Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18
Will Weak US Dollar Save Gold? - 7th Dec 18
This Is the End of Trump’s Economic Sugar High - 7th Dec 18
US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - 7th Dec 18
The Secret Weapon for Getting America 5G Ready - 7th Dec 18
These Oil Stocks Are a Ticking Time Bomb - 7th Dec 18
How Theresa May Put Britain on the Path Towards BrExit Civil War - 7th Dec 18
How easy is it to find a job in the UK iGaming industry? - 6th Dec 18
Curry's vs Jessops - Buying an Olympus TG-5 Tough Camera - 5th Dec 18
Yield Curve Harbinger of Stock Market Doom - 5th Dec 18
Stock Market Crashed While the Yield Curve Inverted - 5th Dec 18
Global Economic Outlook after Trump-Xi Trade War Timeout - 5th Dec 18
Stock Market Dow Plunge Following Fake US - China Trade War Truce - 5th Dec 18
Subverting BREXIT - British People vs Parliament Risks Revolution - 5th Dec 18
Profit from the Global Cannabis Boom by Investing in the Beverage Industry - 4th Dec 18
MP's Vote UK Government Behaving like a Dictatorship, in Contempt of Parliament - 4th Dec 18
Isn't It Amazing How The Fed Controls The Stock Market? - 4th Dec 18
Best Christmas LED String and Projector Lights for 2018 - Review - 4th Dec 18
The "Special 38" Markets You Should Trade ebook - 4th Dec 18
Subverting BrExit - AG Confirms May Backstop Deal Means UK Can NEVER LEAVE the EU! - 3rd Dec 18
The Bottled Water Bamboozle - 3rd Dec 18
Crude Oil After November’s Declines - 3rd Dec 18
Global Economic Perceptions Are Shifting - Asia China Markets Risks - 3rd Dec 18
Weekly Charts and Update on Equity Markets, FX Trades and Commodities - 3rd Dec 18
TICK TOCK, Counting Down to the Next Recession - 3rd Dec 18
Stock Market Key (Short-term) Support Holds - 3rd Dec 18
Stocks Bull Market Tops Are a Process - 3rd Dec 18
More Late-cycle Signs for the Stock Market and What’s Next - 3rd Dec 18
A Post-Powell View of USD, S&P 500 and Gold - 2nd Dec 18
Elliott Wave: SPX Decision Time Is Coming Soon - 2nd Dec 18
Junior Gold Stocks Q3’18 Fundamentals - 1st Dec 18
Little-Known BDC Stocks Thrive Amid Rising Rates and Earn Investors +7% Yields - 1st Dec 18
Ray Dalio: This Debt Cycle Will End Soon - 1st Dec 18
Bank of England Warns UK House Prices 30% BrExit Crash! - 1st Dec 18
Gold Fundamentals Improving but Not Bullish Yet - 30th Nov 18
What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - 30th Nov 18
Global Economic Perceptions Are Shifting Imnplications for Stock Market - 30th Nov 18
The US Economy is Getting Worse. What this Means for Stocks - 30th Nov 18
Trailblazers Leading the Way in Online Reputation Management - 30th Nov 18
The Shift in Trend from Physical Printers to Online Printers - 30th Nov 18
UK House Prices 2019 No Deal BrExit 30% Crash Warning! - 30th Nov 18
Stocks Rallied, New Uptrend? - 29th Nov 18
The Fed Will Probably Stop Hiking Rates in 2019. What’s Next for Stocks - 29th Nov 18
Love. Fear. Inflation. A Precious Metals' Trifecta - 29th Nov 18
GBP/USD – Double Bottom or Further Declines? - 29th Nov 18
Stock Market Santa Rally Still a GO to Dow 27,000? - 29th Nov 18
UK Government and Bank of England BrExit Economic Armageddon Propaganda - 29th Nov 18
Why the Crude Oil Price Collapsed to $50 - 28th Nov 18
Gold Joins the Decline – the Earth is Shaking - 28th Nov 18
Watch This Picture As Asset Prices Fall - 28th Nov 18
GE’s Stock Price Crash Holds an Important Lesson About Investing - 28th Nov 18
5 Rules for Successful Trading - 28th Nov 18
Dollar Trend Imposes: EURUSD to Fall to 1.11 - 28th Nov 18
Gold, Original Money, Fiat Money - 28th Nov 18
When Will the Stocks Bull Market End? - 28th Nov 18
Looking ahead: Why the Smart Money is Investing in Green Energy - 28th Nov 18
The Yield Curve Will Invert Soon. What’s Next for the Stock Market - 27th Nov 18
Silver Trading and the Hands of a Broken Clock - 27th Nov 18
What's Inside SMIGGLE Christmas Advent Calender 2018 - 27th Nov 18
Investing in Recession Proof Trailer Parks - 27th Nov 18
The Advantages and Disadvantages of Debt Consolidation - 27th Nov 18
GDX, This Most-Hated Stock Could Return You 140% in Just a Few Months - 27th Nov 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Bernanke And Draghi Are Not Trying To Save Our Economies

Politics / Quantitative Easing Sep 17, 2012 - 03:45 AM GMT

By: Raul_I_Meijer

Politics

Best Financial Markets Analysis ArticleObviously, after a week of big-time announcements, the German Supreme Court, Mario Draghi's bond buying scheme and Ben Bernanke's QE3 (both virtually unlimited - or presented as such), it's tempting to think the western world is well on its way to tackling its financial crises. Looking at the stock markets one might even presume all's fine out there already.


Still, that is - or indeed, seems - only true if you focus solely - blinders and all - on the world of finance. If, on the other hand, you would like to know where the world at large is going, that focus is simply too narrow. As central banks increase their balance sheets ever more, it would already take a huge leap of faith to have real confidence in the idea that what various previous European financial operations, as well as the entire alphabet soup of US bail-outs, could not achieve, now will be accomplished by what is basically more of the same, just more.

You only need to recall where all of those previous schemes ended up after the initial market exhilaration: that's right, they necessitated subsequent bail-outs. The narrow focus also tends to blind everybody to who's supposed to be paying for the bail-outs. Which is everybody. In essence, all that has been achieved, and that to a far lesser degree than ostensibly intended, is that banks haven't yet been toppled by their debts, and stock exchange numbers look - sort of - presentable.

The question then becomes: is it worth it? The answer to that is a resounding YES if you're a banker or a stock investor or an incumbent politician (Bernanke announced QE3 a comfortable 7 weeks before the US presidential elections). The answer is an equally resounding, if not outright debilitating, NO if you're not part of that small world where politics and money meet and live in relative splendor. Those who are not invited to that party will be called upon to foot the bill, without having anything to show for it.

It becomes clearer all the time that the financial world is not the world, the whole world and nothing but the world; it's merely a vanishingly small part of it. Yet is is the only part that most of those who follow finance and the economy seem to be watching, under the stubborn illusion that if markets go up, everyone goes up; all boats rise with the tide. Which is a big boatload of delusional nonsense.

The markets have so far only been able to keep up their look-good appearance because they have had, and continue to have - through the world's central banks - access to everyone else's cash, even the cash that everyone, no-one, hasn't even made yet. And all that is going to run off the tracks in spectacular fashion, be it tomorrow or the day after, because you can't run an economy forever on money that no-one has worked for.

Bernanke is willing to throw in another trillion or so - or two- dollars in taxpayer money, allegedly to create jobs, whereas he's already thrown far more at that same slippery wall (and for that same slippery purpose), and nothing much stuck before; so why would it this time around? Because he labeled it "unlimited"? There's no such thing, of course. Just because he can throw in $3 trillion doesn't mean he could just as easily do the same with $30 trillion (the bond markets would have him for breakfast).

Draghi wants to purchase sovereign bonds, that are not worth anything near their face value, at that same face value. But are we still clear on why he claims he wants to do that? Here's why: simply so Spain and Italy can continue to borrow more and more on the international markets. Which they can't and they won't, as Draghi knows as well as those same markets do.

That's not some unfortunate turn of events, it's all part of the plan; it will drive the countries into the very demanding hands of the IMF and ECB, who will hand out more bail-outs, but this time under the same conditions that Greece is facing: fire hundreds of thousands of civil servants, cut pensions, cut benefits, cut wages, longer working days, longer working weeks, and sell anything not bolted down to foreign investors at fire-sale prices.

Bernanke facilitates for international banks to dump their mortgage backed securities stateside and get paid far more than they're worth, with the only "condition" that he "hopes" this will create US jobs. Draghi facilitates for those same banks to get rid of their EU periphery sovereign bonds, so they'll allow for the periphery to stay inside the eurozone. There is nothing in either plan that puts the people first. There is always only that one focus: banks. But banks are not the economy, or rather: not your economy.

In the end, the economy is all people. But Bernanke and Draghi's schemes do not target all people, other than perhaps in very vague allusions: Bernanke pays far too much for worthless mortgage backed securities so the banks whose hands he takes them off have room to lend money into the economy (create more debt), which could hypothetically create jobs.

Well, that would, for one thing, depend on how much more banks have in their vaults in worthless and/or questionable "assets", obviously. But even as Ben spends - future - American tax revenues to buy the paper, that last bit is not revealed: how much more is there left where that last batch came from? Yeah, we‘ve been playing this game for five years now. And we still don't have an answer to that question.

It's sort of become the new normal: there's some unelected guy in a suit who speaks in language that's supposed to make us think he knows what he's talking about, who pledges trillions in additional debt, in whatever currency he deals in, to ostensibly make life better for the very people who are on the hook for those pledges, whether they're successful or not, and they haven't so far; unless someone would like to defend the success of US QE1 and QE2 - viewed from the man in the street's perspective -.

It's funny, I know, that they have been successful, in a sense (just not the one we're consistently and falsely told they're aimed at): they have saved banks from bankruptcy, and the S&P from sinking into triple or double digits. But the man in the street who's losing his home, his job or a large part of his paycheck, benefits, pension, doesn't care about whether the S&P is at 15 or 15000.

It's time to get this through our heads once and for all: Bernanke And Draghi Are Not Trying To Save Our Economies. Perhaps they would if they could, but the question is moot: they know they can't. Instead, they're trying to save the financial system by stealing our remaining wealth while making us believe that the economy and the financial system - a.k.a. the banking industry - are one and the same thing. They are not, and that's why we see our jobs and benefits and homes go up in thin air and smoke while the S&P looks rosy.

Those last two things are connected. The first are not, no matter that so far most people fall for the sleight of hand. Which is sad today, and will turn to tragedy tomorrow.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2012 Copyright Raul I Meijer - 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.


© 2005-2018 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules