Quantitative Easing And The Consequences Thereof

Posted at 5:36 PM (CST) by & filed under General Editorial.

Dear Friends,

If you read yesterday’s notes on hyperinflation you now know the common belief that an economy must be in a recovery phase to motivate the velocity of money, which in turn converts expansion of money supply into significant inflation, is a BUSTED ECONOMIC MYTH. History speaks loud and clear to that.

Hyperinflation comes about via a loss of confidence in money. This can be political as well as economic. It can happen to any major currency that weakens. It simply has never occurred by an upturn in business.

The mistaken belief that an up-turn in business activity as an absolutely necessary criterion for the enormous funds now injected and to be injected into the economic system to transmute in an out of control inflation is convenient spin.

Hyperinflation in every case, even those considered political, has been a product of variations of quantitative easing, the process we are now entering.

The key reason why quantitative easing has been so successful at causing hyperinflation is because this method of direct injection is made of liquidity and therefore effectively eliminates and sterilizes the funds so injected.

The reason all historical hyperinflationary events have occurred is due to the failure of attempts to unlock credit lock ups.

The Federal Reserve has no other option than moving to quantitative easing because the Federal Reserve Begging Bowl and the TARP have only served the Good Ole Boy’s Club of Banking.

GE is simply too big to fail. GM is simply too big to fail. Quantitative easing can prevent this but as always, with CONSEQUENCES.

Currency relationships are the final determinant of hyperinflation in every case in history going back to Rome.

The technical dollar rally had to be engineered otherwise TARP or the Begging Bowl could not have been applied.

The credit of unlimited dollars via quantitative easing carries defined dollar consequences that no carry trade nor repatriation can nullify.

So let’s summate what we have discovered by a review of all significant hyperinflationary events in history:

1. The velocity of money increase that transmutes money supply into runaway inflation is currency related in every instance, not business recovering activity related.

2. The tip off to impending hyperinflation is always a currency event. This is without exception and never fails to occur.

3. More than 95% of all hyperinflation events, if not all, started in a business recession or depression, not in a recovery phase of that country’s business activity.

I invite you to try to prove me wrong, knowing you cannot.

The instant the technical dollar rally based on repatriations and carries end, and it will, the process leading to hyperinflation will have begun.

Until then big money will be the buyers of any gold weakness as were certain Middle Eastern entities a week ago.

Those who take delivery of their COMEX contract out of COMEX storage are doing themselves and all of us a favour.

Madness or Reality

Those who are frustrated by gold need to understand that the masses are driven via spin to illusions and madness.

When reality dawns via a break in markets that via spin they have gone mad over, it is too late to do anything but go belly up.

There is a great story that proves this.

Back in 1824 there was a blue-collar worker who had the ability to be a great public speaker.

His topic was his relationship to the then mayor of New York and his observation that the lower end of Manhattan Island was in the process of sinking. He claimed to have been retained by the Mayor of New York to promptly and permanently fix this problem.

The process was simple. He would saw off the lower end of Manhattan then tow it out to sea, turn it around and bring it back properly connecting it with Manhattan, therein resolving the dire problem.

Although that sounded ludicrous and was derided in publications, Lozier persisted. Lozier, purporting his authority, began to order all kinds of supplies, hire workers, and order huge amounts of livestock as food. All of this was in the thousands.

Then came the day for work to start. All items were delivered that day and a huge number of staff as well as lines of workers appeared ready for the task.

The only person missing was Lozier. He was never prosecuted, as everyone fooled by him were too embarrassed to admit they had been had.

This is those in the market who buy the spin that hyperinflation can only be the product of an improving business climate.

You can read about this in the “Grand Deception” by Alexander Klein.

What is occurring now is a “Grand Deception” which due to the unlimited amounts of funds being and to be created gives today’s Lozier an extremely short lifetime.