Wednesday, September 19, 2012

When will the buying frenzy start?

Item found in a central bank office...

You wanna know when the game is up and when the final episode of The Greatest Depression starts?

Sure, I will tell you.

The inflationary policies the latest years and the today hyperinflationary policies driven forward by Bernie the Spender and EvilMario Draghi, has not transformed Western countries into gravedigging- and wheelbarrow shopping areas just yet.

There is however a reason for it.

The reason is not, as you may assume, that they haven´t printed enough money. On the contrary. Especially the U.S. dollar already exists in sufficient amounts to bring down hellish nightmares and Armageddon on U.S. citizens and consequently the world since the U.S. dollar is the world’s reserve currency.

But a huge chunk of that cash is actually still at the Federal Reserve. Deposited by the same huge megabanks the Federal Reserve gave that money to in the first place.

No, this is not a trick or something I made up. It is true. And it is also true in many other countries with many other currencies.

The Federal Reserve have freshly printed (or really digitally created nowadays) money and handed it over to the ´Too big to Fail´s´, mainly big banks. They in turn, instead of using that money, put it back into the Federal Reserve and get interest on it. About 1,5 trillion is collecting interest this way.

And do you know who owns the Federal Reserve? It is not a federal entity, it is privately owned by the very same banks that are saving the very same cash they got for free from the Federal Reserve - which they own.

How´s that for a super villain scheme?

 Then we have the reserve currency status which means that all countries around the world need to hold a decent amount of dollars. We also have treasury bonds and so on and so forth. Hard to count the total amount of all this, I cannot find comprehensive statistics on it, but safe to say its many trillions more.

Since the Federal Reserve decided to do QE indefinitely – $80 billion /month – this means Americans are already living with hyperinflation, it just hasn´t shown up yet. The money hasn´t been used and the longer the FED is allowed to do QE, the worse it’s going to get.

Before I move on to the actual point of this post you may wonder why only $80 billion /month. Why not do it the Krugman way and print a couple of trillions straight away? Ah, but you see if they tip their hand straight away, the rest of the world need to follow along and dump the dollar. Buy stuff for it while it still has value consequently hyperinflation will set in almost immediately, or at least much faster than the normal 1,5-2 years it usually takes for inflation to reach the entire economy.

It’s sneakier and buys them more time to only drop $80 billion /month. If we follow the normal estimation of about 2 years for that inflationary money to reach the entire economy those 2 years is the limit on the first round of QE3. AND since all of those $80 billion /month goes to banks they can prolong the process even further. Either save it at the Federal Reserve or put it to use abroad and the money will not really reach the American economy.

Basically a drawn-out process of bailing out the banks and making the rich richer while slowly making U.S. citizens poorer and poorer.

However this cannot and will not last – and here is my main point.

When they decide to; the rush for the exits will commence. The buying frenzy for all those dollars will happen, and it will happen sooner rather than later. They cannot wait too long because for every month, for every additional $80 billion; the dollar loses in value.

In other words the huge megabanks will, not too long from now, start withdrawing that cash and put it to use. And/or U.S. debt-holders will start selling off U.S. treasuries and getting rid of dollars in mass. If you take a look around the world at what China, Russia etc. is doing, this has already started, but only in smaller amounts.

Countries and businesses are mistrusting the dollar and they are starting to realize that the U.S. government will never repay their debt. When this realization really, really sinks in, that’s the starting point of the next phase of the Greatest Depression. The dollar, the world´s reserve currency and the currency in which many important goods and commodities are priced in, off to meet the hyperinflationary God´s – yes that’s a world crashing event.

And since the only thing the U.S. government and the FED can do is to print even more, it will just get worse from there.

There will of course be other events as preludes or enhancements of this financial apocalypse, and it might even happen that other crashes or a civil war in Portugal (and/or Spain) or something of the sort may get the ball rolling before the dollar start burning - but I would watch the FED´s bank vault and the big banks spending’s very carefully because to me, that is the upcoming main event... 

…that is until World War III... which is surely to follow.