Living In A QE World | The Big Picture

All Central Bank Balance Sheets Are Exploding Higher, Or Engaged In QE

The degree to which central banks around the world are printing money is unprecedented.

The first eight charts below show the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People’s Bank of China (PBoC) and the Swiss National Bank (SNB). Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency. Note that all are exploding higher as every chart goes from the lower left to the upper right. Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank’s balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.

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via Living In A QE World | The Big Picture.

Debt Slavery – Why It Destroyed Rome, Why It Will Destroy Us Unless It’s Stopped

by MICHAEL HUDSON

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.

Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.

This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, also communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.

Near Eastern rulers proclaimed clean slates for debtors to preserve economic balance

Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20 per cent (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.

As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.

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via Debt Slavery – Why It Destroyed Rome, Why It Will Destroy Us Unless It’s Stopped » Counterpunch: Tells the Facts, Names the Names.

European Bank Runs And Underestimated Physical Gold Demand

The demand for gold is vastly underestimated. About 18 months ago I wrote about Euro Gold and the Euro Zone and Euro Evaporation Leading To Credit Default Swaps and IMF Gold. One key excerpt was:

The Euro is broken. This was its destiny. This is the destiny of all fiat currencies. These bureau-rats cannot stop this anymore than Cnut the Great could command the tide to halt.

And here we are.

THE GREAT CREDIT CONTRACTION

The Great Credit Contraction has been in relentless advance for years. This is a massively deflationary period as capital, both real and fictitious, burrows down the liquidity pyramid into safer and more liquid assets. The fictitious capital that does not move fast enough evaporates. Poof goes trillions of wealth!

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via European Bank Runs And Underestimated Physical Gold Demand.

Credit Suisse Warns of ‘Last Days’ For the Euro

By Javier E. David

The financial storm menacing the euro zone could prompt the 17 nations using the common currency to seek closer integration despite political opposition — or spell the “last days” for the common currency, Credit Suisse said Monday.

In a somber research note to clients, the bank said the debt fears of Europe’s smaller, more troubled economies are now radiating to its largest nations. As a result, Credit Suisse warned that markets may well have “entered the last days of the euro as we currently know it.”

Credit Suisse’s analysts cautioned that a nuclear scenario — a complete dissolution of monetary union — wasn’t immediate or even likely, despite the funding fears gripping both Italy and Spain.

However, the bank added that the current turmoil “does mean some extraordinary things will almost certainly need to happen — probably by mid-January — to prevent the progressive closure of all the euro-zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

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via Credit Suisse Warns of ‘Last Days’ For the Euro – MarketBeat – WSJ.

Paper Banknotes and the Indebting of Nations

On April 3, 1024, “the imperial Sung Dynasty began to print and circulate chiao-tzu notes [paper money] in the province of Szechwan”.

p. 11 Ralph Foster, Fiat Paper Money: the History and Evolution of Our Currency, 2nd ed., 2008

In China, paper money was a monetary form of ‘Hamburger Helper’, an addition to the royal treasury that allowed Chinese dynasties to stretch their budgets by allowing them to spend what they didn’t have.

In the West, paper money had a different purpose. There, the invention of paper money would also allow governments to spend more than they possessed; but, in the West, governments would have to borrow their own money from bankers.

When money is issued as debt, everyone becomes a debtor

TERMINALLY INDEBTED GOVERNMENTS: A PHENOMENA CREATED BY THE CHINESE, SCOTS AND JEWS

Paper money and fractional monetary reserves appeared first in China in 1024 and, although China’s monetary advances were noted by Jewish traders, it would be the Scots who 600 years later would transform China’s paper money into a credit-based conveyer of debt in the West.

Note: It’s no coincidence that today’s largest bank in terms of market value and profits is HSBC, incorporated by Sir Thomas Sutherland in 1865. Sutherland was a Scot.

In 1694, a Scottish banker, William Patterson, convinced England’s King William III to establish a central bank that would issue debt-based paper money alongside gold and silver coins. The king agreed to do so in return for loans to pay his war debts and more loans to fight more wars.

The Scots’ bogus paper banknotes—marginally backed by gold—would eventually replace gold as money throughout the world, proving again the ancient dictum, bad money drives out good.

Invented in China and transformed by the Scots, it would be the Jews, however, who would leverage paper money and credit and debt into untold wealth and power. William Patterson’s combination of paper money and money lending would catapult the Jews from societal outcasts to rulers of the financial world; but because of deeply ingrained anti-Semitic attitudes in the West, it would take almost a century for this to occur.

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via Paper Banknotes and the Indebting of Nations.

The Two Prerequisites for Hyperinflation

Below is an excerpt from a commentary originally posted at http://www.speculative-investor.com on 20th November 2011.

Relatively rapid inflation of the money supply — say, a monetary inflation rate averaging 10% per year — can occur for a long time without the “inflation” becoming “hyper”. The reason is that a certain mass psychology must be present to create the condition known as hyperinflation. At the same time, hyperinflation cannot result from psychological factors alone. There must also be rapid growth in the money supply.

To further explain, assume that an economy’s money supply has been increasing at around 10% per year for many years, leading to a roughly 8% per year reduction in the purchasing power (pp) of money. (Under normal circumstances the long-term reduction in money pp will be less than the long-term increase in money supply due to the effects of productivity and population increases.) At this point, a critical mass of people comes to believe that the “inflation” will be endless and that money is guaranteed to be worth significantly less in 12 months time than it is today. These people react by becoming much quicker to spend whatever money they get, which has the effect of reducing the pp of money at a faster rate than the money supply is increasing. The accelerated rate at which prices are rising throughout the economy leads to wider recognition of the inflation problem and a more widespread desire to spend money as quickly as possible. In other words, a vicious cycle begins whereby rapid price rises cause people to accelerate their spending, leading to even faster increases in prices, and so on. This is hyperinflation.

The possibility that a change in psychology could accelerate the pace at which money loses pp is why central bankers devote so much time and energy to the management of inflation expectations. However, they need not bother, because the above description of how ‘normal’ inflation evolves into hyperinflation leaves out a part of the process over which the central bank has full control and without which the general price level could not rocket upward for long. At any time during the inflationary process described above, the central bank could put an end to the price spiral without delving into the nebulous world of psychology. It would simply have to stop the expansion of the money supply.

Consider this: If prices were rising rapidly throughout the economy, a lot more money would be needed for every transaction. Another way of saying this is that the demand for money would be in a steep upward trend. Not the demand for money as a temporary store of purchasing power, but the demand for money as a medium to facilitate exchange.

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via The Two Prerequisites for Hyperinflation.

Germany Votes To Allow Exit From Euro

This is a project that was destined to fail from the start, as many Austrian economists predicted.  When the EU fails, along with it’s supranational fiat fraud the Euro(failing now at an accelerating pace), it will free the sovereign states of Europe from the authoritarian dominion of the unelected bureaucrats of the European Union.

I view Germany’s vote as a very positive development for the subjects ruled by the tyrannical EU, and a positive move toward sound money and liberty in Europe.  JT

Update: Chancellor Angela Merkel’s leading party in Germany voted for a measure that would offer euro states a way to voluntarily leave the euro zone currency union, according to a report from Bloomberg.

Markets are continuing to see volatility alongside changes in leadership in Europe and a rush to balance Italy and Greece’s budgets. So-called safe haven spots have eased in the last week, with gold falling to $1,778 an ounce and the yield on 10-year U.S. Treasury notes at 2.04%. The safe assets may yet see another record tested, however. Analysts at Goldman Sachs raised their 12-month gold forecast by 3.8% to $1,930 an ounce, one of the reasons being the chances for continued low interest rates.

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via Germany Votes To Allow Exit From Euro – Forbes.

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

Is it any wonder why our economy is in dire straits?  Printing money to keep the economy afloat is no substitute for real economic growth, it’s simply more smoke and mirrors that results in a wealth transfer from the poor and middle classes to the wealthy, the political class, and government.  JT

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

— Posted Friday, 21 October 2011 | Share this article | Source: GoldSeek.com

Gold is trading at USD 1,623.80, EUR 1,177.95, GBP 1,027.01, JPY 124,535.72, AUD 1587.39 and CNY 10,354/oz. Gold’s London AM fix this morning was USD 1,623.00, GBP 1,027.02 and EUR 1178.14 per ounce. Yesterday’s AM fix was USD 1,629.00, GBP 1,033.24 and EUR 1,180.17 per ounce.

U.S. M2 Money Supply: Accelerating Sharply in 2011

Gold prices are mixed today as markets remain on edge due to increasing divisions amongst European leaders on how to solve the intractable Eurozone debt crisis. There continues to be very strong demand for physical bullion globally and support is strong at the $1,600 level due to this demand.

The sharp fall of copper yesterday, by 6%, is an indication that the US, Chinese and indeed global economy is very fragile and may soon begin to contract.

Physical demand in Asia, mainly India and China, has entered the traditional peak season with Indian festivals and the increasingly important Chinese New Year.

This is reflected in premiums in Asia which remain good. There are reports of massive physical buying out of China on gold’s fall close to $1,600 yesterday. The most active Shanghai gold futures traded at a premium of more than $10 over spot prices earlier today. The contract stood at 335.22 yuan a gram, or $1,634 an ounce, at a premium of $3.

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via US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?.

The Return of Milton Friedman Via NGDP Revenue Targeting

Milton Friedman

As an avowed enthusiast for the idea of changing central banks’ goals to nominal GDP targeting, I would be remiss in not calling attention to a new Goldman Sachs research note produced by Jan Hatzius and Sven Jari Stehn. I’m unable to link, unfortunately, but the authors argue that NGDP targeting is consistent with the Fed’s dual mandate and if implemented credibly would improve economic performance. – The Economist

Dominant Social Theme: If we could just rationalize money printing and make it scientific, it would work! Sure it would! It would! It really would!

Free-Market Analysis: Like a bad guest at a dinner party, Milton Friedman won’t go away. Now he is returning in the guise of the anonymous “Washington” writer for the Economist magazine. Just like Friedman, he has the idea that central banking can be run scientifically. In fact, it cannot.

Central banking was created to fund the British Crown’s wars and it has never been anything but a brutal and destructive force. Giving a handful of men the power to print money and monitor its price and volume is bound to cause unmitigated disasters. In fact, it has.

Booms caused by monetary stimulation inevitably give way to busts. There is no way for the hand of man to monitor money. Only the free market itself, through monetary competition and the historical evolution of gold and silver as money can do that. But that doesn’t stop the Anglosphere power elite from trying.

From our perspective, Friedman was surely a formal or at least informal agent of Money Power. The mainstream libertarian community still promotes Friedmanite “free-market” solutions and certainly his Chicago Fresh Water school, located primarily within the metaphorical ambit of the Chicago School of Economics, has been extraordinarily influential.

But we’ve never been great fans of Milton Friedman (or at least not after we became “hip” to his agenda), mostly because of his strenuous attempts to justify central banking. Money as much as war is the health of the State. In fact, states seek ownership of money to FUND wars. The control of money by the State is paramount.

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via The Daily Bell – The Return of Milton Friedman Via NGDP Revenue Targeting.

What is money?

We spend a lot of time thinking about money, one way or another. We think about how to get our hands on it, how to keep it safe and how to spend it. When we aren’t asleep, there’s a good chance that we’re paying attention to money. But while money is never far from our thoughts, there is something curious about our relationship with it. For all that we use it to get through the day, most of us don’t know what it is.

I mean, we know what it can do. We know how much we have, more or less. We know what things cost and so we have some idea of what we can afford at any given moment. When we start thinking about the future, how long we might live and how much money we’ll need, we tend to want to think about something else. But money itself escapes our calculations. For the most part we don’t think to ask where it comes from or what it is, in itself. The advantages of having money and the consequences of having none loom so large that we seldom stop to wonder about money as such.

Today is as good a day as any to explain where money comes from and why it matters. On Thursday, the Bank of England announced another £75 billion of “quantitative easing”. If you don’t know what that means or vaguely think it has something to do with “printing money”, it is probably because you don’t know what money is. All will be revealed in what follows. OK. Are you ready to know where money comes from, to know the truth jealously guarded from the dawn of recorded time?

Money is lent into existence by banks

There’s nothing complicated going on behind the scenes. The great secret is that there isn’t really much of a secret. Yet the truth about money eludes us for most of the time.

The economist and ironist JK Galbraith once wrote that “the process by which banks create money is so simple that the mind is repelled. When something so important is involved, a deeper mystery seems only decent”. Offered the unadorned truth, stripped of any technocratic flim-flam, we can scarcely believe it. It seems preposterous that money should have such humble origins, as though it is beneath money’s dignity that it should begin life at a banker’s keystroke.

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via What is money? – Opinion – Al Jazeera English.