Guest Post: Get Ready For An Epic Fiat Currency Avalanche

Tyler Durden's picture

From Brandon Smith of Alt-Market

Get Ready For An Epic Fiat Currency Avalanche

What is it that makes Keynesians so insanely self destructive?  Is it their mindless blind faith in the power of government?  Their unfortunate ignorance of the mechanics of monetary stimulus?  Their pompous self-righteousness derived from years of intellectual idiocy?  Actually, I suspect all of these factors play a role.  Needless to say, many of them truly believe that the strategy of fiat injection is viable, even though years of application have proven absolutely fruitless.  Anyone with any sense would begin to question what kind of madness it takes to pursue or champion the mindset of the private Federal Reserve bank…

Quantitative easing has shown itself to be impotent in the improvement of America’s economic situation.  Despite four years of free reign in central banking, employment remains dismal in the U.S., the housing market continues its freefall, and, our national debt swirls like a vortex at the heart of the Bermuda Triangle.  Despite this abject failure of Keynesian theory, the Federal Reserve is attempting once again to convince you, the happy-go-lucky American citizen, that somehow, this time around, everything will be “different”.

Sadly, as I discussed in August of this year, not only has the Fed announced a new and UNLIMITED round of stimulus measures, but the European Central Bank has also devised its own bond buying free for all:

I predicted simultaneous QE programs by the two central banks because it made perfect sense, at least, for those with diabolical intentions.  With engineered currency devaluation in full swing in the EU and the U.S., the implosion of both currencies, especially the dollar, will be masked.  That is to say, the dollar index is measured in large part by comparison to the relative strength of the Euro.  If the Euro falls through overt printing, the dollar will appear stronger than it really is, duping the general public and giving bankers more time to inflate. 

Germany’s top constitutional court, only a day before QE3, announced its decision to support a Euro-area rescue fund, which the German people and a large part of its government are vehemently opposed to.  This action was preceded by “warnings” from various banking insiders, including Nosferatu himself (George Soros), that the EU would be sent into perdition and total economic chaos if the nation did not bow down to the ECB and hand over its GDP engine for the “good of the union” and the world:

Sound familiar?  This is exactly what Americans were told in the face of their 80% disapproval rating against the bailout bonanza.  The response from the elites, whether in Germany or the U.S. is essentially that the people “don’t know what’s best, and should sit down while the so called “experts” take it from here.”  Again, mainstream talking heads will suggest that new stimulus is not a problem, and that the unlimited quantitative easing of central banks around the globe should become standard.  In fact, they have already begun the propaganda campaign.  Apparently, QE3 will save us all, rich and poor:

These are the typical musing of centralized banking proponents.  But where is the historical precedence for their theories?  Where are the benefits from the last two QE’s?  All we have received so far for the future debt enslavement of ourselves and our children is:

Perpetually High Unemployment Rates:
There has been NO advancement in employment due to quantitative easing.  Official jobless percentages have fallen, but even the mainstream media now admits this is due to unemployed Americans being removed from benefits rolls because they have been without work for too long:

True unemployment including U-6 measurements continues to hover around 20%.  So much for the job creation that both the Bush and Obama administrations promised in the wake of the bailouts.

A Housing Market Black Hole: Does anything else really need to be said about the housing market?  Is it not blatantly clear to almost every homeowner in this country that QE has changed nothing in terms of protecting their home values or their ability to sell?  Has attaining a loan become any easier since 2008?  Alternative analysts including myself ALL pointed out four years ago that property markets would continue to crash despite any efforts (real or fraudulent) on the part of the Fed.  We were right.  The mainstream media shills were wrong.  Moving on...

Disintegrating Global Demand: Manufacturing in almost every economically prominent country has gone bust, from Europe, to the U.S., to China.  The Baltic Dry Index, a pure indicator of supply and demand using shipping rates for raw goods as a medium, hit incredible lows in 2008.  However, since the QE marathon, the BDI has gone even lower!  In January of 2012, it broke historic lows, and continues to skate along the bottom today, indicating that an even greater collapse in demand and the markets is near at hand.  Demand drives economics.  Period.  No demand, no economy.  Tangible demand cannot be fabricated.  QE has done nothing to drive savings into the pockets of consumers, and therefore, it has done nothing to entice them to spend.  The public is broke, we continue to be broke, and we will be even more broke tomorrow.

Unsustainable National Debt: Our “official” national debt in 2008 was around $10 trillion.  Four years later, we have broken $16 trillion.  This obviously does not include outstanding debts on long term entitlement programs, and new programs like Obamacare, which would by some estimates bring our national debt to around $120 trillion:

Whether you believe the Treasury’s statistics or not, the bottom line is that at the very least our national debt has increased by 60% in only four years time!  Now, the private Federal Reserve wants to introduce unlimited stimulus, on top of Operation Twist, and the incredible money burning habits of our current government?  Are Keynesians really foolish enough to think that the generation of such massive liabilities will somehow undo the crippling effects of already debilitating debt?  Answer:  Yes.

Inflation In Necessities: Food and energy prices remain painfully high, and are now in the process of inflating beyond the average person’s ability to pay.  Oil in particular has remained almost static above $100 a barrel (Brent).  This has been blamed on numerous scapegoats, from Middle East turmoil to “speculation”.  Yet, long term high prices show that neither of these explanations is fully sufficient.  In reality, only currency devaluation allows for such a steady and consistent inflationary reaction in commodities.  Unfortunately, we haven’t seen the worst yet.  QE3 will send prices skyrocketing, and with the open-ended nature of the stimulus, there is no ceiling.  We could very well witness Wiemar style hyperinflation in the near term.

As I have said in the past, I believe QE3 will be the final straw for many foreign holders of U.S. debt and dollars.  The world reserve status was already under severe threat after QE1 and QE2.  The MSM has virtually ignored China’s bilateral trade agreements building since 2010.  In the past two to three years, China has made deals with Russia, India, Japan, South Korea, Iran, and the ASEAN trading bloc (most South-Asian nations), that remove the dollar as the world reserve currency.  And, this year, China has arranged a similar bilateral deal with Germany:

These countries combined offer at least 30% of global GDP, and could easily annihilate the dollar if they decide to dump the greenback completely as the world reserve.  With the advent of QE3, this is now a certainty. 

Open ended inflation is exactly what destroyed Wiemar Germany, and more recently Zimbabwe.  The central banks and their lackeys will claim there is no comparison.  I beg to differ.  When a nation expands debt spending instead of cutting it, and then monetizes that debt through fiat printing in order to allow even more debt to accumulate, that nation is not going to survive.  That nation will eventually hyperinflate, then default, then collapse, either turning into something entirely alien, or fading from history altogether.  This is what we have to look forward to in light of QE3, the final and infinite stimulus adventure.  Something has to give, and it has to give soon.  My bet is on the dollar…

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acetinker's picture

I like the way you think.  But, I think we'd do better to wait 'til 9:00 and ring fence the offices of the PD's (not Police Departments).  They're the boots-on-the-ground in this scam, after all.

Papasmurf's picture

Learn how to use the caps-lock key.

Ivar Kreuger's picture

That is strange. I don't see the word Monetarist once in this post. Yet this is an article about Ben Bernanke and "monetary stimulus." The conflation bewteen Keynesianism and Monetarism is a clear indication of an author with a limited understanding of economic history.

Nothing To See Here's picture

Yes, exactly sir.

The real source of our problems is SOCIALISM, not keynesianism. Socialism never went away, unlike what we are told. In its early stages, socialism could argue on philosophical grounds with free market people, but it had no scientific footing. But then, quantitative methods changed that. It gave socialists the means to create an alternate reality (mathematical models) which fit their assumptions and which they could pass off as empirical truth. Both keynesianism and monetarism sprout from there. Yet, both Keynes and Friedman thought they were supporting the cause of freedom.

Austrian economics are the only footing for a re-ordering of the world around free individuals, if only because it is not pretending to know what it can't know, which are the tools to create heaven on Earth out of a central bureau.

Seasmoke's picture

They are lazy fucks who think they are better than you.

francis_sawyer's picture

evil speculators bitchez...

Temporalist's picture

There is no currency avalanche.  Lebron sneakers are only $270.

Not A Monetarist's picture

STOP BLAMING KEYNESIANS!  Bernanke is folllowing the uber Monetarist Milton Friedman not Keynes. Printing money is what Friedman said would have prevented the Great Depression. Keynes did NOT advocate printing money.

LMAOLORI's picture



ROFLMAO ben is following Marx!!!


QE (quantitative easing) is essentially the printing of money and the addition of liquidity into the markets so that stock (and other asset) prices are given an artificial boost. Federal Reserve Chief Ben Bernanke believes that by pulling up stocks, the masses will feel richer and spend more on consumer goods, thus lifting up the economy. This is based on Karl Marx’s reflexivity theory (George Soros essentially paraphrased Marx) that states by turning the small wheel (stocks), you can turn the big wheel (economy), which in turn will come back and turn up the small wheel (stocks). Bernanke subscribes to such a theory, and he wants QE to lift up the small wheel (stocks), which he hopes will lift up the big wheel (the economy).

Money_for_Nothing's picture

Go to YouTube and listen to Milton Friedman's lectures and appearances. It isn't the person you are talking about. Also his books. As he would say, "inflation is a monetary phenomena".

silver surfer's picture

Go further back in time and blame Adam Smith's invisible hand, David Ricardos equivalence, and his labor theory of value.

Glasshopper's picture

At last ... Some truth! That's what I was taught at college. Friedman Monetarist Policy being followed since the time of Thatcher/Reagan. Or put another way supply side economics. Funny how Americans get that so wrong, like geography & especially since Friedman was an American. Guess they don't want to blame themselves forth is mess. Keynsian policy was dropped in the 70's in favour of Friedman Monetarist policy when Keynesism failed during the oil crisis/stagflation.



hannah's picture

THE FEDERAL RESERVE SYSTEM IN THE USA HAS BEEN A 100% SUCCESS say otherwise is either disingenuous or stupid. the fed enriched the fed members for 100 years. people need to get over this shit that the 'fed failed because i aint got no money'.....

Ivar Kreuger's picture

It is like the expectations gap in accounting. The average person expects accounts to catch fraud and expects the Fed to control inflation and maintain employment. In reality accountants just run the numbers and the Fed just enriches its member banks.

hannah's picture

just think of the trillions of dollars created by the fed and 'given' to the fed members over the last 100 years. it has been wildly successful.

Ungaro's picture

The parasite (the Fed) also dies when it destroys the host (the US economy). And on a long enough timeline...

technicalanarchy's picture

I just checked the price of gold on my phone app. It's 1776.00. Irony strikes me at times.

sdmjake's picture

Won't be long and it'll be 2012...

smiler03's picture

If you judge the future price of gold by what happened today, which is more or less nothing, I'd say 1700 would be optimistic.

The world seems to think that shitting on the dollar will be the only correction required. Good grief, the UK admitted it can't cut spending and the GBP is on it's way up against the dollar. The UK has done £374 billion ($608 billion) of QE since March 2009 and has hardly affected the USD/GBP.

Clearly the Euro is the future (sarc). If my silver holding reaches what I paid for it in March then I'm selling up and quitting most of my PMs. Sadly my silver is in USD and still down (only just). I have one UK gold miner which is down, Scotgold, SGZ-GB, I'll sell that too if and when it breaks even, maybe cut my losses before break even.

I'm not a savvy investor at all but I have come to hate PMs. Please junk away, I deserve it.

yogibear's picture

Better believe there is no iniative or care anymore to shore up the US dollar's value by Bernanke or the other Federal Reserve doves.

Rather than the institutions failing (isolated and sold off assets ) and financial criminals going to jail the Federal Reserve and the Treasury has decided to steal the wealth by loading the US and it's citizens with debt and bankrupting it. 

The final corporate financial raid is a governmental financial raid.

Spanish Lizard's picture

A dollar collapse could happen anytime, especially with the petro dollar, but otherwise they can drag this out at least for a couple more years.

AnAnonymous's picture

'Americans' have this knack at showing that endeavour is a failure by ascribing objectives that are not related to the endeavour.

The FED actions are working. Once they are assessed by their objectives. Now if you declare that some of the objectives are cleaning the window glasses in a coal mine or settling the Moon, yes, all of a sudden, the FED actions are not working.

akak's picture

Corpse salads repudiate ragged velvet fury, kittens rage in macabre macaroni mansions.  Alas, alas, fourteen antelopes alas!

lolmao500's picture

Just send a check to everyone in every state that leans toward voting for Obama. That'll be less obvious than what Bernanke just did.

Ivar Kreuger's picture

QE has little to do with Obama's reelection. It has more to do with postponing the financial Apocalypse and keeping the street elbows deep in Peruvian cocaine and hookers.

silverserfer's picture

way too much blame is being put aon the actons of politicians of the past 10 years. We are at the end of a ponzi that was started 100 years ago. the owners of the FED should be receiving the brunt of our anger.

LawsofPhysics's picture

Buying up all the available diesel I can store for my agri-business as we speak.

smiler03's picture

I hope and am quite certain that your tanks are secured. In the UK, back in 2008 at $140 for Brent, thefts of oil/diesel from farms and rural homes went ballistic. This story is from 2011. (2008, Oil at near record $140 a barrel)

Dr Paul Krugman's picture

This is a losing arguement from the get go since it begins with an ad hom attack on "Keynesians".

Economics is a science, thus why there are academic departments throughout all colleges in America and the world. 

Unless you want the great depression I would urge you people to study the science and learn how and why increasing asset prices is necessary to stabilize the economy.  We need more growth in the economy and the way to achieve that is to have easy monetary policies now.  When we recover than we can begin to pay back the debt.  It would be insane to try to grow and pay back debt now.  We would sufer.

Is that what you want?  To suffer?

TrulyStupid's picture

Spending money on wealth destroying foreign wars and making good bad mortgage debt does not create growth.. it creates windfall profits for those who simultaneously seek a tax cut. No amount of money creation that simply covers previous losses can possibly stimulate growth. The hole gets deeper.

BTW  homes are not assets, nor are they savings accounts.

Dr Paul Krugman's picture

I deplore Bush for taking us to war!  Luckily Obama has pulled out of Iraq.

Mortgages need to be paid, and the way they are paid is if people are employed.  Creating jobs is what needs to happen and that happens by creating growth.  So we increase our exports by dropping the price of the dollar which makes the U.S. more competitive.  Then jobs come back to the economy.

Then people can buy new homes and spend more on other goods.  This will lead us to the road of prosperity, once again.

amadeusb4's picture

But to be fair, wouldn't more jobs be created if new money was directly applied towards jobs through something lika WPA rather than purchasing MBS?

Dr Paul Krugman's picture

Congress is well within their reach to start another Works Progress Admin, and I would applaud them if they did.

MillionDollarBoner_'s picture

Paul? that really you?!?

Your shittin' me, right?

If not...if its really you...then by what right does a Welfare Queen like yourself get to tell productive members of society how it rolls? Did you ever do a hard day's work in your life? Take a look at your fingernails - any honest dirt under there?

Just fuck off and leave honest productive workers a chance to get ahead, already.

TrulyStupid's picture

There can be no road to prosperity without ending the wars, encouraging private savings and wealth creating investment. Kicking the can down the road has been going on for the last 10 years... even the longest road has a dead end.

Yen Cross's picture

Are you watching the "TELE" / Your supreme douche bag, did this one all by his lonesome self!

Dr. Engali's picture

How does debasing the dollar benefit exports when everybody else is racing us to the bottom?

Yen Cross's picture

It doesn't, unless you live under the "fallacy" of service based economies.

amadeusb4's picture

He's talking about avoiding deflation, Stupid.

TrulyStupid's picture

The accepted economic definition of deflation means a reduction in the supply of money through debt destruction.. not falling prices of goods and services. In the case of houses which are not an asset (assets produce cash flow, liabilites produce negative cash flow), falling prices reflect the reluctance of lenders to lend and buyers to buy at current prices.

He is talking about shoring up bad debt with freshly printed money to stimulate growth, while all he really wants to do is bolster the banks balance sheets.

amadeusb4's picture

I'm not sure what you're smoking over there but anytime prices drop, that's deflation. When your dollar buys more, that's deflation. When your dollar buys less, that's inflation. It really is as simple as that. There's good and bad deflation. Dropping prices of consumer electronics as semiconductor manufacturing gets more efficient is good deflation. Your dollar buys more electronics. Dropping prices as a result of demand destruction is bad deflation as it leads to a feedback loop of further demand destruction. THAT's what Bernanke is trying to avoid as the economy heads into a recession. That demand is EXTREMELY difficult to recover so it's better to not get deflationary in the first place. Now, HOW the fed spends the new money is another argument and I have argued here that it would have been better spent by direct application in the economy rather than handing it out to banks via MBS purchases.

L G Butz PhD's picture


We have a winner!


DosZap's picture

 homes are not assets, nor are they savings accounts.

They were  for 75 mo.

We will be losing ALL taxable, and Non taxable contirbutions as write off's.(if O get's the chair back, and maybe even if Romulus wins.)

Charitable, 401k's,HSA's, employers contribs to your 401k's, etc, etc.

The ten most used...................gone.

What purpose is there to have any savings in a 401k, or IRA, if it's taxed going in, and coming out(if you earned profits?), NONE.

As to charitable contribs, peple who really give, do it out of their hearts,or for religious beliefs and I see no huge changes here(except maybe corporations),and philanthropists.

But to lose the Property taxes,state,county taxes, school tax write off's and Mortgage deductst, WHO would ever want to own a home?.

Not me. They are the only thing that allows a partial return on upkeep.

Even paid for they are now money pits.

James's picture

You're right Krug.

I'm sure that gangrene on my big toe will heal right up.

Count de Money's picture

Science attempts to explain the laws of nature. By understanding the laws of nature, science can explain what happens in the present and what will happen in the future.

Economics is the study of how people behave when it comes to money. No more, no less. It's closer to sociology than it is to physics. Since people are not entirely predictable, that by itself, disqualifies economics as a science. Science can predict the future. Economics can't.

How does making things more expensive stabilize the economy? The price of my house might go up, but its value to me remains the same. So how does that make me feel wealthier? And since I have no intention of selling any time soon, how does this help me? And what if I know that this is being artificially manipulated? How does economics take that into account?

Brazillionaire's picture

And yours is a losing argument from the get-go since it begins with "Economics is a science".

ceilidh_trail's picture

krugman- The only positive thing about you and your ilk is that I own an original edition (excellent condition) of Keynes General Theory. Paid $100 for it in early 90s, now valued somewhere between $8-20k thanks to persons such as yourself. Too bad the economy has to suffer for it.

tradewithdave's picture

No Mommy, I want candy. Candy makes me grow. Exercise hurts. More TV too. Homework hurts. Now give it or I will cry.