardseed's picture

Who watches CNBC anymore?

Mon, 10/01/2012 - 08:52 | 2844510 Stackers
Stackers's picture

Thats not flying - Thats falling -- with style


Mon, 10/01/2012 - 08:53 | 2844521 malikai
malikai's picture

HAH! Another fed crone, not Benny yet. Can't wait for the quiverer to show up.

Mon, 10/01/2012 - 09:05 | 2844569 GetZeeGold
GetZeeGold's picture




Sir.....Chuck Munger is on line 2......and he sounds ticked.


Mon, 10/01/2012 - 09:11 | 2844593 BigJim
BigJim's picture

I was wondering what kicked off the movement in gold & silver just now... thanks, Tyler.

Mon, 10/01/2012 - 10:04 | 2844823 new game
new game's picture

we like spikes!!!!!!!!!!!!!!!

cost of living just went down

thank you kindly ben


citizen of facist ussa

Mon, 10/01/2012 - 09:06 | 2844575 Top_Kill
Top_Kill's picture

Evans says that higher interest rates are good, but higher rates now would be bad, because everything would crash again, so lower rates are good. So savers would end up getting screwed anyway. So it is better to start screwing them now. I think these guys are freaking lunatics.

Mon, 10/01/2012 - 09:07 | 2844584 HelluvaEngineer
HelluvaEngineer's picture

Lunatics?  I'd agree with you if I actually thought that they believe the BS they are spewing.  They know exactly what they are doing and why.

Mon, 10/01/2012 - 09:19 | 2844635 ElvisDog
ElvisDog's picture

Couldn't agree more. Bernanke knows that lowering interest rates or QE doesn't create jobs or encourage J6P to borrow more money, but he has to go through the motions of claiming that he's doing all this to "maximize employment in the context of price stability". He does this to continue the $40B a month transfer to the big banks.

To make a football analogy, people complain that the comissioner of the NFL, Roger Goodell, favors the owners when he does things. Of course he does, because he works for and is paid by the owners. Same with the Fed. They are not civil servants working for the public good. They are paid by and are presidents of a collection of private banks.

Mon, 10/01/2012 - 10:02 | 2844818 A Lunatic
A Lunatic's picture


Mon, 10/01/2012 - 09:44 | 2844740 debtor of last ...
debtor of last resort's picture

Savers screwed? They should save in pm's, and buy with paper. Stupid savers.

Mon, 10/01/2012 - 09:17 | 2844620 1fortheroad
1fortheroad's picture

Yea, the quivering never stops even when he sleeps, give the man some meds. 


The fed cant be audited so they can buy anything they want and turn the losses back to the treasury. 


Thats scary.

Mon, 10/01/2012 - 08:52 | 2844514 stocktivity
stocktivity's picture

Until the printing stops....It's all Bullshit!

Mon, 10/01/2012 - 08:56 | 2844530 cbaba
cbaba's picture

Only the ones who doesnt have gold.

Mon, 10/01/2012 - 09:08 | 2844578 TWSceptic
TWSceptic's picture

Who watches CNBC anymore?

Tyler, to report and remember us that it still sucks. It's a dirty job, but someone's got to do it.


BTW did anyone else notice the PM haters are nowhere to be seen lately?

Mon, 10/01/2012 - 09:13 | 2844603 BigJim
BigJim's picture

They'll be back, at the bottom of the next correction, to say the top is in, and Sell! Sell! Sell!

They do it as a public service, out of their infinite concern for us. 

Mon, 10/01/2012 - 09:24 | 2844658 BandGap
BandGap's picture

CNBC serves a purpose, and a master. It only takes one person to watch and spread the news through their lens.

Mon, 10/01/2012 - 10:23 | 2844916 Meesohaawnee
Meesohaawnee's picture

they are an embarrassment. they are just an infomercial. nothing different than what you see on sat  morn. its so painful to watch what little i do

Mon, 10/01/2012 - 08:50 | 2844501 EscapeKey
EscapeKey's picture

The economy is in trouble?

Perhaps we should try printing some money? Has anyone though of that?

Mon, 10/01/2012 - 08:51 | 2844511 jekyll island
jekyll island's picture

I like it!  You don't work for the government, do you?  

Mon, 10/01/2012 - 09:04 | 2844568 EscapeKey
EscapeKey's picture

Well, we all do. I didn't build that.

Mon, 10/01/2012 - 09:07 | 2844580 GetZeeGold
GetZeeGold's picture



You don't build print it.


Mon, 10/01/2012 - 09:42 | 2844734 JimBowie1958
JimBowie1958's picture

Actually, they dont even print most of it any more. Just move electrons around and call it money.

Mon, 10/01/2012 - 09:19 | 2844632 iinthesky
iinthesky's picture


Mon, 10/01/2012 - 09:16 | 2844612 BigJim
BigJim's picture

 I like it!  You don't work for the government, do you?  

According to my Inland Revenue tax demand, that's exactly whom I work for.

Mon, 10/01/2012 - 08:54 | 2844527 NorthenSoul
NorthenSoul's picture

The government say it illegal...or something like that. Not that said government is bothered by such triffles when comes the time for them to do whatever they please.

Mon, 10/01/2012 - 08:49 | 2844502 redpill
redpill's picture

Nice chart, morning wood.

Mon, 10/01/2012 - 09:26 | 2844671 Bay of Pigs
Bay of Pigs's picture

Wood? New all time highs for gold in Euros.

Mon, 10/01/2012 - 08:50 | 2844504 jekyll island
jekyll island's picture

Yeah!  Keep him talking, my wife needs some new shoes.  Might be inclined to part with some more fiat if PMs are up.  

Mon, 10/01/2012 - 08:50 | 2844507 Sphinx_www
Sphinx_www's picture

They have no clue.

Mon, 10/01/2012 - 08:53 | 2844522 Stackers
Stackers's picture

Sadly they do have a clue, they just find the destruction of the American middle class as an acceptable cost to maintaining their banking cartel

Mon, 10/01/2012 - 09:33 | 2844701 1fortheroad
1fortheroad's picture

Its just not the destruction of the American middle class, its way more evil than that.


They want complete controll before everyone wakes up.

The Banking cartel is only a tool.

Take that away, maybe we have a chance.


Mon, 10/01/2012 - 09:29 | 2844685 Galactic Superwave
Galactic Superwave's picture

If you happened to watch, he tends to talk while looking with head down and eyes upward...also the dark circles under the eyes.... and you have the look of evil.

If you are a saver or retired, get ready for more ass raping.

Mon, 10/01/2012 - 08:52 | 2844508 Oh regional Indian
Oh regional Indian's picture

A lot of that crappy, smelly easy liquidity is sloshing over here and killing middle India. 

Inflation exportation on steroids, dis-courtsey the FED/ECB.

Benny Bucks the trend...


Mon, 10/01/2012 - 08:53 | 2844517 jekyll island
jekyll island's picture

Tell everyone "Your Welcome" from us here in the states.  Inflation is our biggest export and with those cool new printers, manufacturing costs are at an all time low.  

Mon, 10/01/2012 - 08:56 | 2844536 EscapeKey
EscapeKey's picture

Well, someone launch a gold backed currency.

"Currency Wars" starts with an economic war experiment, in which Russia launches a new gold backed currency. American Keynesians attempt to discredit this, as it would "never happen in real life".

Just like hyperinflations. They don't exist in the minds of Keynesians. HyperDEFLATIONS, however - despite noone ever having seen one, now THOSE are scary monsters, which we need to throw everything including the kitchen sink at.

Mon, 10/01/2012 - 09:01 | 2844557 Oh regional Indian
Oh regional Indian's picture

Deflation = Death to the Supply Siders (Keynes/Freidman/Krugwoman... the lot)

Inflation = Till the balloon bursts... partaaaay!


Mon, 10/01/2012 - 10:14 | 2844863 Zadok
Zadok's picture

It appears to me that the reason that won't happen is because it would end the Ponzi. All that perpetuates the Ponzi goes, and all that would end it is resisted. Hence, claim to fight deflation and pretend inflation doesn't exist. Isaiah 5:20

Mon, 10/01/2012 - 08:52 | 2844512 Sean7k
Sean7k's picture

It's hard to remember what life was like before the algos...

Mon, 10/01/2012 - 08:54 | 2844523 Oh regional Indian
Oh regional Indian's picture

A lot slower for sure Sean.

All around...


Mon, 10/01/2012 - 08:52 | 2844513 LoneStarHog
LoneStarHog's picture

With all this additional printing of FRNs, mattress sales are booming.  Karl "The Hammer" Denninger just ordered five new king size ones.

Mon, 10/01/2012 - 08:52 | 2844516 MillionDollarBoner_
MillionDollarBoner_'s picture

"PMs flying. WTF! This prick need to get with the program!"

J Dimon.

Mon, 10/01/2012 - 09:04 | 2844520 buzzsaw99
buzzsaw99's picture

When in doubt give Dimon & Blankfein bigger bonuses.

Mon, 10/01/2012 - 08:54 | 2844525 Quinvarius
Quinvarius's picture

They need to print a lot more to keep the banks from dying and then to give them the illusion of profits.  At some point they are going to try and get ahead of the issue and fix it all at once.  As long as the banks are a mess and the Fed has freedom to print, the printing will continue.

Mon, 10/01/2012 - 09:16 | 2844615 NorthenSoul
NorthenSoul's picture

As long as the banks are a mess...


As long as the banks are permitted to be an engineered mess, the priting will continue, courtesy of the infinite cowardice and moral depravity of the Wall Street - DC Axis of Greed.


The correct way to solve this problem for generations to come is to do what Icelanders forced their politicians to do.

Mon, 10/01/2012 - 20:10 | 2846910 Jendrzejczyk
Jendrzejczyk's picture

Many of us can't vote you up when you begin with a "quote".

Mon, 10/01/2012 - 08:55 | 2844528 Flakmeister
Flakmeister's picture

Alex, I'll take "Japanese Monetary Policy for $400"

Mon, 10/01/2012 - 09:02 | 2844562 EscapeKey
EscapeKey's picture

Alex, I'll take "Fed price stability" for $400,000.

Mon, 10/01/2012 - 09:07 | 2844581 tmosley
tmosley's picture

Alex, I'll take "Non-dilutable Currencies" for $400,000,000

Mon, 10/01/2012 - 09:54 | 2844785 Sudden Debt
Sudden Debt's picture

I'll take silver for 36$!

Mon, 10/01/2012 - 08:55 | 2844529 BeetleBailey
BeetleBailey's picture

Chuck "The Fuck" Evans: Big bnaks have him in their pocket, and I'll bet the ranch he is getting some goooooood bonuses from them. This moron needs to be audited.

Mon, 10/01/2012 - 09:19 | 2844633 NorthenSoul
NorthenSoul's picture

Before auditing anything, Geithner and all his acolytes must be removed.

Same for Obysmal and Robme.

Gary Johnson is the only acceptable choice. But that would presume shorting the bet about average American voter. Risky shit!

Mon, 10/01/2012 - 08:55 | 2844532 RobinHood73
RobinHood73's picture

Evans has the comportment of an imbecile. Seriously. He looks like the snotty nosed kid you feel violent towards with no obvious reason. His body lnaguage just resonates mistrust and underachievement. I for one sneerwhen i hear is suggeastion that QE Infinity is the path to prosperity

Mon, 10/01/2012 - 09:20 | 2844640 NorthenSoul
NorthenSoul's picture

He looks like the snotty nosed kid you feel violent towards with no obvious reason.



Mon, 10/01/2012 - 10:49 | 2845022 BeetleBailey
BeetleBailey's picture

Well said Robin.

Indeed, he does remind me of a little gutter snipe that was picked on in school.....just because of his looks, demeanor and girlie voice.

Evans is a little cuntish, ain't he?

Mon, 10/01/2012 - 08:55 | 2844533 NeedtoSecede
NeedtoSecede's picture

I am honored to be the first one on the boards to say it today:

Gold Bitchezzzzz!

And don't forget the silver, lead and brass.

Mon, 10/01/2012 - 10:17 | 2844878 Zadok
Zadok's picture

Brass is mostly copper! Don't forget the copper!

Mon, 10/01/2012 - 08:57 | 2844538 Dr. Engali
Dr. Engali's picture

The rest of the world "market" participants must be fucking stupid. They have got to see that the U.S intends on destroying the dollar and defaulting by inflation. Why anybody would buy a bond is beyond me.

Mon, 10/01/2012 - 09:09 | 2844591 Bay of Pigs
Bay of Pigs's picture

MOAR BAWNDS............fuck yeah!

Mon, 10/01/2012 - 09:19 | 2844634 BigJim
BigJim's picture

 Why anybody would buy a bond is beyond me.

Regulation means a lot of the big institutional investors don't have much of a choice.

Mon, 10/01/2012 - 08:57 | 2844541 Haager
Haager's picture

The amount of silver in my pockets didn't soar. It's just the paper-price, and EURUSD. Those doing there "investment" on that base clearly deserve a hit.

Mon, 10/01/2012 - 09:02 | 2844561 TWSceptic
TWSceptic's picture

Inflation actually does increase wealth for those that get it first, that includes people owning gold & silver. It makes life more expensive for the poor and middle class that do not own PM.

Mon, 10/01/2012 - 09:05 | 2844571 RSBriggs
RSBriggs's picture

You just don't get "buy physical", do you?

Mon, 10/01/2012 - 09:14 | 2844602 Haager
Haager's picture

The amount of that silver in my pockets stays the same. The worth increases, but it's more than just a price issue. I should have made that thing a bit more clearly.

Mon, 10/01/2012 - 08:57 | 2844542 orangedrinkandchips
orangedrinkandchips's picture

Doves and Hawks? Who the fuck came up with that stupid shit?




they want more money? I really do not get it....THEY STUDY ECONOMICS.


Im at a loss....


it's comparable to not setting a broken will will heal...

Mon, 10/01/2012 - 09:12 | 2844596 yogibear
yogibear's picture

They will not stop trashing the US dollar until they trigger a currency crisis and hyperinflation occurs. 

By then it's too late. Zimbabwe is their target.

Mon, 10/01/2012 - 08:58 | 2844545 monopoly
monopoly's picture

I just looked at silver and whoosh, now I know why. Thank you ZeroHedge.  And right, who watches that crap channel anymore.

And this from NYTimes. Not sure it is right on but an interesting opinion. Page 1.

Independent analysts say that the expiration of the tax cut could shave as much as a percentage point off economic output in 2013, and cost the economy as many as one million jobs. That is because the typical American family had $1,000 in additional income from the lower tax.

Mon, 10/01/2012 - 09:17 | 2844587 Sean7k
Sean7k's picture

Please take note: the standard media method used against any change deemed bad for business is as follows- it will hurt jobs and cost money. Regardless of the issue. 

This is your political science lesson for the day. For more, take the time to analyze who the analysts are, how they came to that conclusion and which jobs would be affected. What is a "typical" family? Because last time I checked, the people most affected are in the top 20%, which by definition makes them atypical. 

Propaganda is rarely interesting, usually just dangerous.

Mon, 10/01/2012 - 09:34 | 2844697 LawsofPhysics
LawsofPhysics's picture

Yes.  The "typical American family" had an additional $1,000.  Both of my brother-in-laws (both venture capital guys) enjoyed an additional $10,000,000 (almost all from capital gains).

Any suprise the truly "rich" don't like taxes.  These guys need to re-learn what "earned income" really means.  Dumb fucking sheep get an extra $1,000 and think they are now "rich" LMFAO!

Where are all the jobs these douchebags were supposed to create?  We have had over eight years of these tax breaks, where are the fucking jobs?  Where are the god damn fusion reactors I have been waiting for?  

Here's the thing, those who have nothing (more and more of the population now) sure as hell are not going to underwrite this innovation you dumb fucks.  

Yeast will be shown to be smarter the humans, once again.

Hedge accordingly.

Mon, 10/01/2012 - 08:59 | 2844550 monopoly
monopoly's picture

I think what really surprises me is that what he is spewing out of his mouth is surprising to many out there. It is Ho Hum to all of us here. How stupid so many still are.

Mon, 10/01/2012 - 09:01 | 2844559 Schmuck Raker
Schmuck Raker's picture

FYI Tyler: clicking on the chart links to a different chart, not better detailed version of same.

Mon, 10/01/2012 - 09:02 | 2844560 orangedrinkandchips
orangedrinkandchips's picture





Mon, 10/01/2012 - 09:13 | 2844598 quasimodo
quasimodo's picture

Be sure to cast your vote for barry and co. then....perhaps we get said destruction a tad sooner?

My fear is if mittens gets the nod, we only kick the can down the road a little longer, before the worms finally fall out.

Mon, 10/01/2012 - 09:03 | 2844564 Hannibal
Hannibal's picture

Silver shines and still cheap,..hint,hint!

Mon, 10/01/2012 - 09:06 | 2844574 yogibear
yogibear's picture

Evans has the Zimbabwe economic midset. He's taking the lead on trashing the US dollar. 

Dennis Gartman joined the many thinking the Fed is using the Zimbabwe economic path.


Mon, 10/01/2012 - 09:07 | 2844585 Igiveup
Igiveup's picture

Herding sheep this morning. Coral gate to close shortly. Shearing to begin before 3:05

Mon, 10/01/2012 - 09:09 | 2844590 Jason T
Jason T's picture

The Fed is gonna own everything.   Who owns the Fed again?

Mon, 10/01/2012 - 09:26 | 2844622 LawsofPhysics
LawsofPhysics's picture

A few successful families that came before yours.  They want their rent, now pay up.


Something tells me there might be a problem with taking delivery.  When fraud is the status quo, possession is the fucking law.  Much of the "success" of this banking and financial class has come from fraud, this is where they failed.  The cognative dissonance of these arrogant fucks is simply unbelievable, but somewhat expected, they have been "educated" in the same business schools and are all members of the same fraternities and clubs, but no where near as tough as their forefathers. - FAIL.

Mon, 10/01/2012 - 09:13 | 2844597 LawsofPhysics
LawsofPhysics's picture

Keep talking, fine with me!!!

Mon, 10/01/2012 - 09:14 | 2844600 giggler123
giggler123's picture

... and the guy doesn't own an oz of the yellow stuff, does he?

Mon, 10/01/2012 - 09:14 | 2844609 XtraBullish
XtraBullish's picture

BUY BUY BUY! Cash is trash and stocks are going to all-time record highs. NEVER underestimate the replacement power of STOCKS within a Zimbabwe-esque money printing orgy. I smell barbecued SHORTS again this morning and that can't be good.

Mon, 10/01/2012 - 09:32 | 2844693 Conman
Conman's picture

Who are these mystical shorts you speak of?

Mon, 10/01/2012 - 09:16 | 2844618 PUD
PUD's picture

Banks mission statement...

Get as many as possible in as much debt as possible for as long as possible at as high a cost as possible

Feds mission statement..

Do whatever it takes for the banks to fulfill their mission statement.


Disclosure..long dumpsters, locks and lead

Mon, 10/01/2012 - 09:19 | 2844628 azzhatter
azzhatter's picture

LIESman does the hard hitting interviews. It would be better if he didn't have Evans dick in his mouth when he tries to talk

Mon, 10/01/2012 - 10:25 | 2844654 rustymason
rustymason's picture

Hold the phone, Chuck. If gold markets are as manipulated as so many say, why then assign any other explanation for its movements?


No, seriously. Whenever gold or silver go up, many are quick to say it is due to fundamental currency weakness. Fine. However, whenever precious metals go down, the same group of people say it is due to market manipulation. It just seems inconsistent, that's all.

Mon, 10/01/2012 - 09:31 | 2844691 khakuda
khakuda's picture

These guys are incompetent academics.  I don't think I'd let Evans pump gas into my car.

And I love when they say how buying mortgages allows people to refi and have more cash to spend, always forgetting to mention that someone owned the mortgage and now doesn't get interest to spend.  Plus, how about the taxpayer that is now buying overpriced mortgages without his consent via the Fed and handing over huge profits to PIMCO?  How is this good?

Mon, 10/01/2012 - 10:43 | 2844884 Curt W
Curt W's picture

He is not buying mortgages, he is buying mortgage backed securities.  If he bought mortgages and then gave homeowners the same interest rate he charges the banks, and marked them down to market value.  Now that would stimulate the economy.

Mon, 10/01/2012 - 09:36 | 2844711 ebworthen
ebworthen's picture

Print, print, print, print, print, print, print...pray...print, print, print, print, print, print, print...pray...

Mon, 10/01/2012 - 09:43 | 2844738 Stuck on Zero
Stuck on Zero's picture

Translation: "The banksters will continue stealing from the public treasury until the economy improves."


Mon, 10/01/2012 - 09:46 | 2844748 Munkey
Munkey's picture

This might be over-share but I just shit my pants.

Mon, 10/01/2012 - 09:52 | 2844774 forrestdweller
forrestdweller's picture

permaduck quacks that we found a golden planet behind the moon. all our problems just vapourized.

Mon, 10/01/2012 - 10:13 | 2844858 Curt W
Curt W's picture

finding out the Fed was being shut down, Ben was put in prison, would boost my morale

Mon, 10/01/2012 - 10:24 | 2844918 polo007
polo007's picture

According to former Morgan Stanley chief economist Stephen S. Roach:

The disease is a protracted balance-sheet recession that has turned a generation of America’s consumers into zombies – the economic walking dead. Think Japan, and its corporate zombies of the 1990’s. Just as they wrote the script for the first of Japan’s lost decades, their counterparts are now doing the same for the US economy.

Two bubbles – property and credit – enabled a decade of excessive consumption. Since their collapse in 2007, US households have understandably become fixated on repairing the damage. That means paying down debt and rebuilding savings, leaving consumer demand mired in protracted weakness.

Yet the treatment prescribed for this malady has compounded the problem. Steeped in denial, the Federal Reserve is treating the disease as a cyclical problem – deploying the full force of monetary accommodation to compensate for what it believes to be a temporary shortfall in aggregate demand.

Mon, 10/01/2012 - 10:35 | 2844957 RazvanM
RazvanM's picture

The Grand Plan is simple: increase the running costs of the whole system, so in the end the accumulated debts are covered - all of these while the inflation is kept "low". The payers of this shit are: the pension funds, the retierees and the 3rd world slave workforce (see Chineese workers).

Ah, and cover the gigantic loses over many years, while forcing everybody through regulations to pay higher fees to cover these loses.


There will be some victims, like we see in the Arabic world, or in Africa, or in America, or in Europe, or in Asia :) But nothing will change, the power will be taken by those able to adapt and able to rotate to the power. It won't be the end of the world, in some 1-2-5-10 years this crisis will be forgotten. And, after all, what wrong can 200% per year price inflation do?

Mon, 10/01/2012 - 10:59 | 2845048 polo007
polo007's picture

The three ways in which QE3 can succeed;

“The first being the direct effect via the impact on the prices and liquidity of the assets purchased – in this case, mortgage-backed securities (MBS).But US mortgage rates are already very low and the housing market is recovering of its own accord.”

“The second route is the diffusion of the additional money through the economy.” However they add that simply swapping relatively liquid securities for cash doesn’t necessarily result in stronger growth in the broad money and credit aggregates which really matter. They highlight the plight of Japan and more recently the UK as examples of this. They also note that the USD has also already fallen substantially since its 2009 peak and is more likely to rebound as and when the crisis in the EZ escalates again.“

Finally there is the potential boost to confidence from the Fed’s open-ended commitment to buy more assets until the labour market improves.” However, they feel that it is debatable whether this is a 'gamechanger’. They note that “Most people would surely already have expected the Fed to loosen policy further if unemployment remained high.”

Instead, Capital Economics expect the focus to return to the deterioration in “underlying economic and financial onditions that made the additional stimulus necessary in the first place.” Something which they feel could already be happening.

Mon, 10/01/2012 - 13:56 | 2845792 polo007
polo007's picture

Prof. Hudson: Central banks began to be created in 1694 with the Bank of England, and down to the Federal Reserve in the United States in 1913 their function was to finance government budget deficits by printing money. All governments over time run deficits – at least, most of the time – because that is how they supply the economy with the purchasing power and the money it needs to grow. The role of a central bank is to create money to finance the deficit.

If it does not do this, then the commercial banks end up performing this function. However, the commercial banks creating credit on their own computer keyboards have a different role from that of the central bank. When the central bank finances government spending, this is supposed to promote growth, full employment and industrialization. But that is not the object of a commercial bank. Banks, in the first instance, make loans against property already in place – mainly real estate and also the buyout of entire corporations. So they provide credit that bids up the price of housing, making it more expensive for workers. They also loan to buyers of commercial buildings, making it more expensive to do business, Takeover loans enable corporate raiders to bid up the price of stocks and bonds, making them yield less, so it costs more to buy a retirement income. And now, commercial banks are moving from finance capitalism to casino capitalism to make big gambles. They are essentially financing gambling. That’s what derivatives and “hedge fund” trading are.

None of this funds industrial investment. From the United States to Germany, almost all industrial capital formation is now funded by the retained earnings of corporations, not by bank borrowing. Even the stock market does not fund new direct investments. It has become a vehicle for corporate raiders to go to the banks to borrow the money, to buy a corporation on credit with junk bonds, retire the stock, and use the corporate profits to repay the banks – and then try to steal for themselves the pension funds, or sell off the assets, or just work the labor force more intensively; longer hours, outsource labor and move to the un-unionized labor. So the banks are no longer part of the industrialization process; they are part of the de-industrialization process. This is applauded as the post-industrial economy.


Prof. Hudson: So the flip side of asset price inflation is debt deflation. More and more money has to be spent to carry the debt overhead. The problem is not central banks financing domestic government budget deficits. Every hyperinflation in history has come as a result of the collapse of the balance of payments. The Germans are most familiar with 1921, but they tend to forget that the Weimar inflation was a result of Germany trying to pay reparations abroad. They were ordered by the Allied powers to print Deutsche Marks not for domestic spending, not to run a domestic deficit, not to rebuild Germany, not to employ labor, but to throw reichsmarks onto the foreign exchange market to obtain the foreign currency to pay the Allies, so that the Allies could turn around and pay the arms debts for what they bought from the United States before entry into World War One. It was the collapse of the foreign exchange that caused the hyperinflation, not domestic spending. And Germany’s hyperinflation was not cured by the central bank creating less money. It was cured by setting up a triangular flow of international payments. American bondholders would lend money to German municipalities that would issue bonds. The municipalities would receive dollars, and turn them over to the Reichsbank. It then would issue German currency against this for local spending – using the dollars to pay the Allies. The Allies would pay America, and that would keep the circular flow going. But to do this, interest rates had to be held down in the United States, to make German and other European borrowing more profitable for international lenders.

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