The central bankers of the world, including our own Federal Reserve, began printing (creating) money out of thin air in hopes it would inject some juice into the dying veins of our global economy.
Of course they hoped they would only have to give one or two injections of liquid $$ to "heal" the consumer economy....but 36 months later they are still have the global economy on full IV drip.
Now here is what is really concerning....they are coming to the horrifying conclusion that the patient isn't getting any better...and if they stop injections, the patient may suddenly die!! And if the patient dies, then life as we Western Consumers have come to know it, will come to an abrupt end.
What's a poor central banker to do?? They have no exit strategy, no way to quit giving injections, and no way to suck the injections back out of the dying patient!
Recently the world received a warning. There will be no exit. For central banks, accountability will not be escaped. And “thus spoke Zarathustra”…more specifically, the Master of the Universe himself, the head of the U.S. central bank. Recently, he made a big pronouncement and the world listened.
What are we speaking of? Nothing other than the announcement by Ben Bernanke of the U.S. Federal Reserve Board (Fed) that they would not “taper.” Readers might not appreciate the large kerfuffle that this caused. Many observers were shocked. Earlier, the Fed had signalled that it would like to begin “tapering.” As a result, interest rates promptly soared. Bond markets everywhere, from Indonesia to Spain, threw a tantrum. Then, when the time came for their decision on September 18th, the Fed balked. It announced it would not “taper.”
What is the “taper” all about? Simply this: Back in 2012, when the economy was again sagging, the Fed felt it could not risk a further deceleration and again began a program of buying $85 billion worth of treasury bonds and mortgage-backed securities per month. It can do so quite easily, though this might amount to a gargantuan $1.02 trillion per year. It can pay for its purchases by simply crediting banks with new reserves.
For all intents and purposes, it is a form of money printing. It’s a clever little technique, since by doing so, these actions also lower the debt burden for the federal government. The Fed collects the interest on all the fixed-income instruments that they have purchased and gives it back to the government. Voila.
But now, the Fed said it would not stop this program. They would not “taper” (reduce their pace of buying every month); they would continue. A number of conclusions and confirmations spring from this action.
Firstly, the Fed now realizes that there is no easy exit. Once the financial markets, both domestically and globally, are used to the drug of cheap and unlimited money — this being money that has not been earned by human effort and wages — they become hooked. It is like heroin. A few doses may be necessary when the patient is in triage with deep economic trauma, but no more. As soon as drug dependency is established, the exit can only be painful.
This situation applies to the actions of all the world’s major central banks including the Bank of Japan (whose monetary arteries have already collapsed long ago), the European Central Bank, the Bank of England and others.
Taken together, the world’s eight biggest central banks have bloated their money base by over $9 trillion over the past five years. The balance sheets of all the world’s central banks (almost all of it by fiat) now amounts to an equivalent of 32% of world economic output.
What is worst of all is that central banks themselves are now unsure and confused…and desperate. They have pumped many trillions of dollars into the world economy and what do we see? Nothing more than slow, creeping economic growth in most of the developed countries in the world. Even the faster-emerging countries are facing economic decelerations at the present time. All the trillions in fabricated money has been shown to be largely impotent.
More and more economists are prescribing “money finance” policies. This involves true high-power money creation. What these types of policies comprise is the direct purchase by central banks of new government bonds. In effect, central banks would be directly financing governments with newly-created money. Governments will be sure to spend this free money. What government wouldn’t? No doubt, this will cause a surge in economic activity...but only for a time. Inflation will also surge.
We anticipate that many people will be taken in by these possible actions. Thinking that a new prosperity is underway, suddenly, they will discover that it is a trap…a false, empty, fabricated prosperity.
The Psalmist brings a comforting message for those that loathe the ungodly environment of the world at this time. “This is what the wicked are like—always free of care, they go on amassing wealth. Surely in vain I have kept my heart pure and have washed my hands in innocence. Surely you place them on slippery ground; you cast them down to ruin. How suddenly are they destroyed, completely swept away by terrors!” (Psalm 73:12-13, 18-21).
“Will not your creditors suddenly arise? Will they not wake up and make you tremble? Then you will become their prey” (Habakkuk 2:7).
“While people are saying, ‘Peace and safety,’ destruction will come on them suddenly” (1 Thessalonians 5:3).
"But Dennis, who really is this author?...some guy on Fox News whose just an alarmist?"
About the Author: Wilfred J. Hahn is a global economist/strategist. Formerly a top-ranked global analyst, research director for a major Wall Street investment bank, and head of Canada’s largest global investment operation.
"Yeah, but Dennis, nothing bad could ever happen here...because this is America!"
Pride comes before the fall.
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