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Martin Armstrong Warns "QE Has Failed... Central Banks Are Simply Trapped"
Submitted by Martin Armstrong via ArmstrongEconomics.com,
The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money. If we are looking only at the institutional level, then this will not contribute to DEMAND inflation only ASSET inflation by causing share markets to rise in proportion to the decline in currency value.
The European Central Bank (ECB) then pushes interest rates negative to punish savers and consumers for not spending money that never reaches their pocket. Negative rates promotes hoarding cash outside of banks which in turn then inspires the brilliant idea of eliminating cash to force the objective and end hoarding. But negative rates have been simply a tax on money. The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.
Then we have the problem that the central banks in attempting QE operations, cannot figure out how to reverse the process. They cannot sell the debt back to the market thereby defeating the original concept of creating elastic money supply. You increase the money supply during a recession to prevent banks being forced to sell assets to meet a panic demand for cash. Transactional banking has altered the classic borrow short lend long operations of banks cancelling out the idea of requiring and elastic money supply. All central banks can do now is allow the bonds they bought to mature and expire. If they attempt to sell the bonds they bought back into the marketplace, they will drive rates higher in a panic.
The ECB is now expected to inject “fresh” stimulus into Euroland’s economy come Thursday given Mario Draghi said he and his policymakers would “do what we must” to return inflation from its current level of 0.1% to 2% asap. Draghi now implies that he has failed for unless he takes aggressive action, there is a tremendous risk of a dramatic disappointment in financial markets as QE is revealed as a failure.
The combination of a continued declining recovery and a deflationary atmosphere present a compelling case that the ECB will accelerate it program despite strong opposition from German policymakers and others on the 25-strong committee. Since late October, many officials from Euroland have gathered in Frankfurt to brainstorm just what the central bank could do now to turn things around.
Many can only see that the same course must be extended and pledging to buy about €60bn of bonds a month from March 2015 until September 2016 was not enough as they assumed would create inflation to achieve 2%. This has produced a total buying spree of about €582bn out of a planned €1.1tn. All this did was ease up some credit markets, but bad loans are still the huge problem for banks and raising taxes dampens the BELIEF that there is a viable future to even borrow to expand the economy.
European economic growth remains extremely weak and inflation has failed to pick up as much as the ECB had anticipated BECAUSE they are NOT lowering taxes and that is the ONLY way to reignite DEMAND inflation from the consumer. Increasing the money supply which never reaches their pockets is pointless especially when banks are not interested in lending in the face a serious unperforming loans as taxes and tax enforcement increase. Clearly, the ECB has already changed its tone on the September 2016 deadline.
The ECB’s position is to remain in denial arguing that QE is indeed working, but it is just not working fast enough. Without the ability to control taxation, buying bonds and attempting to simply inject capital that cannot reach the consumer becomes a joke. It is more like a medieval doctor who bleeds his patient and assumes when the patient dies it was not the method of bleeding and perhaps he took out too much blood but the fact he did not bleed him soon enough. Inflation by their own measurement has remained under 1% for two years.
There is absolutely no credibility in terms of returning inflation to a 2% target. Obviously, the argument is to bleed the system further by buying even more bonds. The burning question is the very theory of QE being inflationary. The ECB has bought mostly government bonds amounting to slightly less than 75% of all purchases. The balance is composed of repackaged loans as covered bonds or as asset-backed securities.Buying in government debt clearly creates no jobs and it certainly does not expand the economy. Government produces nothing but a drain upon the wealth of a nation that is produced only by the people. The larger the government, the lower the economic growth for you are spending more to sustain government that creating an economy.
The Federal Reserve was established in 1913 with the directive that to stimulate they would buy directly corporate paper – NEVER government. When banks were reluctant to lend, the Fed would buy the corporate paper and that would prevent unemployment. Thanks to World War I, the structure of the Fed was altered and they were directed to buy government bonds. That directive was never reversed. Today, while most central banks have stuck to buying mainly government or quasi government bonds which do not directly stimulate the economy,they have failed to comprehend the significant difference between buying corporate debt issues compared to government. This is a primary misconception of how to manage an economy and holds a large key as to why QE has failed combined with raising taxes and increasing tax enforcement to pay for QE.
Indeed, if we look at central banks as a whole, the Bank of Japan purchased exchange traded funds and property directly that was in the form of Japan real estate investment trusts,as part of its QE program.
However, real estate trusts are a dead asset class. They also produce nothing and represented purely a collapsing asset value. This failed utterly to “stimulate” the economy for it merely relieved others of sure losses.
The ECB became the first major central bank to follow Larry Summer moving into negative interest rate territory which was really aq tax on money. The ECB cut its deposit rate below zero last year punishing people for saving money when in fact they fear the future and will not spend lacking confidence. We have now seen this policy adopted in Scandinavia and Switzerland. The US Federal Reserve is not following this course and sees that negative rates destabilizes pension funds and the efficient use of capital. The Fed counters this trend warning that its domestic policy objectives cannot be held hostage to international and it sees that interest rates must rise to be “normalized” to prevent a further economic crisis. This clash between policies between the ECB and the Fed are more likely to weaken the euro against the dollar.
Moreover, I have argued that the Fed should abandon paying 0.25% on excess reserves. Foreign institutions are moving cash to their US branches to simply deposit money at the Fed. This money is accumulating massively and obviously it is NOT stimulating the economy. The ECB can buy European bonds and the cash is being sent into the dollar and deposited at the Fed. Total deposits at the Fed in excess reserve facility is approaching $3 trillion. This may be creating money which in theory would be inflationary, but if it is simply parked, it has no inflationary impact for the velocity of money in this cash become zero.
Clearly, the ECB cannot stimulate the European economy with QE unless it also lowers taxation and buys private debt directly to stimulate the economy when banks are now simply transactional. Allowing the ECB to buy bonds with lower negative yields while raising taxes is proving to be a lethal policy that is sending capital on every boat to the USA. Currently, the ECB has a ban on buying anything with a yield below minus 0.2%. The ECB somehow must convince markets not only that it can hit its inflation target, but that its policy is even sound. QE is not working and it cannot work under these conditions.
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Painted into a corner. More QE and ZIRP is what they will do. Head fake 0.25% hike if ever then QE and NIRP.
Get rid of cash, troll every digital balance for taxes and deposit scalping; they will take this to the graveyard.
I guess Armstrong never read MEFOBILLS like us, Hedgers:
The so called money printing by FED in QE is actually double entry mechanics. The double entry ledger is swapping TBills for newly created keyboard money.
In effect, they are unprinting TBills, not making new money.
New credit comes with a new debt instrument. In the case of QE, it is existing debt instruments being swapped. Banks system is primary, while FED is an adjunct.
Just remember what I've said in the article below; hyperinflation does not happen "just because" it is planned for in advance by political elites. The plan is about to go into high gear...
Your Pre-Thanksgiving Hyperinflationary Warning Sign that Most Will IgnoreOld Marty has been quite prolific recently on everything other that 2015.75. It surely couldn't be that his own theory was also a failure?
People who live in glass houses, whilst better than a prison cell, still shouldn't throw stones?
Captain Obvious, Martin Armstrong has been on this mantra for a long, long time... Is this time different? Who knows as this bitch should have collapsed a long, long time ago... The central planners have pushed all the chips into the middle of the table and are banking on economic upheaval to usher in their planned recovery under a new paradigm... That is after a few billion useless eaters are removed from the equation...
Dont look now but a solution is popping up in Syria... obie going boots on the ground now.
Problem solved 7 years in is enough. This will be over in a couple years once it is ON!
Edit: this fulfills way more than the economic crisis, it solves the USA problem.
<--"QE Has Failed ... for the money injected ... never reaches the consumer."
<--"QE Has Succeded ... for the money injected ... never reaches the consumer."
My call on him, out of all the analylst, Marty has been the most right I have ever read. I've made a lot of money over the past year folllowing that computer of his says.
I think his computers call on 2015.75 will be very apparent a year from now, just like a year after his call on real estate 2007.30.
..and like four years after his call on gold in 2011.
The call I remember, he made in a broadcast interview, which still can be found, where he said there was going to be a big takedown on gold. That was in april 2013, a week later it happened. 1600>1200 in 3 months. The only thing he was wrong on was the timing. It happened much sooner then he thought.
So let me see if I understand this. Marty's prediction of total collapse at 2015.75 HAS actually taken place but it has been hidden so we won't actually be able to see it until a year from now? Or is this piece actually an attempt to obfuscate the issue and "blame" the CB's for Marty's projection failing?
I read this site every day. It seems like after 2015.75 everything has been far more rolling over. It was interesting the Dry baltic index took a nice ramp down on that date and has hit its lowest to this date. Tyler posted it. Interesting to how the Russians started bombing that date too. I guess there is people who read marty, and others who just glance at his writings.
If you look at the data on the real estate crash. It started in spring of 2007. It didnt start when the poor slobs who were still buying houses to flip relized it to late. .
Let me re-quote myself. " I have made....Lots...of...Money ... this year from what his computer models have forcasted".
i think its fair to say that IF we get a downturn by years end that is sustained, it will appear in hindsight to be a resumption of the august/sept drops.
re armstrongs "negative rates have been simply a tax on money" - to be more accurate, neg rates are the direct incremental destruction of capital, no less.
Hyperinflation is a good story and we have heard many hypothetical situations before. It didn’t happen. And it doesn't reflect US reality.
There are a lot more stressful issues such as lack of demand, balanced sheet recession, and lack of physical growth.
All this to say that the FED has practically destroyed American society because their phony MONEY is the problem>> https://goo.gl/IoiSjv
Armstrong is a shill and a flake. According to him precious metals are not manipulated nor is the stock market. Still hawking his truth to lie formular.
The FED is "rocking the boat". For the next 3 to 5 years the US will suffer and Europe will get the benefit of central bank intervention.
QE? It's as you say, simply disguised by currency swaps and slight of hands. It's actually readily available to see on the FED's own web page.
Additionally, who says the FED even wants the economy to improve? They don't like it when American's can afford to go to Europe and picket Billderburg meetings.
If they really wanted to stimulate the economy and put money into the middle class hands they would put everyones morgage rate at 1%
That wont happen since its not good for the banks bottom line
QE the flogging of savers planet wide.
Spend or feel the lash grandpa.
Course grandpa has a REASON not to spend his money if he does he will STARVE.
But why am I saying this? It's not like they don't already know this if they wanted to know what QE does they can just study some recent history in Japan.
The reason we have QE is the same reason Japan did what it did. Over and over again the theme in Japan is making money by being connected and knowing when the government was going to step in and save, X Y or Z or all of them.
It's just too damn tempting they can't get to actually solving the problem because the hungry hogs keep clogging up the trough. If they wanted to solve a spending problem that is trivially easy and Ben wrote a thesis about it and that's the one thing he never tried.
JOKES ON YOU!
He never actually just airdropped money to the people he airdropped money to the bond market and Wall Street and what do you know they kept it.
Here's the deal you can pull out all the charts you want but there is something going on here that should terrify the FED more than anything else "I don't believe they are terrified of anything because I don't believe they don't know exactly what they are doing" assuming of course they actually cared about what they say they care about.
If they don't raise rates soon the entire bond complex that has existed for a very long time is going to starve all the insurance companies and all the pension funds and all the savings of the world of return so bad it will catastrophically fail them all causing some kind of black monetary hole to open up and suck in everything.
Again of course they know this they aren't that stupid.
Raising rates now would actually be the correct move and it will destroy nearly everything but it would be the correct move given where we are on the board.
That and outright printing money to fill all the gaps and payoff the debt levels back to historical norms it's the only way to preserve the older system if they don't do that and of course they won't then it will just blow up and of course they know that too.
QE hasn't failed.
The dream and then the reality of QE got all of us, tinker, tailor, soldier, spy from January 1, 2009 to December 1, 2015 and it looks like the old girl (JY) as some steam in her yet.
These psychopaths change corners like they change underwear........
No worries, they have a plan.
Well of course the answer is more QE, which i'm sure other posters already pointed out.
Can't figure all the nuclear war talk lately. Over what?
I can stand these "experts" who pen this stuff without a clear grasp of what is going on. QE kicked the can down the road and was the biggest transfer of wealth upward in the history of mankind. When judged by that metric QE was a raging success. TPTB aren't trying to save anything other than their ass. They are postponing the inevitable until they're ready to fuck us again.
Edit: BTW, the fed is not trapped yet, they still have NIRP and helicopter "money".
And they haven't even monitized the Grand Canyon yet. Those crazy collapse-a-tarians.
Bingo Doc.
No surprise here, I discovered 4 years ago that stimulus has NEVER worked in history, and liberals know it, in my book, Atlas Shouts.
http://www.amazon.com/Atlas-Shouts-Modern-Patriot-Action/dp/1458217566
The current monetary policy is just as misguided as that which caused the Great Depression.
Here are some signs of a coming recession.
1. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
2. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
3. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
4. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
5. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
I thought we were already in a recession.
"“do what we must” to return inflation from its current level of 0.1% to 2% asap."
Hahahahaha, it's all about the skim. All they can do is push more debt into the system. Proof they are parasites.
They didn't fail at all. They succeed spectacularily so far by convincing the public that QE was meant to stimulate the US economy rather than to shore up the broken fiat ponzi system built upon a debt based currency and too big to fail fractional reserve fraud banks.
You're exactly correct - QE was a HUGE SUCCESS!
money (FRN) is becoming scarce, ave folks have debt (student debt), but the discretionary money is close to gone for millions in the west. debt is used for new cars and iphones but it is debt ..the higher wages needed to support this debt are not there. the road ahead looks bleak for the ave citizen of the west.
the big centers of wealth and power are moving to avoid having to interact with the masses who are consigned to the new third world.
do you see the paulsons or the corzines no they are hidden, protected above the masses, you cannot get to them, they are the new gods.
I have a credit score of 760 and yet my new credit card agreement charges me a 19.5% interest on any unpaid balance (which I never carry). That's a 19% spread between what the banks pay their customers and what they charge their customers. But the Fed can't figure out why consumers aren't spending. Give me a break.
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What is it that we've been doing to drive the velocity of money to near zero since the 80's?
If things are so great, inflation is happening, the VoM would be far higher, would it not?
•?•
V-V
QE didn't fail. It was NEVER intended to reach the average man/woman in the street. It did exactly what it was designed to do - to make the rich richer.
Bring back Bernanke, he's a hero. Yea Ben will fix it he's the best crook in the room and he does as he's told.
Government produces nothing but a drain upon the wealth of a nation that is produced only by the people.
In inelastic markets, government is the lowest cost producer. Inelastic markets have no ready price competition, and therefore prices are not driven to their lowest cost value. Inelastic markets must be heavily regulated or government owned. Historical fact: All successful economies in the past were mixed, with government substantially involved with inelastic markets and the commons.
Inelastic markets are things like ports, bridges, roads, sewers, electrical transmission, and the military. Anything that has no ready competition is either inelastic, or sometimes a mixed market. Elastic markets do have ready competition and hence government does not need to be involved, except to maybe reduce fraud and attempts at monopoly.
Case in point: Nuclear power in Japan was not regulated heavily enough, and hence in order to make more profits, it was deemed too “expensive” to move back-up diesel generators to a higher level. The real cost? An on-going nuclear disaster with externalities that are probably incalculable.
Is it cost effective to have two competing sewer lines coming to your house? How about two competing highways – is that cost efficient?
Properly constituted government is required for the wealth of a nation to vector towards its producers. Improperly constituted government (as in today) vectors economic surplus toward Oligarchy. A large government owned by Financial Oligarchy is predatory and drains wealth away from producers.
A pre-condition to political freedom it to be economically free. A population bent over with personal debts; an economy where rents on taken in every sphere, makes one a slave. The slave keeps his head down and does not complain, because his needs/wants are under constant threat.
Monopoly forces privatizing the commons, and claiming “inelastic markets” for privatization is more rent scheming, to then extract from laboring producers. Greece is a modern example of a country being harvested by financial rentiers.
Witness Russia as their economic and political freedoms increase – former Oligarchs have been ejected. Commons such as Oil (Yukos) have been claimed for the people. Former dollar debt burdens against land under Yeltsin have been undone. These mostly Jewish former Oligarchs simply borrowed or were gifted money from in-group Western Banks and Capital markets to buy up Russia cheap, after the collapse.
It is State power working at behest of Russian people that is reversing monopoly and predatory finance.
This constant demeaning of Government with hypnotic statements skews reality. Properly constituted government is required for higher civilization.
All economics is transformation of the earth’s free gifts, by using labor, machines and energy. Doing this transformation cost efficiently requires government involvement, especially in inelastic markets (and the commons).
www.sovereignmoney.eu
Taxation is fiscal policy, a purview of government. Central banks using QE to do swaps is MONETARY POLICY. Monetary policy was given to banking corporations when FED corporation was created in 1913.
QE is the swapping of FED keyboard money to trade for existing TBills, MBS, or whatever paper asset the FED aims their credit firehose at.
QE actually drains TBills away from Shadow Banks. See scenario two below. These Shadow Banks then cannot make short term loans or paper for business. In other words, QE can cause a contraction of useful credit that business needs for short term exigencies.
Banks within the Federal Reserve System have their “reserved” t-bills swapped for cash. See scenario one below. Cash in reserve loops is paid for as if it were interest bearing paper. This prevents a rate collapse to zero on the overnight market. In other words QE would not work if not for this collusion with private banks. To buy a TBill from a bank within the FED system, they simply buy it out of bank’s reserve accounts.
Transmission mechanism is that banks move a TBill out of money supply, and it finds its way to expand balance sheet at the FED. If new FED keyboard money chases a bond, it causes bond price to go high, and interest rate will go low. Remember this fact: Bond price high, interest rate low.
QE then causes interest rates to be driven low.
Here are the two main QE scenarios. Maybe Armstrong will read this and stop spreading hypnotism? Nah – he is wedding to a worldview at variance with reality. Actual bank mechanics matters and where the credit goes – matters – a lot.
Scenario 1 – Bank sells $100 in t-bonds to Fed
Federal Reserve balance sheet:
Change in Assets = +$100
Change in Liabilities = +$100
Change in Net Worth = $0
Banks balance sheet:
Change in Assets = $0 (t-bond is swapped for reserves)
Change in Liabilities = $0
Change in Net Worth = $0
Scenario 2 – Non-bank sells $100 in t-bonds to Fed where bank acts as intermediary
Federal Reserve balance sheet:
Change in Assets = +$100
Change in Liabilities = +$100
Change in Net Worth = $0
Banks balance sheet:
Change in Assets = +$100 (reserve assets increase)
Change in Liabilities = +$100 (deposit liabilities increase)
Change in Net Worth = $0
Non-bank (shadow bank) balance sheet:
Change in Assets = $0 (non-bank sells t-bond and obtains deposit)
Change in Liabilities = $0
Change in Net Worth = $0
Low interest rates are “supposed” to cause a surge in new borrowers, who show up at banks start a new debt cycle. (You cannot push on a string.)
The end result of QE is that Says law is obviated, as “credit” does not flow in a virtuous circular loop amongst producers/consumers, but instead vectors purchasing power away toward parasitic finance.
Ponzi schemes fail when not enough new entrants line up.
Que the implosion of birth rates in the developed world.
We are simultaneously hurtling towards the zero bound on the value of manual labor or even human intellectual capital. So if you earn your living with your back you're going to have to work harder and harder to find a traditional factory job if you can at all I'd suggest just doing something like starting your own lawn mowing business I am dead serious.
At some point even that will go away and it's going to just keep going it's insidious Ted the unee bommer already laid all this out in between psychotic breaks the lucid parts of what he said are in fact real.
If and when general human intelligence level AI shows up it's totally game over for most if not all of us in terms of earning a living in the type of system we have now it'll be gone.
So I understand the anger but if you take just a second and look there are in fact bigger problems than even the asshole factor and that itself is a doozy but even if they weren't there it would only extend our time in this current iteration a few decades if that just due to technology alone.
The real problem has been there all along and I think the elites know it's there and haven't solved it at least to their satisfaction that they can keep their placeholder in place afterwards.
Think this through if you are a multi billionaire who enjoys controlling peoples lives how are you going to do that when anyone with a cheap robot can build an empire?
I think this is the bigger problem but not many agree with me.
Well it looks like the National Socialists and their War on White People (WWP) is winning.
There is little differrence between the National Socialists we fought in WWII and those of today except the target today is the White Race. Shortly the Write Race will wake up and get in the fight as what future historians will call WWP.
Marty never said there was going to be a stock crash on 2015.75. He said it would be the beginning of worldwide sovereign debt collapse. There were a few notable events that occurred on that date, the most important of which was Russia started bombing in Syria. The DAX also bottomed around that date. I agree that the true meaning will likely be more apparent a year from now, but suffice to say we have entered a new and dangerous time where wars, large currency movements, and sovereign defaults begin to create havoc worldwide. So far I've seen nothing to discredit Marty's forecasts. Best I can tell, he's been absolutely correct. I am not looking forward to it either.
Get in your head QE is causing DEFLATION!
Every Economist not on the Government/Banking Payroll would have said, QE was never going to work.
BUT...
It's not the Control Banks that are trapped, it's the Publc.
The Central Banksters can just pack their bags and go to Switzerland, but you can'r, you'll be stuck with the Bill.
QE has been a resounding success. The Central Bankers are at least as smart as Martin Armstrong and they neither believed nor intended for the QE to "stimulate" the economy. The objective of the QE was to keep borrowing costs low for those whose debt the Central Banks were buying and succeeded in that objective. Central Bankers know as well as anyone else that Central Bank buying bank debt doesn't create additional demand or additional loans, the only sources of economic growth. Yeah, they won't say so openly, but even an idiot should know why.
They are also not "trapped". It is not a Central Banker's job to "stimulate" the economy. When the economy crashes again, they will admit to as much.
Central banks do not know what they are doing........
Yeah right baby.
Armstrong has no moral credit.
What does reach the consumer is a FAIR RETURN ON SAVINGS and on other dollar denominated iinvestments.
That money, distributed throughout the economy, is the great consumptive driving engine that the FED has removed...and then they wonder .."what happened?"
Acadamia will sit down and write new theories that will show protracted low rates tamps down economic activity; destroys savings, allows government expanison, promotes malinvestment and causes the velocity of money to plummet.
Low rates slow economic activity because everyone is afraid the rates will rise , so they save.
Best thing you can do is have no rate.
Remove the rate from the equation altogether.
Get rid of these people who arbitrarily fix rates and print money and just let money be based off demand.
Step 1
Convert all Debt to Simple interest and Ban Compound Interest.
Step 2
Set the Federal Funds Rate to 5% Simple Interest Forever just to curb inflation.
Step 3
The 5% collected by the central bank goes directly to the treasury debt free (The U.S. Govt becomes the primary share holder of the Fed) and whoever "owns the Fed " and its "shares" as a corporation have their assets liquidated and nationalized because everything they own was stollen from the U.S. people anyway.
Step 4
Profit?
Its not restraint when you dont have the money to spend in the first place.
Thats like me saying you aren't selling me apples because you are restraining yourself.
When the real reason you aren't selling me apples is because you are fucking fresh out of apples and some crazy fuck is running around in your fields burning your fucking trees down.
QE is a stealth wealth redistribution scheme from those who have too little disposable income to invest in financial assets to those who do.
It is reverse Robin Hood.
Of course material wealth is not denominated in financial assets. It is denominated in real goods and services, the things consumers spend on. The trick is that they must first produce in order to consume.
And therein lies the problem.
The monetary system has QE built in to its structure inasmuchas it requires an expanding central bank balance sheet, and an expanding currency.
When that expansion happens solely in the commercial fractional-reserve banking sector the stage is set for an inflationary boom followed by a deflationary collapse, because there will eventually be too little base money for banks to meet their reserve requirements. Only a slight shock to depositor confidence is needed to reveal that fact.
When that expansion happens solely in the Central-Bank-Government sectors, you get a zombie economy where productivity and consumption both decline even as more and more currency is created. Some assets explode in value - those that central bankers, financial cronies, and governments like. Everything else suffers mild deflation until no further credit can be extended to consumers...at which point it all (currencies, credit, governments) collapses.
The problem is that Activist Central Banking in itself has distorted the relative value of things, as depicted by prices, such that non-productive ventures earn high wages and attract new investment, while desperately needed productivity is foregone as unprofitable.
All of the above is a description of the MEANS of the economic disease.
The disease itself is simple...there is too much theft for society to continue to function, too many people getting something in return for nothing productive.
Why did they go on with this bad experiment for this long?
PLEASE WORK, JUST ONE MORE PUSH! THAT'LL DO IT! All it did was make the rich, richer. Now they can spend all that phony cash on cool toys. like bunkers.
hey Armstrong, why don't you allow comments on your blog? you keep saying gold will be worthless when it all hits starting 2015.75? so explain why china, russia, india, among others are buying the physical stuff at record pace for years. so theyre all wasting their money, and your the messiah? he's selling articles folks, that is all.