Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Monetary Policy Killing The System

Stock-Markets / Quantitative Easing Sep 20, 2014 - 09:28 AM GMT

By: Jim_Willie_CB

Stock-Markets

The byline should read MONEY VELOCITY HITS RECORD LOW, WHILE MONEY SUPPLY CONTINUES TO GO INTO ORBIT... SYSTEMIC FAILURE IS EVIDENT AS POLICY IS NOT STIMULUS AT ALL... THE PRINCIPAL CAUSE FOR THE BREAKDOWN IS MONETARY POLICY, WHICH IS STUCK IN PLACE.

The USFed monetary policy is killing the system, simply and boldly put. They call it stimulus, when the extreme accommodation is actually just a backdoor Wall Street bailout combined with a pass on the USGovt debt discipline. No debt limit is enforced anymore, a travesty. The United States is looking more like a Third World nation with each passing month, with colossal fraud, economic decay, war and sanctions, and no leadership. The US Federal Reserve has ventured into very dangerous ground, putting hyper monetary inflation as the installed policy, while making money free for the Interest Rate Swap machinery that operates the derivative for maintaining the easy policy.


So foreign creditors have largely exited the room, with no great entities to finance the yawning annual $trillion debt. So derivative machinery is relied upon to maintain the absurd 10-year USTreasury (TNX) yield at 2.60% without buyers. So asset markets like the US Stock Market go to monthly new high levels, despite the USEconomy mired in the worst recession since the Great Depression. The visible piece is shopping malls with one third of stores shuttered, and the jobless rate over 22% in the real world without rose colored glasses. These conditions cannot be sustained, especially since the credit machinery is all jammed. The big US banks are insolvent structures dedicated to the bond carry trade, where that same cheap money is used to invest, often with leverage, in the long-dated maturity USTreasury Bonds. The banks serve the casino, not the business sector.

STUCK MONETARY POLICY

In no way can the current easy money policy be reversed, and put into a normal mode. In no way can the accommodation be tapered. The entire Taper Talk is a lie, and always has been a lie. The Jackass called out the USFed last June and July, and was proved correct by September. Since that time, the USFed has been lying vigorously and creatively. The Belgium Bulge showed itself as a $400+ billion abscess visible to the world, hardly a real savings account by the small nation. It was either a Hidey Hole for USTBonds or else a loading depot for BRICS sourcing of Gold bullion for their upcoming central bank. In no way can the enormous bond carry trades be stopped. They are the only source of actual income for the big US banks. Their other source of narco funds money laundering. Doing so would put the carry trade engines into reverse, forcing an unwanted Bond Convexity episode of leveraged selling of USTreasury Bonds by the same large corrupted banks which are so clearly involved in the derivatives game. In no way can the USFed hike rates, since their own outsized bond portfolio would register huge losses, only to gain ugly publicity. They after all bought the top in bonds, and continue to buy the top in bonds every month that QE continues. They are the fools buying the asset bubble at the top. See a parallel in Japan.

Red light warning signals are all over the place. The biggest in the Jackass view is the Failures to Deliver. We are told that the demand for USTreasurys is huge by the market players. It might be moderate, but surely not huge, since savings is in shortage. When the Interest Rate Swaps are applied, using 0% money into the machinery tubes, the result is an artificial demand produced to purchase the same USTreasurys. The big US banks are required to follow through, or else to expose the entire sham game, a veritable Ponzi Scheme. The banks are growing in resentment. However, not enough USTBonds exist in the operating bond market to satisfy such outsized contrived demand out of machinery. The result is Failures to Deliver, the warning signal of a fabricated rigged market. This Third World nation has fancy machinery indeed.

SMOKING GUN GRAPHS IN CONTRAST

The answer to the US bond riddle lies in corrosive ruinous effect of monetary policy, now in its fourth year. They said the 0% ZIRP would be just for a few months, but they lied. The Jackass said in 2009 that it would be permanent. They said QE bond monetization would be just for a few months, but they lied. The Jackass said in 2011 that it would be permanent. We were taught by central bank mouthpieces for years that a little inflation is good, but a lot is bad. We were taught in economics classes that hyper inflation destroys the entire system eventually, like in Third World nations. Yet QE (hyper monetary inflation) and ZIRP (free money) respectively cause capital destruction with retired equipment and distorted asset prices with no reward to savers.

The two graphs show in clear terms that QE is not stimulus, and ZIRP is a wet blanket. Together they are causing economic collapse with systemic failure. The Jackass words have sounded exaggerated and fantastic for years, actually since the Lehman failure, a basic scuttle killjob done by Wall Street criminal banks in order to protect Goldman Sachs from sinking. The two graphs show a Money Velocity down almost 4-fold while Money Supply is up 3.5-fold. You decide if it translates to systemic failure. Jackass says resoundingly yes. This is broken US financial system and thus a broken USEconomy, the consequence of heretical injurious damaging monetary policy. The greater tragedy is that it cannot be removed. Putting a halt to the QE monetary spigot means letting the financial markets collapse, bond yields to rise, stock indexes to fall, carry trade to go into reverse, and consumer lending to dry up. So the QE spigot continues in a slow death dispensing acid, rather than causing a sudden death.

The story sold on the highly corrosive and assuredly ruinous monetay policy is of stimulus. The only stimulus is for the big US banks to continue recycling their worthless bond assets to the USFed as buyer of last resort. The USFed has been totally wrecked in the process, a good thing since the HQ of the banking crime syndicate. The only stimulus offered is to the big US banks to continue with carry trade projects instead of lending toward capital formation in the business sector. The big banks are able to keep the derivative game going with free money, to maintain the Whirling Dervish platform of vaporous mass. The result has been a systematic assault on capital. The USEconomy has entered a feedback loop of capital destruction, job cuts, and reduced activity. It cannot be stopped. The results of much lower Money Velocity stands as screaming evidence of failure in monetary policy. The moribund activity means capital is being ruined, not functioning, not producing the wanted output. The slower turnover in the USEconomy is not from hoarding of cash. The participants are suffering a shortage of money, often struggling to survive. Putting money in mattresses is an absurd concept when struggling to pay the rent and buy the food and pay the utilities. The beneficiaries of the easy money are the big US banks. They are also suffering a shortage of money, since the derivative holes are acting like sewers to drain their capital. Their capital ratios are not good, and the harsher Basel III rules have been delayed. No cash hoarding evident anywhere.

LOGICAL CONCLUSION

The logical end is systemic failure, USGovt debt default, war to defend the USDollar and the USTreasury Bond. The USDollar has become the ticket that when refused, invites war. The USTBond has become the toxic element in the banking systems. The Western chambers in the US, UK, EU refuse to liquidate the big banks and work toward the Gold Standard return. So the Eastern chambers in Russia, China, and BRICS nations will pursue the return to the Gold Trade Standard with a growing alliance in support. They are accumulating gold in volume.

The pathetic explanation is left as the final word, by the USFed. They are out of answers, out of policy solutions, and out of integrity. The central bank franchise system has failed. The bankers are cornered, some being murdered. Others might be prosecuted. They are the principal cause of the systemic failure, the other cause being the massive outsourcing initiatives over three decades and the outsized USGovt social welfare state. The bigger principal cause of the systemic failure is the US War Machine, which has been around longer than the debutante Fascist Business Model that made its introduction in 2002. Half the $17 trillion in USGovt debt comes from war spending. They defend the indefensible USDollar, but also the narco business. As footnote, Russian President Vladimir Putin committed two deeds that infuriated the Western bank cabal supra-national leaders. Putin kicked out the Rothschild bankers from his country. Putin interrupted the USGovt heroin trade supply routes out of Afghanistan. Like Abraham Lincoln 150 years ago, the elite banker chambers wish to remove Putin and to suppress Russia, but the sprawling nation has joined at the hip with China. Thus Russia cannot be isolated any more than a bear can be bear hugged. the nation spans 12 time zones and is a top supplier of numerous important commodities. The theme is a constant item in the Hat Trick Letter reports. The Russia & China bond is growing and will result in a marriage, the consummation being a baby called the Gold Trade Standard. The attempts by the USGovt to impose sanctions will result in the United States being isolated, another steady theme in the Hat Trick Letter.

The Federal Reserve published a report. It is laughable. They blame the public, the citizens, the victims. They talk endlessly of a sluggish recovery like fools and charlatans. THE FOLLOWING IS RUBBISH AND FLIMSY. The StLouis Fed stated the following.

"The issue has to do with the velocity of money, which has never been constant, as can be seen in the figure below . If for some reason the money velocity declines rapidly during an expansionary monetary policy period, it can offset the increase in money supply and even lead to deflation instead of inflation. During the first and second quarters of 2014, the velocity of the monetary base2 was at 4.4, its slowest pace on record. This means that every dollar in the monetary base was spent only 4.4 times in the economy during the past year, down from 17.2 just prior to the recession. This implies that the unprecedented monetary base increase driven by the Fed’s large money injections through its large-scale asset purchase programs has failed to cause at least a one-for-one proportional increase in nominal GDP. Thus, it is precisely the sharp decline in velocity that has offset the sharp increase in money supply, leading to the almost no change in nominal GDP. So why did the monetary base increase not cause a proportionate increase in either the general price level or GDP? The answer lies in the private sector's dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase in money demand has slowed down the velocity of money." Rubbish!! The surge of money killed capital!!

GOLD STANDARD RETURN

It is coming. It will be painfully slow in its return. It is the only answer, the avoided solution. As long as QE & ZIRP are in place, highly destructive forces will remain at work, ruining capital within economic structures, distorting asset values in financial markets, leading to gross misallocation of assets, and forcing the system into breakdowns under constant aggravated strain. The monetary policy cannot remain in place indefinitely, since so destructive and disruptive. Time is not on the bank cabal side. The Eastern Alliance will continue to work toward installation of the Gold Trade Standard. It requires and has successfully seen a growing boycott and rejection of the USDollar in trade settlement. The Chinese RMB has been making important inroads to establish Swap Facilities that avoid the USDollar in usage, while more RMB Hub sites are being constructed like giant pillboxes in the Global Monetary War.

The King Dollar is being displaced, kicked off its throne. Its squire the Petro-Dollar is undergoing demise. The Ukraine War is the USDollar Waterloo event. The Kiev Regime fascist leaders have begun to bug out, the IMF $3.2 billion loan funds now gone missing. The big Eastern energy deals are underwritten in Rubles and Yuan, no longer the USDollar, another recent correct Jackass forecast. The Saudi rejection of the USD in exclusive oil payments will be the crash heard around the world. The marriage between the Saudis and Chinese is a process well along, with each month featuring yet another high level conference. The Saudis will make the announcement in the coming weeks or months, as a genuflection before the Chinese, with a hat tip to the Russians. Soon the crude oil price will be set by the Russia-China tag team, priced in Yuan currency. When the Gold Trade Standard is entrenched, the diversification away from USTreasurys in the global banking system will become a torrent. Bank system practices will follow trade payment practices. When installed, it will cause prosperity in the East and havoc in the West.

The reaction by the USGovt and USFed will be full of intrigue and desperation. The USFed will be in overdrive with its interest rate derivative machinery active, to prevent a US debt default event or a visible derivative event with another whale beached in full view. The USGovt will be cornered into launching a new domestic currency, a Scheiss Dollar. The USEconomy will react in its own way, with price inflation, supply shortage, and growing chaos with violence. The hint of what comes is seen in the devastating situation in Venezuela, whose tragedy few are paying attention to. They are exporting their essential products (beans, rice, oil) in order to raise hard currency and to prevent a domestic currency collapse. The same will be done in the United States. The early example of exported essentials is of hayfeed for livestock, heading to China from US farms on a growing basis.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

"For over five years I have been eagerly assimilating any and all free information (articles, interviews, etc) that Jim Willie puts out there. Just recently I finally took the plunge and became a paid subscriber. I regret not doing this much sooner, as my expectations were blown away with the vast amount of sourced information, analysis tied together, and logical forecasts contained in each report."   (JosephM in South Carolina)

"Not only have I seen many of the things you talk about in the public arena come to pass, but I have seen many of the things you say repeated three months later by the other analysts. Congratulations!"   (MannyM in England)

"Jim Willie is a gift to our age who is the only clear voice sounding the alarm of the extreme financial crisis facing the Western nations. He has unique skills of unbiased analysis with synthesis of information from his valuable sources. Since 2007, he has made over 17 correct forecast calls, each at least a year ahead of time. If you read his work or listen to his interviews, you will see what has been happening, know what to expect, and know what to do."   (Charles in New Mexico)

"A Paradigm change is occurring for sure. Your reports and analysis are historic documents, allowing future generations to have an accurate account of what and why things went wrong so badly. There is no other written account that strings things along on the timeline, as your writings do. I share them with a handful of incredibly influential people whose decisions are greatly impacted by having the information in the Jackass format. The system is coming apart on such a mega scale that it is difficult to wrap one's head around where all this will end. But then, the universe strives for equilibrium and all will eventually balance out."   (The Voice, a European gold trader source)

by Jim Willie CB
Editor of the “HAT TRICK LETTER”
Home: Golden Jackass website
Subscribe: Hat Trick Letter

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

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.

Jim Willie CB Archive

© 2005-2019 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