U.S.A. Caught In Enormous Policy Vise - ZIRP & QE Destructive Influence
Politics / US Politics May 02, 2015 - 01:47 PM GMTBy: Jim_Willie_CB
Today is May Day, the international day of workers celebrated by most communist and deeply socialist nations. To be sure, Obama should come out of the closet with admission of not only his Muslim roots but his Marxist roots. By now, he could have easily promoted the holiday and had it moved from its longstanding September location to the May month. In honor of the holiday, the Jackass will outline the profound damage to the USEconomy, its recent destructive pressures, and the newest dynamics which assure a systemic breakdown. The outcome is being seen in widespread job loss, business shutdowns, a new war waged each year, and civil disorder prompted by a strange phenomenon hardly ever discussed.
The US police forces have been given carte blanche to conduct an extremely wide raft of criminal activity ranging from simple roadside mugging robberies, to commercial hijacks, to orchestrated public explosion events, to home invasions without warrants, to killing criminal suspects during raids, to abuse of suspects in custody, and recently in the open killing suspects in custody. A detail came to the fore recently, that the US Police Forces killed more of its own civilians in the year 2014 than the United Kingdom did in the entire 20th Century. What would George Washington, Thomas Jefferson, and Benjamin Franklin have to say? My belief is that they would decry the advance of the police state, as consequence of the banker class domination, which has trampled the Constitution and ripped the Bill of Rights to shreds. The next phase will be led by Gold, and force the US nation to comply, even if a wrecked field.
As much as the practice is horrendous and unconscionable, the national wreckage has helped promote the Obama agenda. He is fast advancing the police state, with a race war chaser as distraction to the more suitable class war. Witness the rise of the US Police State. The Occupy Wall Street movement was largely gutted, subverted, and waylaid. The race war will be easy to promote and execute, with the end of the road being martial law. The clue is riots and curfews. The police have almost zero accountability for violence committed against the public. The agenda contracted by Obama in mid-2008 was to kill the USDollar, to wreck the USEconomy, and to install martial law with a lit race war. Mission Accomplished, but the Jackass digresses. One week after inauguration, Barry was the beneficiary of a $1 billion Vatican bank account, as promised when he was selected, not elected. If the Kenyan squatter is not a victim of a renege or bail-in, he will be fortunate. He is by far the most expendable president in US history.
Before diving into the newest economic wrecking balls, let us share a reminder on the destructive wrong-footed monetary policy which serves the financial elite and prevents national debt default, however with huge consequences. It really has not prevented any debt default, since behind closed doors some important events have occurred. The citizen vassals are not worthy of being informed about the US corporate structure, its finances, its fealty, its contracts, its dealings, its failures, its pilferage, its homage to distant elite families, and its defaults. The Jackass has been extremely vocal on the destructive influence of US monetary policy. The effect has been utterly devastating, as the American nation has been reduced to a retail parlor, a half empty shopping mall, a socialist dole queue, and vast crime scene. The promoted consumer economy ate its capital beyond the critical mass point of no return, without adequate capital formation.
Many are the new powerful pressures to tear the nation asunder. The systemic failure discussed for seven years in Jackass analysis has finally come to the fore in ugly glory. The upcoming Currency Reset will knock the nation on its keister. After the tumult, a fair and equitable system will be installed, forced upon a nation which abhors fair and equitable systems since doing so removes the gross opportunity for fraud and thefts at the national level, in addition to debt securities fraud, and debt control levers exerted upon citizens. The monetary policy damage has a flanking factor which is equally devastating. The destructive factors are extending into fallout from dismantled Petro-Dollar and rising USDollar.
As footnote, the pernicious nature of the controls and demolition can be seen in personal savings accounts held in banks. They are last in line during liquidation failures, treated as unsecure debt. Ordinary people do not own their savings held in banks, either in passbook accounts or certificates of deposit. Personal savings, according to the Bush 2007 Bankruptcy Reform Act, are treated like donations to banks, then structured as unsecured debt. The bank derivatives are treated as secure debt. In the event of bank failure, the derivatives will be honored first. In so doing, the entire national savings held in banks will be wiped out, since the derivative debt is in the hundreds of $trillions, far outweighing the volume of national savings in the low $trillions. A vassal state will be created. The clock is running to put the rascals out of office, to install the Gold Standard, and to restore justice. However, in the process of removing the scabs on the helm control center, the nation will lose wealth and fall into the Third World. As a sassy colleague quick with a quip commented a couple months ago, every Third World nation should have an African president. America does, true to form, following a string of narco presidents, much like Mexico.
ZIRP & QE DESTRUCTIVE INFLUENCE
The monetary policy has been adequately covered in Jackass scribbles since 2009 for its highly destructive effect, the annals found in public writings and public interviews. Official policy has solved nothing, and only put a patch on the gaping wound of insolvency. The Zero Interest Rate Policy became necessary in order to give the big broken dead banks an opportunity to make money the lazy gauche way, in carry trades. The bond issuance business has vanished, as has their stock issuance business. The concept of capital formation is not in the Wall Street lexicon or boardrooms anymore, only carry trade. They must have free money from which to invest in rigged arbitrage gaming. So they borrow at 0% and invest in long maturity USTreasury Bonds, also with added leverage in futures contracts. Despite the absence of foreign investors, demand for bonds has been found to be strong, due to the arbitrage on rates better labeled as carry trade. In addition, the zero bound money fountain source was urgently needed to provide the feeder mechanism for the Interest Rate Swap derivative contracts. It makes the multi-$billion purchases as the prevailing current in bond rivers. The bond demand is all phony baloney, fabricated from financial machinery, as all astute observers know. Sir Alan Greenspan beams with pride on its sophistication, even if destructive.
The effect of ZIRP has been powerful in its wrecking balls and jack hammers. The misallocation of assets is a hidden effect, much like transposing the dinner table elements. Nobody knows what to eat or where to find it, as wrong food finds spots on the table out of disorder. It is GMO crappola anyway. Capital formation is all messed up. But such damage is hard to pinpoint on specifics, and besides, the public does not care. To explain asset misallocation to the public, or even to educated people (outside economics fields) is much akin to teaching monkeys calculus and orangutans higher order mathematics. The practical damage from ZIRP has been low interest yield to savers and savings institutions., thus the reward to debtors and penalty to savers. Citizens do not earn any income of substance, and professional funds do not earn income either. The effect has been powerfully felt by pension funds and insurance firms. They each sit on vast manure hills and termite mounds of paper assets, not earning a yield. Both sector niches are eating their nut, much like the homeowners in the 2000 decade at their home equity capital. Destruction is rampant, as capitalism has been turned on its ear in a lost colony. Gold will soon enter the room and rule the roost, served by Silver as squire.
The pension funds just won a victory in the USCongress, which passed a law to permit pension funds to pay out 35% less on contract benefits. So pension payouts will be reduced legally. Insurance firms are caught in the squeeze also. They will resort to the other methods, by hiking policy premium costs. They cannot pay reduced awards on covered policy payouts. Hence, expect lower pension income and higher insurance costs, in a basic economic squeeze. The pathetic result to the USEconomy has been seen in a 50% reduction in Money Velocity, the big wet blanket. In no way is ZIRP a policy success, this ZIRP Forever. It can never be removed, since Wall Street needs the free money to gamble on carry trades, the USDept Treasury needs the free money in its feeder system for Interest Rate Swap contracts to fabricate the artificial bond demand, and the USGovt will not permit higher borrowing costs to lift the deficit. When the ZIRP goes away with the Great Reset, Gold & Silver will be released like wild yellow and white horses rampaging through the wheat fields and corn fields.
The Quantitative Easing became necessary in order to enable the USGovt to cover its monthly deficits, to cover the foreign creditor dumping, and to bring order to the adjustments made from long-term to short-term portfolio shifts. Almost no creditor nations (except Japan and England) wished to continue the travesty of investing in USTreasurys when the USFed was busy acting in true Zimbabwe form with hyper monetary inflation. To monetize annual deficits is pure Third World, now with a fascist twist. To call QE stimulus is like calling suicide a liberating experience, or calling sexual rape an act of social discourse, or calling disembowelment of a child a rite of passage. The direct damage from QE has been outlined by the Jackass for three full years, and with surprising little economist company on the stump. No more than two other analysts have identified the profound damage to capital from a rising cost structure, thus producing a wiped out profit margin. Hence the retirement of equipment, the warehouse of productive machinery, the removal of capital from businesses operation, followed by its liquidation and sale, or recycling of parts. It is called capital destruction by any other name. QE actually kills capital, which the Reich Finance experts (of fascist origin) prefer to call stimulus. That QE aids the Wall Street firms is obvious, as they dump their toxic bond assets on the USFed, which itself is wrecked. QE is nothing more than an emergency Third World monetary measure installed in emergency conditions, to avoid default, and to enable a backdoor bailout of the big banks desperate to unload their toxic assets. It would be hilarious to learn in a few years that principle creditor China ordered the USFed to conduct endless QE so that Beijing could busily convert its toxic 3W debt paper from Washington into tangible assets around the world. Beijing is rumored to own controlling interest in the US Federal Reserve.
The pathetic result of QE has been a USEconomy (and Western Global Economy) which cannot find traction to recover and an Eastern Global Economy severely hampered. The US GDP is stuck in a minus 2% to minus 4% annual recession, painted over by cooked books and basic lies on the inflation rate and jobless rate. The business shutdowns, the retail outlet closures, the new job cut pink slips, the poor forward guidance by corporations, the lousy Fed Beige Book outlooks, the horrible USGovt economic reports (once the veneer of wax is removed), these all makes lies out of the official USGovt stat rat drum beat of a sluggish recovery. It is Fascist Business Model bitter fruit, a failed crop, this year, last year, every year. The fascist clowns managing the Reich Economics buggy have run the show over the cliff. Few have noticed. In no way is QE a policy success this QE to Infinity. It can never be removed, since the USGovt cannot finance its deficits and war costs. The creditor nations are no longer in the room. The maverick Fed Governors admit it must continue forever. The rise of the BRICS financial platforms (like New Development Fund and Asian Infrastructure Investment Bank) ensure vast dumping of USTreasurys in favor of Gold bullion, which the USGovt and USFed masters must soak up. When the QE goes away with the Great Reset, Gold & Silver will be released like wild yellow and white horses rampaging through the wheat fields and corn fields.
As nasty and ugly and full of wreckage that ZIRP & QE have been and continue to be, another new pair of powerful factors has entered the economic equation. It acts like a vise, while monetary policy acts like a fire hose to erode capital within the two contracting walls.
HIGH USDOLLAR VALUATION SLAM
The high USDollar exchange rate is not a sign of strength, but rather of wreckage of the Global Economy. It cannot survive the ZIRP & QE delivered as left and right hand policy punches to capital structures. Four and five years of such monetary policy assures a global systemic breakdown. Despite pronouncements by the midget Jacob Lew as Secy Treasury, the high USDollar has caused enormous problems. Foreign investors did not want the USTBond asset before, but now with a price premium added on the USD side, they want it even less of these toxic bonds. The foreign investors are no longer interested in over-priced bubbly US Stocks either, especially with the USD premium. They are much less interested in US property due to high cost, except for the Chinese. The Middle Kingdom masters are still motivated to dump boatloads of USTBonds before they go worthless, so a purchase at exaggerated price is no big deal. It works out for Beijing to be equivalent to a discount rendered to the USTBond asset generally. Use it or lose it, and factor in a writedown on value applied within the hard asset conversion process. Think of the high USD factor much like a wall around the nation, kind of like an international quarantine for trade.
In addition to the financial sector impact, an economic impact is felt. US industry has been beset with burdensome problems. Now they have the high USD exchange rate to contend with. They must find export destinations, while the foreign customers seek equal quality at lower price from an ample list of competitors in the Emerging Market arena. Furthermore, the foreign customers have grown increasingly weary with the endless red tape from USGovt dealings. The forms and procedures are onerous, in compliance with anti-money laundering objectives and anti-terrorism objectives. The banking transactions are a pain in the ribs as well. Hence the legion of foreign customers are abandoning the US industries, which have fewer technological advantages as the years pass. The outcome is an economic vise squeeze which removes foreign clients from the USEconomic equation. America is pricing itself out of the game. The US GDP growth will slow (recession will gain more momentum), just like its Money Velocity. The trade deficit will rise. The national insolvency will erode further, far past the systemic breakdown point. The United States has become of victim of its own derivative devices, as the USDollar rise has put a clamp on the national economy. It is no longer competitive.
The Jackass is impertinent always. Consider a metaphor that illuminates and elucidates. The King Dollar is dead, the Petro-Dollar harness is dismantled. As the once powerful reigning king lies prone on the global stage, industry having been gutted for three full decades from outsourcing, his body has entered the putrefaction stage following the 2000 decade of magnificent fraud. The immune system is long gone, except for exported foreign wars, which have a much bigger predator role for syndicate profit than defense of the dollar any longer. As the body fills with gas from the unchecked bacterial growth at work during the rotting process, the chest cavity expands. As time passes, we see the King Dollar lifting, not from strength, but instead from the death process and the massive buildup of gas. The pathogenesis is not seen by more than 5% of the population, of which the Hat Trick Letter followers dominate.
LOW OIL PRICE SLAM EFFECT
The deeply depressed oil price is no advantage at all. To be sure, the lower price at the gasoline pump is appreciated. But consumers cannot unleash their disposable income stream, since job security is nowhere, since company cutbacks are universal, since threats to savings are being integrated into bank account policies, since wages have fallen by 20% on a real basis in the last 10-15 years, and because citizens are scared. There is no extra disposable income. The harsh fact of business model life is that the lower oil price has whacked the corporate profit model in the crucial energy sector, much like in parallel to the QE capital wreckage. The profit margins are nowhere. The parade of bond defaults and commercial loan covenant failures has begun in earnest. The list of defaults and failures is already of critical mass, most assured to worsen badly. Negative momentum grows on a weekly basis, as investors and bankers pull the plug. The victims initially are workers on projects, each abandoned since no longer viable. The next victims will be the many investment firms and even banks. They have already begun the process of asset seizure, part of the shutdown aftermath. The moron at the White Horse marbled office Jacob Lew must explain to the ravaged energy industry what the actual advantage really is, where it is seen, how it is manifested. To the workers in the field, those rugged roughnecks, they are angry and feel betrayed. Lew is a moron and stooge.
The entire US-based shale sector will be shut down. The active rig count was cited in the April Hat Trick Letter. The drill rig count has fallen off a cliff in a vertical dive never seen in US history. The low oil price might be a benefit for those businesses which must pay for the feeder cost, but the overall aggregate macro effect overwhelms the collective local micro effect. The national ISM reports show the pervasive decline. The recent Dallas Fed business summary report was devastating. The region is major league oil country. The damage is massive. Jacob Lew should review the idle fields and failed financial investments, like Obama does the hurricane zones, shirt sleeves rolled up. The dismantled Petro-Dollar is to blame. The vast apparatus of FOREX contacts linked to the oil price are being undone, piece by piece, much like the dismantling of the oil field derricks and platforms, piece by piece.
The Saudis are behind the falling oil price. The Jackass suspects vengeance by the sandy crusty angry royals. They clearly collude with China to bring more output to market, to depress price, to kill off the US marginal shale output (their competition), and to reek havoc in the USEconomy. The American landscape has become a veritable killing field. The outcome is an economic vise squeeze which tears apart the USEconomy. The wreckage is once again seen in the USEconomic equation. America is seeing itself priced out of the great global game, in a role reversal. Economic fascism has resulted in ruin and isolation. The US GDP growth will slow (recession will gain more momentum), just like its Money Velocity. The trade deficit will rise. The national solvency will erode further, far past the systemic breakdown point. The metaphors come quickly to mind, almost a fun exercise. The demise of the Petro-Dollar has effectively resulted in the fracking of the entire energy sector, one of its most vital sectors. The holes perforating into the economic table are vast. Its capital pools are on fire. The injection of contaminants has been ordered by means of insolvency rendered via QE itself. The idle drill rigs testify to the misallocated capital.
CONCLUSION
Time is running out on both the USEconomy and the US nation. Its very social fabric is finally being stretched and torn, as the Jackass forecast for the last three years. The triple threat will be price inflation, supply shortage, and social disorder. It is happening before your very eyes, no surprise here from Ferguson to Baltimore. The USDollar is soon to fade into oblivion. Its rise signals its demise. The hidden dismantle of the Petro-Dollar mechanism has been full of intrigue. The Gold Standard will return, but through the trade window. The many crucial new Gold platforms are being assembled, one by one. The most recent platform in view is the Asian Infrastructure Investment Bank, which will render obsolete both the Intl Monetary Fund and the World Bank. Actually, the IMF will be useful for China to seed the global banking system with a few types of RMB-based bonds. These Chinese Yuan denominated bonds will have a few flavors, like in addition to the Chinese Govt Bonds, there might be some other sovereign bonds (like UKGovt bonds) held in RMB denomination. The Chinese took control of the IMF, not just to shut it down, but to exploit it. They have an agenda. As the global banks place more RMB bonds in their reserves shelves, they will find the USTreasurys of no use. They will be converted conveniently to Gold bullion during the restoration phase. The Chinese hand moving the IMF part is a brilliant stroke, like an answer to the Monsanto GMO seeds. China will seed the global financial system with RMB seeds with the only genetic modification being of a golden strain and hue.
The solution to the untreated Global Financial Crisis is the gold device. The Eurasian Trade Zone will be built upon the gold route. Next soon comes the heralded Gold Trade Note used as Letter of Credit in facilitated trade. The movement cannot be stopped, not by war, not by sanctions, not by toxic monetary spew. The global rejection of the USDollar continues, far above the din of Washington and Wall Street propaganda. The nascent Eurasian Trade Zone will soon include Germany and whatever nation follows its prudent lead. The Teutonic shift is more clear with each passing month, in a sequence replete with intrigue and betrayal. Events of early 2015 proceed in the nasty sequence to isolate the US and its monopolist money mavens. The King Dollar is dying a horrible death, as Gold will return to its rightful throne. The toxic USD will be chucked into the dustbin of history. Bond fraud, asset bubble devotion, and QE will be the captions read in the annals of this chapter of ruin. The rise of the USDollar precedes its vanishing act.
The New Scheiss Dollar will be launched in order to guarantee import supply to the beleaguered nation. However, the New Dollar will not pass muster. It will quickly fail, due to final phase fraud. The palette full of new Gold & Silver backed currencies will include the Chinese Yuan, the Russian Ruble, the Gulf Dinar, the New Nordic Euro, possibly the New Mexican Peso (silver backed), possibly the Central American Dollar (if Panama can elude Langley murder obstacles). The requirement for sustained usage will be independent audit, which the New Scheiss Dollar will not pass. Its deep storage gold fraud will be exposed for all the world to see. Next stop is the New American Third World. It is a lock, followed by colonization by China. Expect the Chinese industrial park concept to flourish, executed by force, paved by USGovt policy. In five years, the biggest new marginal employer and lender inside the USEconomy will be Chinese firms. They will tap the idle US talent, but with lower wages than expected, and absent the hefty fringe benefit packages the workers have grown accustomed to.
Gold & Silver will be at the core of the new monetary system. Following the Global Currency Reset, better named the Return of the Gold Trade Standard, precious metals will prevail once again. For over 40 years, the FOREX tail has wagged the trade dog. The Petro-Dollar system enabled the paper currency regime to dictate terms on trade norms and banking reserves management. A reversal is soon to take place. The trade corridors will take control, since the Petro-Dollar is dead, in fact dying a horrible death. With Emerging Market strength, and with vast warehouses of Eastern family Gold, the trade dog will wag its own golden currency tail properly at long last. Justice will be meted out, as the most magnificent vanishing of wealth in human history is undertaken. The majority put their trust in paper, and lost. They trusted the system after a generation of indoctrination, and were betrayed. The people were deceived on matters of money and capital, and lost both life savings and family fortunes. The American public knows very little about concepts of money and capital, and therefore will be treated to devastation. Let history judge whether it was a meretricious swing of justice. Only precious metals and certain physical assets will survive the storm.
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by Jim Willie CB
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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com, which includes a Squirrel Mail public email facility.
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