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The Quantum of Quantitative Easing Inflation is Coming!

News_Letter / Quantitative Easing Oct 01, 2012 - 12:52 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter

July 20th , 2012 Issue #12 Vol. 6

The Market Oracle Newsletter
July 20th , 2012            Issue #12 Vol. 6

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

The Quantum of Quantitative Easing Inflation is Coming!

Stocks Stealth Bull Market 2011 Ebook Direct Download Link (PDF 2.8m/b)

Interest Rate Mega-Trend Ebook Direct Download Link (PDF 2.3m/b)

Inflation Mega-Trend Ebook Direct Download Link (PDF 3.2m/b)

Dear Reader

The City of London is Imploding as a consequence of ever escalating shockwave's mostly emanating from across the Atlantic as the United States goes into overdrive in attempts to wipe-out competition from London in terms of profiting from global financial market transactions.

First we saw the US dig out and focus on 4 year old LIBOR manipulation stories centred around the cesspit that goes by the name of Barclays Bank that looks set to devastate all of UK's biggest banks, with the UK tax payer ultimately footing the bailout bill. I have covered this story at length that illustrate that everyone knew about LIBOR manipulation but now pretend that they only found out relatively recently - more here - RBS Chaos and Barclays Libor Cesspit Prompts Slow Motion Run on British Banks

And this week we have seen more convenient revelations out of the US dating back to 2007 that HSBC, Britain's biggest bank that forces ordinary citizens to jump through hoops to transfer small amounts of currency abroad has been engaged in systematic money laundering for the Mexican drug cartels to the tune $7 billion with potentially far worse across the world as HSBC affiliates apparently did business with rogue nations and terror organisations.

The truth is that BOTH stories could equally apply to major U.S. Banks but U.S. politicians are choosing not to investigate / hold them to account. Compared to the master market manipulators such as JP Morgan and Goldman Sachs, the likes of Barclays is just a mere amateur. The reasons why US politicians are looking the other way are the same that UK politicians and the Bank of England have ignored the crimes of Britain's biggest banks in that the politicians are in the back pockets of the bankster's and that the truth risks shaking the confidence of an already fragile financial system.

So the real story is why are U.S. politicians not holding their own thieving criminal banks to account ?

One possible answer may be found in the records of campaign donations.

So now in the UK, HSBC takes the lead from Barclays as Britains most criminal banking institution, the question is will Barclays fight back for the lead with something even worse? Off course Britain's banks are just a few amongst many that is the global banking mafia crime family. The truth will belatedly come out though the price paid will probably wholly be by tax payers.

Now whilst you should by now be agreeing fully with me that the global banking system is fraudulent and possibly even start to see that the central banks are party to this fraud by evidence of their actions as illustrated by money printing, the whole of which has been effectively funneled into the back pockets of the Bankster elite where in the UK this stands to the tune of £375 billion over 3 years, all aided by pure propaganda that central banks are pumping money into the economy which I have repeatedly illustrated as being a PURE LIE because it has NOT been pumped into the the economy as politicians continually state but into the banks.

The Only Solution Governments have is Inflationary Debt and Money Printing

If the Government / Bank of England wanted to boost the economy then they would have handed over at least some of the money that has been stuffed into the bankster banks to the people of Britain by means of tax refunds. The only reason why they have not done so is because it will be highly inflationary, after all Britain being an economy in depression for the past 4 years has still suffered Inflation of 15% as illustrated by the Inflation Mega-trend graph below -

The inflation mega-trend is something that the mainstream press never mentions as the journalists who think they are economists rely on vested interest academic economists to pump out propaganda that virtually wholly focuses on what is only the annual momentum in the rate of change of inflation as illustrated across the media by graphs such as below that paints a picture of relative stability when the truth is that of an exponential inflation trend.

Quantum of Quantitative Easing (QQE) is Coming!

I am quite often asked where will future inflation come from as disposable incomes are falling and my answer is that the government will ignite the wage price spiral. Then I am asked how will they ignite the wage price spiral and my answer to that is what I call the Quantum of Quantitative Easing.

There is a crisis brewing and that crisis is political as a consequence of the subversion of capitalism by the mafia crime family that includes our biggest banks and central banks. You cannot shatter the illusion that has been in force for at least 60 years and probably much longer, and not face the consequences, the illusion has allowed the banks to turn everyone and everything into debt slaves, they have stolen ALL of the wealth of virtually every citizen that has debts and even those that have never borrowed a single penny as a consequence of the fractional reserve banking debt printing Inflation Mega-trend, and the consequences are going to be fought with Quantum of Quantitative Easing, which could become the big new buzz phrase in the mainstream media in about a years time, though given the 4 year delay in waking up to the LIBOR scandal it may take a lot longer still.

What is QQE ?

To date the central banks electronic money printing presses have been busy for the purpose of monetizing government debt by means of the bankrupt banks. Which as I warned several years ago is likely to continue for the whole of this decade and will be one of the primary drivers of the Inflation Mega-trend and in the meantime nothing has changed this expectations. The next stage is QQE, which will involve the UK government (same applies to the likes of the US) via a number of mechanisms to directly spend money printed electronically by the Bank of England without it going through the mafia banking system i.e. direct transfer from the Bank of England to Government. The exact mechanisms used and what they will eventually be called will only become fully clear in hindsight but the basic outcome will be as I indicate here in that the Government will spend money printed (electronically) without it adding to government debt!

The QQE Secret of How to Print Money Without Increasing Debt

The answer to the secret lies in the name, in that we are discussing the QUANTOM of Quantitative Easing.

This is taking place right now, completely out of the focus of the public and the mainstream press.

QQE is taking place by means of the interest earned on government debt bought by the Bank of England i.e. the Bank of England prints money to buy government debt from the banks, therefore the government pays the Bank of England interest on this debt most of which then gets recycled back to the Government so in effect the government has free money to spend that it should not have, and the more bonds the Bank of England buys the less net interest the Government has to pay. Imagine if all of the bonds were owned by the Bank of England, this would mean that the net interest paid by the government on all of its £1.1 trillion debt would be virtually ZERO! So effectively the government has NO DEBT TO SERVICE, because without any interest to pay it effectively ceases to exist! Yes this mechanism is QQE because it allows the government to spend money without increasing its NET debt burden, not only that but the government is actually REDUCING its debt burden as the debt is actually being cancelled out. So QQE is the quantum of QE as the net debt interest burden falls towards ZERO.

I am sure this is one secret that the Bank of England wants to keep hidden away for as long as possible for it implies that the ramping up of the Inflation Mega-trend is already underway with approx 1/3rd of Government debt having been effectively cancelled to date! As effectively 1/3rd of the interest the government pays on it's debts is going back to itself! And meamtime about 12% of the value of the debt has been wiped out by inflation (£132 billion) over the past 3.5 years)

This is the magic of the electronic money printing presses and inflation, as one minute the government had £1.1 trillion of debt and then the next minute POOF, it is all gone! A bit like Verbal Kint turning into Kaiser Sozer!

It is economic magic that the coalition government politicians will pull out of their hat, resulting in no increase in debt and lots of free money to spend or give away in electioneering tax cuts!

This is just one mechanism, though probably the primary mechanism but there will be many other schemes that will cooked up between the Treasury and the Bank of England that will fall under the QQE banner.

Why is it Dangerous?

If QE is akin to pouring petrol onto the inflation fire then QQE is akin to pouring rocket fuel onto the Inflation fire. It will result in an ACCELERATION of the EXPONENTIAL Inflation Mega-trend as the government will effectively keep writing itself blank cheque's that it cashes at the Bank of England.

Why is it Coming?

We are approaching the mid-point of the UK election cycle which means the coalition government will have to start to ramp up the money printing presses that will increasingly target the general public as they attempt to buy votes going into the election. The Mafia banking system is allowing the government to engage in the Quantum of QE which will increasingly allow the government to buy votes by starting to spend monopoly money (which is what Sterling will become) directly on all sorts of activities such as digging big deep holes that they will call construction projects or other measures such as tax cuts, however the key point will be that this expenditure will not have any impact on the governments budget deficit so it won't be money added to debt! They will deploy much smoke and mirrors to try and mask what they are doing and where the money is coming from.

Again the consequences of QQE will be to ramp up the Inflation mega-trend, I have tried not to mention the word Hyperinflation because that is a latter stage panic event. But you are reading this at least a year ahead of the curve, at a time when mainstream press pseudo economist journalists are fully focused on the latest dip in the CPI inflation rate to 2.4%, and are eagerly regurgitating the views of vested interest academic economist propaganda of always imminent deflation.

This is how the Exponential Inflation Mega-trend is likely to play out:

1. QE for the bankrupt banks to monetize government debt = High Inflation

2. QQE to buy votes by expenditure that does not add to the government deficit = Higher Inflation

3. Loss of confidence in Fiat Currency due increase in supply of currency and velocity of money = Hyper inflation panic event.

No3 is not a certainty, it is a risk, and the more QQE a government engages in the greater will be the risk.

My next in-depth analysis will attempt to map out in detail what I expect to follow over the next few years as QE continues to give way to QQE In the meantime try to immunise yourself against the worthless deflation mantra in the mainstream press, because at the moment we are experiencing the calm before the coming inflation storm.

Source and Comments -

By Nadeem Walayat

Copyright © 2005-2012 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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