QE3- The QE Infinite Path Off the Cliff

Last week, The Fed announced the third round of quantitative easing, the so-called QE3.  Quantitative Easing, in theory, is supposed to stimulate the economy because the Fed both prints more money and puts it into “circulation”, but also keeps interest rates low.  This is basic Keynesian Economics. So let’s take a look at how this has really been working out.

QE1 came in late 2008 under President G.W. Bush.  The Fed initiated purchases of $500 Billion of mortgage backed securities.  Remember, the bundles of bad mortgages that the banks were stuck with after the housing crash? You must remember also, this was in addition to the so-called $700 Billion bailout.

Also, in late 2008, the Fed cut the key interest rate to near zero.  By the summer of 2010, it was obvious that other than enriching the banks, QE1 had not spurred any growth in the economy.

So QE2 came in November of 2010 and lasted until June 2011.  The Fed went to buying $600 Billion in US Treasury Bills to “spur” the economy.  QE2 did NOT create any economic growth.  What QE2 DID DO was to bailout a bunch of foreign banks.  During the period of QE2, cash reserves of foreign banks went from $308 Billion to $940 Billion.  Hmmm,  ahhhh, about $600 Billion. Imagine that!

QE3 is essentially no different in the apparent approach is again to purchase mortgage backed securities, which we already know just enriches the banksters, and just tries to hide the elephant called debt.  WHAT is different about QE3 is that for the first time there is NO LIMIT to how long QE3 will go on!

Fed Chair, Ben Bernanke announced the Fed would purchase $40 Billion A MONTH in mortgage backed securities INDEFINITELY!  In addition, the Fed will keep interest rates at near zero until 2015! Truly QE Infinite!

Given that QE1 and QE2 did nothing except enrich banksters and hide debt, QE3 or QE Infinite only means that the Fed has put us on a course that only increases the size of the cliff and only slightly delays the inevitable crash of the dollar with the super-imposed hyperinflation that will flare.

Given the dollar of today only has 4 cents of the purchasing power of the dollar in 1913 when the Fed “took control” of the US monetary policy. The collapse of the dollar is real potential reality.  Already China and Russia have agreed to trade in Rubles and Yuan, instead of dollars.  India will soon follow.

There are several oil producing countries that now require dollars be converted to British Pounds or Euros, however, even this option is weakening meaning the demise of the dollar as the “petro-dollar” could be a reality in the near future.  This event alone would trigger the collapse of the dollar. This would trigger hyperinflation.

In countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.  Once it starts it can happen very quickly.  The Weimar Republic of Germany in 1923 is a very good example, as are a few others.

  • By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government’s Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 million million).  At the height of the inflation, one US dollar was worth 4 trillion German marks. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28 × 1019, or 33 quintillion) Marks.

  •  The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 million million million) image. (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however did not depict the numbers, “hundred million b.-pengő” (“hundred million trillion pengő”) and “one milliard b.-pengő” were spelled out instead.
  • This makes the 100,000,000,000,000 Zimbabwean dollar banknotes the note with the greatest number of zeros shown.
  • The Post-World War II hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016% or 41.9 quadrillion percent) for July 1946, amounting to prices doubling every 15.3 hours. By comparison, recent figures (as of 14 November 2008) estimate Zimbabwe’s annual inflation rate at 89.7 sextillion (1021) percent., which corresponds to a monthly rate of 5473%, and a doubling time of about five days. In figures, that is 89,700,000,000,000,000,000,000%.

There are those that say that that kind of event could not happen in the US.  The demand of our economy is just too large.  However, the real logic is that regardless the size of the economy, zero value is zero value, so therefore if the largest, most solid currency crashes, the global impacts are catastrophic.

So let’s rethink QE3 and let’s say the Fed will fund Education, Infrastructure in the US, and properly adjust minimum wages and social security benefits to reflect a livable wage and retirement at the rate of $40 billion a month.  I can absolutely guarantee the Fed that this would absolutely stimulate growth because it is a fact that people, both surviving on a minimum wage and those living on social security, SPEND 100% of their disposable income.  This is the direct IV line to the economy.  Just a thought.

OK Folks, When are you really going to get angry?

As we have been documenting for months, every years now is that the Federal Reserve is raping the wealth of the US and everyone is silent, no one seems to mind!  The middle class of this country lost 40% of its wealth between 2007 and 2010, and no one seems to mind.  49,000,000 people go to bed hungry every night in this nation and nobody seems to mind.  10 million people lost their homes from 2007 to 2010 and nobody cares. We have lost 90% of our manufacturing jobs and no one speaks out.

Well maybe this will light a fire under our collective asses. The GAO has just completed their not in depth first audit of the Fed and what was revealed in the audit was startling:

$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”- Bernie Sanders (I-VT)

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.

The list of institutions that received the most money from the Federal Reserve can be found on page 131of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve

As we enter into the campaign season in earnest, just remember this isn’t about “saving America from liberals” or “moving forward”.  This is about putting these casino bankers in jail before they destroy life as we know it.  In fact, it may already be too late.  Just one thing to remember, the key question, who got all this money?  We want it back before this is what we call home:

The Fed’s contract expires with the US Government in 2013 and the most important campaign issue should be that there is no way in hell that contract should be renewed.  Why you haven’t even heard this come up is obvious.  There is no politician that isn’t on the Fed’s payroll one way or the other.  So the second most important issue in this election is campaign financial reform.  Again, this is not even mentioned in either party’s platform.  Don’t be duped by the meaningless issues being presented by either party.

I diligently continue to inform, but without those who read this blog passing the information forward, it is all for naught.  I have never asked for any article of mine to be made viral, but this one certainly qualifies and I humbly and respectfully ask you to make this known to everyone you know and ask them to do the same.  We need to reach 200 million people and based on the readership of this blog, that is only 4 degrees of separation. Get it. Pass it on.