Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22
AI Tech Stocks Current State, Is AMAZON a Dying Tech Giant? - 20th June 22
Gold/Gold miners fundamental checkup - 20th June 22
Personal Finance Tips: How To Get Out Of A Tough Financial Situation - 20th June 22
UK House Prices Relative to GDP Growth - 19th June 22
Will Global Markets Be Pushed Deeper Into Crisis Event By The US Fed? - 19th June 22
Useful Things You Need To Know About Tweezer Top Candlestick Pattern - 19th June 22
UK House Prices Real Terms Sustainable Trend - 17th June 22
Why I’m buying the “new” value stocks… - 17th June 22
Optimize Benefits from R&D in Software Product Development with an R&D Tax Credit Software - 17th June 22
Want To Save On Your Business Energy? Here Are Some Helpful Tips - 17th June 22
State of the Stocks Bear Market - 15th June 22
The Gold Market Is Getting Ready for Another Interest Rate Hike - 15th June 22
The Dow Industrials’ Big 8-Wave Cycle is Incomplete - 15th June 22
7 Things You Need to Know About Finances - 15th June 22
Dow Stocks Bear Market Forecast Trend Trajectory - 13th June 22
Why Putin has KILLED Russia - 12th June 22
Trading the Calm Before the Stock Market Storm – Consider Putting On A Long Strangle - 12th June 22
Shrinkflation! - 12th June 22
6 Useful Tips To Help You Create A Good Marketing Strategy - 12th June 22
Big Inflation Will Spur Gold Price - 11th June 22
Economic "Hurricane": Here's a Take on a Bank CEO's Warning - 11th June 22
Axie Infinity (AXS)Mmade a lot of People Rich… Temporarily, What We Learned - 11th June 22
The CRACK UP BOOM! Implications for Stocks, Housing. and Commodities, Silver Potential - 10th June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Quantitative Easing or Quantitative Looting?

Stock-Markets / Stock Markets 2010 Oct 13, 2010 - 05:44 AM GMT

By: LewRockwell


Best Financial Markets Analysis ArticleJeff Fisher writes: Governments are spending far more than they could ever hope to collect through taxation.

In order to finance these yawning deficits, governments are borrowing massive amounts of capital from the private sector.

In normal times, government deficits are financed by investors choosing to invest a portion of their savings in government debt securities.

The amount of savings transferred from the productive economy to fund unproductive government spending is usually a fraction of total annual savings generated by the productive members of the economy.

Government deficits consume capital and tend to lower the productivity of labor below what it would be in the absence of government deficits.

However, if deficits are small relative to savings, net savings tend to increase and the capital stock of the economy is maintained and standards of living remain stable.

Today we are living in anything but "normal times."

Since 2008 governments have been running deficits far in excess of annual savings.

As a result, capital well beyond what the economy can save annually must be extracted from the existing pool of private capital in order to fund the schemes of the State.

This poses a problem for governments unwilling to cut their expenditures.

How can that capital be seized and used to fund the State?

Taxes can not be raised enough to meet the deficits and massive borrowing threatens to spike interest rates.

Quantitative Easing (QE), I call it Quantitative Looting (QL), or debt monetization, is a very effective means of funding government spending beyond what is available through taxation or borrowing.

It enables the State to loot the entire capital stock of the country using its legal tender as money.

Or, in the case of the USA with the dollar as the world's reserve currency, QL enables the US Government to loot the savings of the entire world.

QL enables the State to bypass taxation and the private loan market and simply capture what it needs with the purchasing power created by newly printed money.

This printing press money allows the State to bid away capital from the productive economy and consume it as needed.

The immediate consequence of QL is a massive looting of savings and higher prices for the goods and services that the government purchases.

Furthermore, the new money created by QL becomes high-powered money which can be the base for further credit inflation of the fractional reserve system.

The longer-term effects of QL are a shrinking of the productive sector of the economy as it is robbed of savings and capital, and accelerating impoverishment of the majority of people in society as savings dwindle in real term and prices for consumer goods skyrocket.

So, next time you hear cheers for QE, think QL and all the destruction it brings.

Rothbard addresses Fed direct purchases of Treasury debt briefly in his book The Mystery of Banking and simply states that it would be "wildly inflationary."

In summary, QL or QE is simply a means to loot savings on a grand scale by using the printing press.

It destroys the capital structure of the economy and creates a huge incentive for people to withdraw capital from the banking system and the productive economy.

Replacing old equipment and maintaining production will be far more costly than businesses currently estimate.

As savings vanish and capital flees prices will rise faster and faster.

The inflationary fire of QL will not be extinguished until at least these two things occur:

The Fed must stop the monetary inflation.
The US Govt. must balance its budget.
If these two actions are not taken, the dollar will lose purchasing power at an ever faster rate.

The most dangerous and destructive stage of every hyperinflation is the final few months or years.

It is not too late to exit the financial system, the Dollar, or the US paper markets (Muni, Corporate, or Treasury); however, time is growing very short.

Jeff Fisher [send him mail] is an independent investor and professional trader living in Austin, TX. Formerly, he co-managed a successful hedge fund.

    © 2010 Copyright - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in