The Entire Western Fiat System is Getting Close to Imploding!

The Keynesian economists managing or advising the world’s Central Banks have always promoted that they could pull us out of the weakest recovery in the post-WWII era if they were allowed to have their way, says ZeroHedge.

“Their “way” involves rampant debt monetization, also called Quantitative Easing or QE. Indeed, the primary argument from the Keynesians as to why QE has thus far failed to generate a rip-roaring recovery is that none of the QE programs in place were large enough.

Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program.

In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. 

 

The program has been a complete failure. Japan’s GDP growth accelerated for only two quarters before turning down again. The misery index in Japan has hit a 33-year high as households were crushed by riding prices.

Even exports, which were supposed to be the primary beneficiaries of a weakening Yen, have tanked. According to CLSA, real exports remain 16% below the 2008 peak in real terms. Sony, the once great electronics giant of Japan slashed its profit outlook by 70% and canceled its dividend for the first time in 50 years.

In simple terms, Abenomics has failed to revitalize Japan. In very specific terms a single QE program equal to over 24% of Japan’s GDP FAILED to generate sustainable growth in GDP, jobs, or even exports.

So what did the Bank of Japan do? It increased its QE efforts.

It is now clear that Central Banks will do absolutely anything but admit failure. Japan has proven point blank than QE does not create growth. Instead of admitting this, the Bank of Japan has chosen to increase QE.

This is only going to usher in the next round of the Great Crisis that much faster. Only… “

This is a world where nothing is solved. Someone once told me, ‘Time is a flat circle.’ Everything we’ve ever done or will do, we’re gonna do over and over and over again.   Nic Pizzalotto, “True Detective”

Investment  Research Dynamics says, “The Fed has formally “ended” QE, but it hasn’t really.  The Fed will continue reinvesting interest on its portfolio in more bonds and it will rollover maturities.  
.  

Right at the bottom of the drop, the very same Bullard issued a statement suggesting that QE should be extended.  This triggered an insanely abrupt “V” move back up to a new record high for the S&P 500.  Bullard either did this intentionally or is a complete idiot.

The stock market can’t function without Federal Reserve intervention.  The stock market lost 8% quickly on just the thought that the Fed might start raising rates.  Imagine what would happen if the Fed decided to “experiment” by shutting down its market intervention operations – both verbal and physical – for a month…

As for QE, if the Fed has achieved its objective of stimulating the economy, why doesn’t it startremoving the $2.6 trillion of liquidity that it has injected into its member banks?  This was money that was supposed to be directed at the economy.  How come it’s sitting on bank balance sheets earning .25% interest?  

That’s $6.5 billion in free interest the Fed continues to inject into the Too Big To Fail banks.  But why? What would happen if the Fed decided to “experiment” by removing this massive dead-pool of money from the banks?  The money isn’t really “dead,” it’s keeping the banks from collapsing.

I’m interested to watch the Government Treasury bond auctions now that the Fed is not there to soak up anywhere from 50-100% of each issue.  I wonder if the banks will be moving their $2.6 trillion in Excess Reserves into new Treasury issuance.  Obama is going around broadcasting the lie that the Government’s spending deficit in FY 2014 was something like $600 billion.  

Yet, the amount of new Treasury bonds issued increased by $1  trillion over the same period.  Either Obama is lying or the accountants at the Treasury committed a big typo.  Either the Fed has found a way to continue opaquely monetizing new Government debt issuance, or the market is soon going to force U.S. interest rates up much higher.

By continuously intervening in all of the markets, the Fed has destroyed the information transmission system that is built into freely trading markets.  If the Fed left the gold market alone – instead of hammering away with the naked shorting of Comex paper gold – the price of gold would be significantly higher than where it is now.  This would be the market’s signal that our system is indeed terminally broken.

Instead, the Fed keeps interest rates artificially low in hopes of stimulating a recovery in consumption and housing. But if this is working, how come the country’s two largest retailers have begun Black Friday shopping discounts on November 3rd (LINK)?  And the Fed keeps pushing stocks higher to new record highs in order to “stimulate” confidence and faith in the system.  

The fact that the stock market craps its pants when the Fed steps away for a split-second tells us just how broken this transmission mechanism is. 

A colleague of mine has concluded that: 

 

 

For more article from the same author, click on the image below: