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Message: Think about James Bullard comment
Really think ...
"The Federal Reserve exhausted its conventional tools when it cut short-term interest rates to near zero in December 2008.
Since then the Fed has sought to provide an additional boost to the economy via two asset-buying programs — with the second program dubbed QE2 — effectively showering the banking system with money to try to spur lending. Economists call this tactic quantitative easing."
The fed bought US bonds, thereby increasing the debt burden to the citizens ... rates shown below
This money is then loaned to the big banks that caused the financial crisis to "assist the recovery" at zero to .25% who in turn lend it either through mortgages, loans, or credit card expansion (generally to people who can safely pay it back) at a substantially higher rate ... even a 2% loan is a return of 8x more than cost.
Given the feeble nature of the "recovery" the fed is essentially allowing these same rogue banks to make money by mortaging the future of its citizens.
A contraction of the money supply (i.e. the fed does not roll over the bonds and the deficit plagued gov't pays the money back to the fed who no longer provides the banks with "free" money.
With less money in the system those who do wish to borrow will have to pay more since a smaller supply with an equal demand means price goes up. That cost is called interest rates. As interest rates goes up the cost of to service government debt also goes up.
If quantative tightening occurs so does the noose around the neck of taxpayers who will a greater percentage of the collections of government (taxes) to interest or taxes or revenues will have to grow based upon economic growth.
Of course the only way to increase economic growth is increased competitiveness. This occurs by innovative ways to produce something making it less expensive to produce, a reduction in the factors of production, or a devaluation of the currency.
What is the likelihood innovation or deflation of the factors of production will occur ... IMO 0%. So hyperinflation is inevitable which is of course the much anticipated collapse of the US$.
The most sensible person to listen to ... perhaps the only person clearly preaching what to do is Jim Rogers ... there is no greater financial prophet today ... he outlines the protective action individuals and investors must take not necessarily to prosper but to survive.
What should we expect ... the real great depression and the real World War I ... one that brings the entire planet to the brink of or results in the obliteration of humanity.
Here is to the great medicine known as alcohol ... we'll need it more than ever.
cheers, orgy
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