Thursday, August 11, 2011

What QE3 Will Look Like

The recent financial fireworks in the US and in Europe have made it clear that QE3 is close at hand.  The third installment described herein is much more than just another revving up of the printing presses, as it will involve a paradigm shift intent on restoring currencies and maintaining the current  power structure.

It's an all too common mistake to see the central bankers and their mainstream media propagandists derided as incompetent fools.  These “fools”control the money and the message and it's their game to lose.  Most pundits think the powers that be have lost control and can do little more than kick the can down the road. They are wrong.  We are about to witness one of the greatest orchestrated events in human history; a monumental sleight of hand that will restore economic prosperity, keep the masses happy and most importantly- maintain the parasitic elites in power. 

Tin Hats or Tin Men

Mainstream sources deride conspiracy theorists as simpletons unable to  deal with the complexity of the world;  the tin hat crowd are in need of a “God” or “bogeyman” to explain the evils of the world.  The sophisticated academics and journalists tell us that history is the product of countless interests fighting for limited resources. The cabal of bankers is nothing more than a mirage conjured up in the thirsty imagination of simpletons.

If one wears a shiny tin hat then the problem, and the solution, are very different: the 1%  crowd have created an enormous pyramid scheme supported by magnificent lies preached from schools, televisions, governments, churches, newspapers, universities and the like.  The mission is to wake up their brothers and the whole misbegotten scheme will melt into a sea of crisp consciousness.

What is is not in doubt is that the world reserve currency is nearing the end of its viability at least in its current form. The only other two options, the euro and the yen, are in as bad or worse shape.  The end game has arrived for the current monetary system which began with Bretton Woods in 1944. The sub prime crisis, the Fukushima earthquake and nuclear disaster and the PIGS (Portugal, Ireland, Greece & Spain) were the final nails in the coffin of the dollar reserve system. 


Why Size Matters

When humans existed in small groups as hunter gatherers, societies were generally egalitarian and specialization of labour was limited.  Since there were no full time enforcers, authority was relative and flexible as most tasks could be accomplished by most people; the groups “stickiness” was determined by the incremental benefits of the group.  As society progressed and the groups became larger, labor specialization increased efficiencies, allowing for full time armed forces and propagandists.  Elite rulers thrived off their capacity to control and made it very difficult for individuals to leave and make a go of it on their own. 

Men gave up their freedom as soon as they began plowing to eat.  The larger societies became, the more complex the control mechanisms of religion, slavery, standing armies and caste systems.

The main impulse of history has been for the 1% to maintain their power against the brave few intent on to replacing them.  The key novelty of the information age is the extreme specialization and unprecedented technologies of control the elites have today.  The modern citizen in an industrialized nation is more vulnerable then any other human in history.  He relies on his masters for everything from food and shelter to education and entertainment.  He is incapable of teaching his children, growing crops, entertaining himself, or, most importantly, thinking for himself.  Modern man is the ultimate souless slave.

The modern division of labor consists of a ruling class (top 1%) that control about 40% of all financial assets, a managerial class ( the top 2%-10%) who control about 35% of all assets, with  the other 90% of the working masses dividing up the 25% that’s left.

The pyramid is organized by a complex and highly specialized division of labor, state run education,  massive corporations, government bureaucracy, the judiciary, intelligence organizations, mediatic propaganda machines and mainstream religion.  Those rare few that actually wake up and see the zombie world are quickly diagnosed by the DSM-5 and given anti-depressants.

There are two things everyone wants all the time, and one of them is money.  Control of the money is the magic wand that rules the world.  All the other  religious, patriotic and historical paraphernalia are directly related to allowing the 1% to control the creation of money.  Take that away, and they are nothing but media hacks.

The current era which began with the creation of the Federal Reserve and the involvement  of the United States in WWI  is coming to an end.   The great mistake most “awake” people make is believing redemption is at hand while underestimating the ruling class.  The masters of propaganda and finance and are much more in control then they will ever reveal through their own channels.  Their imaginations are immense and their capacity to orchestrate drama has no limits.  They are the voice of reason while the dissenters are “diagnosed” with a collection of ailments that quickly marginalize them.

The Greatest Brand Ever Created

What should never be underestimated is the importance of the dollar for international commerce.  A dollar collapse would inevitably lead to a mad scramble for commodities and an unprecedented global economic downturn.  While there are solid world currencies, only three are large enough to be a reserve currency, and all three are mortally wounded.  No one will appreciate the incredible role the dollar has provided until it is gone.

The dollar began in the sixteenth century as the Bohemian Tolar which eventually became the eighteenth century standard Spanish silver piece which they pronounced dólar.  The Americans called it the dollar, determined it should have 24.057 grams of pure silver and adopted it as the US "money of account".  In 1933 Roosevelt pegged the dollar to .888 g of gold,  or $35 per ounce. Finally, under pressure from many central banks to convert their dollars to gold, Nixon established  the pure fiat era in 1971 which meant that the dollar was officially backed by nothing more than faith- it had become a pure paper currency.  The dollar was the symbol and expression of the American Empire in the 20th Century and it was the the pillar upon which globalization was accomplished.

No brand in history has ever become so ubiquitous.  From Tijuana to Tehran, from Vladivostock to Vanouver, from Senegal to Stockholm, a fistful of green backs will get you whatever your heart desires.  Through the greatest slight of hand in history, the 1% turned this once receipt for gold into nothing more than paper that they produced at will and for a dear price.  The dollar is the backbone of their parasitic existence, and QE3, the final QE, will be a valiant, brilliant attempt to restore the validity of the dollar regime and their control of it. QE3 will be a radical transition to a new era, similar to the  period of 1912 –1918. 

The top 1% was hurt in 2008. The financial disaster that was the sub prime debacle put them on the ropes leaving QE1 focused on buying up about $1 trillion in mortgage paper that had become almost impossible to move.  QE2 flooded equity and commodities markets with liquidity until the SP500 as well as most major commodities had regained their pre-2008 valuations in one of histories greatest bull markets.  QE1&2 restored the financial wealth that the 1% had lost during the crisis.  Unfortunately, in doing so, the Feds (Federal Reserve and Federal Government) have put the last nails into the current dollar’s coffin.  They would argue that the dollar was already on its last legs post 2001, and they simply hastened the end by a few years- a small price to pay for restoring the fortunes of their masters.

To Kick or not to Kick (the can)

One should never confuse politicians- chronic can kickers- with the 1%.  Politicians are the shills and lackeys of the real power and generally are incapable of any kind of policy creation on their own.  The current stop gap measures to save the euro, the dollar and the yen were never meant to be anything more than breathing room for the 1% to recuperate their massive losses.  Their fortunes have been restored and now it's time to create a new, post American period of wealth and prosperity.  This will be accomplished by none other than mystery man himself, Barack Hussein Obama.

The are no major economic, political, or social problems in the developed, industrialized world that threaten the 1% other than excess debt.  The debt problem is not a real problem, but an abstract claim on present and future income (work) by the 1%.  The system is so utterly clogged that is reaching a point of complete paralysis .  We have entered the tumultuous and inevitable debt destruction period that is often the death knell of regimes.  Deflation, hyperinflation, default and revolution are the usual outcomes.  But there is another way.

The Big Finale


The New York Times recently reported on how banks were reducing the principal on thousands of performing  loans by about 50% in exchange for small increases in interest rates and new, clean promissory notes, with no MERS involvement.   As long as the Federal Reserve “adjusts” the reserve requirements for the bank to reflect half of the money that the bank created as “disappeared”, then for the bank, its no harm no foul.  They are off the hook for the same amount that they reduced for the borrower, and the small adjustment in interest rate recaptures some of the lost future interest earnings from the smaller loan size. 

This solution serves two absolutely critical functions for the banks and the 1% that control them.  First, the banks morbid balance sheets are wiped clean, marked to market and made pure.  No more zombie banks threatening the world.  Second, it frees up vast amounts of consumer income to re-charge the economy, create jobs etc.

The second part of the QE3 will be the ‘public debt crisis’.  Act I was  the S&P downgrade and AIG (government owned) lawsuit against Bank of America which by a wild coincidence all happened on the same   "Black Monday" as the European Central Bank beginning quantitative easing by purchasing Spanish and Italian bonds.  Act II will see a few very large banks being ‘nationalised’ in both the US and Europe, (Bank of America and SocGen for example) and a massive mortgage principal reduction of about 50% will  follow as the President can nationalise banks without congressional approval through the “orderly liquidation authority” or OLA  provisions under Dodd-Frank.  Act III will see the US $14 trillion, as well as the Italian, Spanish, UK, Japanese etc. public debt being halved in exchange for balanced budgets and reduced social spending.  The $50 trillion or so in US unfunded liabilities will be wiped out in a new “social contract”.  Some student loan and Third World debt forgiveness will be thrown in for the full Kumbaya effect.

All of this will emerge out of a new “Bretton Woods” type of agreement that will be followed like the World Cup, Dancing with the Stars, Eurovision, the Superbowl, and the rest of the circus events meant to keep the plebs entertained.  The Euro, doomed to failure, will escape the fangs of a new dark age and emerge triumphant with the Ode to Joy playing in the background.  Logic will overcome chaos and a new age of enlightened corporate slavery will begin.  The only difference will be that the dollar will be replaced by a new reserve system that spreads ultimate control over more than one currency.

Barack Obama will emerge as the new Franklin Roosevelt, the reluctant revolutionary who saved the world.  Prosperity will return and the holders of the dollar, euro and yen debt while not avoiding a nasty haircut, will in exchange get a world willing once again to buy hand over fist again their oil and the products of their manufacturing base.  All of this will take place in a massive drama worthy of Hollywood (because it actually will be written by Hollywood types), keeping the sheeple glued to their televisions, talk radio etc.   They  will cheer when it all finishes with the good guys winning, just as they did when Bin Laden was killed, and when “major combat operations” ended in Iraq. 

Will the masses demand to know how banks can simply create and destroy money with a few clicks of a mouse?  Will they insist on dismantling the Fed and halving the size of the Federal Government?  Will they not rest until all their soldiers are brought home and the war mongers who started these conflicts brought to justice?

Unfortunately, no.  They won't ask any questions that can’t be explained away by the talking head de jour on Fox or MSNBC and the charade will continue, the matrix intact, for another generation to try to dismantle.


Special thanks to Jim Horky for editing this article.

12 comments:

  1. How does peak oil enter into this picture?

    ReplyDelete
  2. Sorry folks, I have to put on the admin control for the comments as someone has forgotten to take their meds. Please, leave your comments, and I will check in as often as I can and publish them.

    ReplyDelete
  3. Hi Mansoor, very interesting question. I am convinced that Peak Oil is one of those key issues that people don't discuss because it is just too big, it shakes their worlds far to much. This piece is obviously speculative, both on the plan and the planners. But, if I had to take a stab at it, and we assume there is a "head" to the monster, than I would say that Peak Oil is baked into the equation.

    They know the real numbers, and realize only with a major economic slowdown will we be able to transition away from crude without sparking a major upheaval. One would have to think that the period of transition to a new currency and world financial order would be the time to also make those very big changes, ie, world oil tax or something of the sort.

    ReplyDelete
  4. Robert,

    Thanks for the reply.

    There is even a simpler way to look at it. The allocation of the future new global reserve currency to individual countries will really be about oil output allocation. Since the most scarce resource with respect to demand defines what money is. With peak oil: Money = Oil and Oil = Money.

    At least this keeps the countries from having a hot war over more and more scarce oil. So may there is blessing in disguise from god in all this.

    Mansoor

    ReplyDelete
  5. Interesting, but your whole premise rides on their being a cohesive group with one aim.

    I don't see things as quite as organized as you do. ; )

    ReplyDelete
  6. Actually there will NOT BE QE3, as just confirmed by the FED board.
    They will keep the interest rates flat untill 2013 but that's all .
    Please get your facts straight.

    ReplyDelete
  7. Interesting development, the New York Times is now calling for principal reductions when they know full well that they are already going on. It is like calling for an intervention into Libya, Homeowners Need Help

    ReplyDelete
  8. What's the probablity of this happening on the loan restruction portion, taking into account LaGarde's recent comments about US homeowners needing assistance in order for the "recovery" to remain strong?? This would also mean the death of the PM's run.

    ReplyDelete
  9. Interesting that Krugman, and now Lagarde are both hitting the same points. Here is Lagarde's qoute.

    “more aggressive principal reduction programs for homeowners, stronger intervention by the government housing finance agencies, or steps to help homeowners take advantage of the low interest-rate environment,” Lagarde said.

    As for the PM's, Gold is the enemy of fiat money. The massive manipulation in gold and silver is a very good barometer for where things are headed. My feeling is there are only two outcomes, the QE3 as described above, or a return to hard money... it's winner takes all.

    ReplyDelete
  10. "it's winner takes all. "

    An appropriate Oxymoron.
    Winners take things.
    Losers are taken from.

    Ce La Vie.

    ReplyDelete
  11. this is the most depressing thing i've read in years.

    here i've been feeling good that the death machine that runs the world is grinding to a halt under its own weight and complexity, and you're telling me that it will be welded back together, rebranded and continue on for another generation! i hope you're wrong.

    personally, i don't see it happening. reality is giving all kinds of signs that we're operating beyond natural laws, and those can't be denied.

    we shall see.

    gregg

    ReplyDelete
  12. Here is how the banker's game works:

    1) Get the government to issue some currency (cash -- paper or reserves at the central bank -- reserves are government issued cash central bank deposits). Government issued cash is around 5% of the currency (money) supply. The government issued currency is put into circulation by the government simply spending it.


    2) The rest (95%) of the currency is issued by the private banks. Each customer loan is a new bank deposit (i.e., new currency) and increases the currency (money) supply of the economy. Note that this newly created money (currency) is put into circulation by the borrower spending it. Most currency (about 95% America's currency supply) has been borrowed into existence and when bank customer pays the loan back that amount of currency is removed from circulation. The banking system cannot go backwards (fewer net loans) as time moves on because fewer net loans means fewer currency in circulation in the economy.

    Accmulation of interest charges on outstanding loans means that the currency supply must constantly increase even if it means giving out lower quality loans. Think of it like a plane flying it must fly at some minimum speed or else the plane (the banking system) will crash (i.e., banking system collapse).


    3) The bankers make dam sure that the common public does not understand how the monetary system works meaning that the private banks issue 95% of the currency. This is whole another topic how they do this.


    4) The system works until real economic capacity of the economy grows and debts can be serviced and interest charges paid. Most of the time the economy oscillates between boom (growth) and bust (recession) because bust is needed to clear debts and start a new lending cycle.


    5) Eventually, one of these cycles goes so deep that currency supply (and demand) falls so low that too many debts become un-serviceable. The recession becomes a depression now.


    6) The bankers then have to decide how to "reset" the system. One way to reset the system is to let the depression takes its course. But of course this path is very chaotic because people lose jobs and may become violent. Once most debts are cleared lending can start again and the currency supply is replenished. Wars are a good way to get initial money (currency) into an economy after a depression to get demand going again. This is the great depression scenario.


    7) Another way to "reset" the system is to get the government to print too much money and spend and destroy the currency and blame it on the government. This justifies issuance of a totally new currency (note that hyperinflation clears debts) and the lending cycle can start again. This is the Weimar scenario.


    8) The banking system (as is) is setup to maximize the power and influence of the global bankers and NOT for the maximum general well being of people. By the way this is a global game. This is the only system around no matter what country you are in. The global banking cartel makes sure that no competing systems are allowed to exist (so they might be copied and global bankers will lose power).



    For more details on this stuff please read the following articles in order listed below:


    http://seekingalpha.com/article/209386-modern-monetary-system-there-is-another-way





    http://aquinums-razor.blogspot.com/2010/07/why-is-deflation-and-depression.html





    http://seekingalpha.com/article/210346-should-newly-created-money-be-a-private-or-a-public-asset




    http://seekingalpha.com/article/192375-cause-of-today-s-economic-crises-too-much-thrift




    http://seekingalpha.com/article/160269-a-radical-solution-for-america-s-insolvent-financial-system




    http://seekingalpha.com/article/146658-great-banking-confusion-is-there-a-better-way

    Mansoor H. Khan

    ReplyDelete

Copyright © 2012 Cactus Land | Home | About Us| Contact Us