Note: the following analysis is NOT quite like any I’ve seen elsewhere, either in “main-stream” media, in alternative media, or from economics professors of various schools. I’m not trying to tell you how other “experts” view our current monetary situation or future prospects. If you judge the following by how well it reflects any of these common narratives, you will find the following wanting.
As I write this, for several months now, the Federal Reserve (Fed) has been “printing” trillions, buying up, or funding banks and hedge funds to buy up, trillions of dollars of stocks, bonds, treasuries, derivatives, swaps, and Lord (or more likely Satan) knows what else.
This should be inflationary, shouldn’t it? Shouldn’t we Americans be entering hyperinflation, as in other well known cases of a national bank printing currency like it’s going out of style, such as in Zimbabwe or the German Wiemar Republic?
But it’s not, so far anyway. A few prices are up, such as for meat and toilet paper, while a few prices are down, such as for gasoline and AMD Ryzen computer chips (a product near and dear to this geek’s heart.)
Why not? Why is there no particularly serious inflation, despite the unprecedented money “printing” by the Fed?
It’s the debt.
The central banks of the world, which tend to act in concert (or tend to get bombed into oblivion, such as in Libya or Iraq, if they don’t “cooperate”), have spent the last several decades building up the world’s debt. Individuals, businesses and governments, large and small, rich and poor, world-wide, with few exceptions (can you say “Russia”?) are deeply in debt.
With the combination of:
- the collapse of much world business due to the global “corona-lockdown”,
- the collapse in oil (both volume and price each collapsing to less than half, for a combined effect of less than a quarter of the usual revenue from petro sales),
- the collapse of wage and salary income due to high unemployment from the “corona-lockdown”, and
- the collapse in tax revenue, resulting from the above
we are ending up, in most nations world-wide, with individuals, businesses, and governments, large and small, rich and poor, desperate to make debt payments.
The U.S. Fed is essentially foreclosing on bankrupt corporations (in essence buying their stock and debt) and nations (buying their currency and debt).
Let me make an analogy, that might put this on simpler terms, easier to relate to.
Imagine that you live on “the wrong side of town”, where some criminal gang (let’s call them the “Mafia”) has been running things for decades. They sell drugs and sex, run protection rackets, launder money through store fronts, bribe and blackmail politicians, judges and cops, murder those who get too much in the way, lie about all this in their controlled local paper, and have a few “charity” operations in order to steal more money while earning some “good press.”
… so far just a microcosm of how cynics like myself figure the elite bastards run things on this planet … but I digress.
But our not-so-elite bastards are not content to just keep their seedy “businesses” running along. They also build up “receivables”. Over the years, the local residents and businesses of our seedy neighborhood are increasingly indebted to these criminals. The local residents get to feed their families (or their drug habit), and get to stay alive and out of jail … but at a price. They “owe” “the man”.
Now let’s say the Mafia decides it’s time to collect on all those debts, tear down the neighborhood, and embark on some major urban renewal. So they deliberately run a crime spree through the neighborhood, and print about it in scary newspaper headlines. People stop visiting our neighborhood. People stop going out to shops, bars or hairdressers. People shelter in place, unable to work if they had a job, or unable to keep their little business open for lack of customers. Landlords can’t collect rent.
Now this puts the Mafia in the cat bird seat. They can pick and choose who or what they want to buy, for pennies on the dollar, and let the rest collapse and fail. They can agree to make the rent or car payment for the chosen ones, but if you’re one of those chosen ones, you have to make a deal with the Devil … “they” end up owning that business or car (or your lovely daughter or whatever they valued.)
Back to “real world” reality … the above is a close analogy to what’s actually happening, world-wide.
For example, it’s exactly how China has come to hold a 99 year lease on the Hambantota Port in Sri Lanka.
For another example, it’s exactly how the Fed’s balance sheet has ballooned to $6.7 Trillion dollars, and counting. As Gregory Mannarino says, they (the Fed) wants to “own it all” (well, all that they consider worth buying.)
The Fed owns the most valuable instrument on the planet right now, the US Dollar printing press. Everyone (almost) is desperate for Dollars to make debt payments. The Fed can buy whatever the hell they want to buy, without limit.
Whether or not this turns into hyperinflation (the US Dollar collapsing in value) depends on what the Fed and their cohort the US Treasury do after the Fed is done buying.
If the Fed continues to “print” US Dollars, we get Dollar inflation, else Dollar deflation. The usual forecast in the gold bug and silver stacker circles in which I read is that it will be inflation, because that’s what most nations due when they get too far in debt and their debt is denominated in their own national currency - they print their way out of the problem. Those holding the bonds of that nation get their bonds paid back, but it’s in currency that is no longer worth much.
However I suspect that forecast is flawed.
The United States government does not control or issue the Dollar. The Fed does. It creates dollars by creating more dollar denominated debt, and removes dollars by extinguishing that debt.
The United States Dollar is the quintessential debt currency. The Dollar is lent into existence by and at the whim of the Federal Reserve. That’s why I’ve sometimes put “printing” in quotation marks above. Dollars are not “printed” into existence. They are lent into existence, in exchange for some sort of bond, bill, note, IOU or other dollar denominated debt instrument or other encumbrance on future income or property.
(The above two paragraphs are perhaps the most important two paragraphs in this entire article.)
The Fed, and the Fed’s owners, aka the Banksters and their elite bastard controllers, will decide whether the US and most of the rest of the world enters a deflationary collapse or an inflationary collapse. It is they who will decide whether or not to issue yet more debt.
The politicians in Washington, DC don’t control the Dollar. Rather the elite bastards control the Banksters, who own both the Fed and those politicians. It is they who decide when and to whom to issue, or call in, debt and its ledger counter-party, money.
In any case, for now, and regardless of whether there is monetary inflation or deflation in our future, the average person will be increasingly hard pressed to obtain the basics of food, clothing and shelter. Many will die, whether from pandemics or famine or vaccine caused illness (masquerading as pandemics) or other medical or agricultural malpractice (also masquerading as pandemics.)
My rough expectation is that this will end like the Great Wars and Depression of 1914 to 1945 ended, with a new burst of economic activity and technological advancements, including new forms of energy and propulsion, with major mineral mining operations extending out into the solar system, and with major “advancements” in the basic sciences. Just as nuclear physics, computers, televisions, and wide spread use of airplanes revolutionized the fabric of our world economy and society after World War II, similarly perhaps to an even greater degree the coming advancements will revolutionize our civilization again.
Meanwhile, hang in there, resist, help each other out, and do one’s best to stay informed (which is a key purpose of this here “theMooster” website). We are in an information war. Those who can figure out what’s going on, well enough and soon enough, are more likely to survive.