Inflationary pressures are still gripping the economy. The economy is balancing on the critical line of destructive deflation and runaway inflation. Prices could quickly and unexpectedly fall or rise, one way or the other. The occurrence of relative price stability is a product of deflation and inflation acting at the same time. Far from price stability, it actually is an extremely unstable situation. Over the last six years it has been deflation because the world is in a depression, but governments cannot tolerate deflation, so they have to cause inflation. That’s why the excessive money printing is going on for so long. There is pressure on each side, deflation against inflation – depression against money-printing – one pressure against the other. Deflation and inflation both fight on the edge of a knife. Eventually, one side wins, but the battle could go on for a long time before one side wears out the other side.
The world is since 2008 in a depression, and that obviously is deflationary. In a depression, debtors sell assets to raise cash and pay their debts. That pushes down asset prices. Falling asset prices, in turn, put other investors in distress, causing further asset sales. So it goes on in a downward price spiral.
Printing money is logically inflationary. With more money chasing a given quantity of goods and services, the prices of those goods and services tend to rise.
If central banks stop causing inflation, deflation quickly will overwhelm the economy. If central banks don’t give up and keep printing money to stop deflation, they will eventually get more inflation than expected.
When central banks print reserves far in excess of domestic savings, the result is inevitably inflation. The US, EU, and Japan each of those have printed $4 trillion, that’s 12 trillion in added liquidity. This is monetary inflation on an unprecedented and massive scale. Far away from seeing any lasting increase in commodity prices and wages, but collapsing profit margins, moribund unemployment figures, and even falling commodity prices. Central banks can monetize everything, leading to an unprecedented asset bubble which if only for the time being boosts investor and consumer confidence, they can’t print trade – that all important driver of growth in a globalized world long before central banks were set to monetize over $1 trillion in bonds each and every year to mask the fact that the world is deep in a global dept.
The more they print, the more capital is available for institutions – central banks – to invest. Creating massive asset inflation, in the price of assets, as central bankers buy – bonds, stocks, and real estate – to push economies upwards all around the world. Instead of producing immediate currency flight, like seen in Argentina or Zimbabwe, this inflation has produced an investment-led boom. This ongoing financial boom is a folly of historic portions. Nobody knows exactly when, but eventually the world will lose faith in central banks’ ability to boost markets.
The Bank of Japan (BOJ) is buying every new bond the government issues. Japan can’t meet its 2% inflation target. The latest numbers for November show consumer prices increased 0.07% – well below expectations. Even with the massive amount of stimulus measures, Japan can’t get its economy out of the low growth/deflationary mode.
Since Prime Minister Shinzo Abe called for unlimited monetary easing in November 2012, the yen has weakened nearly 50%. The BOJ managed to send asset prices soaring – significantly weakening the yen’s purchasing power. So far, the BOJ has pushed the yield on Japanese 10-year bonds down to 0.32%. For comparison, the U.S. 10-year bond yields 2.22%. Japanese stocks are up 70% since the beginning of 2013.
Abe successfully destroyed his country’s currency, robbing his own people, and boosting the stock market, but he’s still not seeing inflation – so he continues to ease. He recently won overwhelmingly a ‘rigged’ reelection victory. He has a mandate from the Japanese public to continue to pilfer his country on behalf of the Crime Cabal. He even announced a new stimulus package of 3.5 trillion yen ($29.1 billion) to ‘subsidize’ the country’s poorer regions and households. Japan has the stimulus throttle to the floor – and is not about to let up.
Then again it isn’t the only country active to inject its monetary system. Worldwide central bankers faced with policy limitations – like extremely low interest rates – are struggling to find “creative” ways to stimulate.
Faith in central bankers allover is fading by the day. The EU will be put to the test yet again with Greece that is on the verge of another collapse. The country will hold early elections on the 25th of January next, after Prime Minister Antonis Samaras failed, in a third and final attempt, to get enough support.
The International Monetary Fund (IMF) and European Central Bank (ECB)’s bailout package is now jeopardized. Greece’s extreme left party – SYRIZA – is ahead in the polls – and said it will not honor the austerity terms and may even default on the debt. As a result, yields on Greek 10-year bonds spiked to 9.26%. The IMF said it would suspend financial aid to Greece until it forms a new government. Syriza a leftist party is expected to win the upcoming general election said it would repudiate its debt, leave the Euro and issue government currency.
The scandalous on going scarification of Greece is a prime example how the cabal’s monetary swindle is kept in place. Should Greece default, billions of dollars of Greek bonds would get crushed. Those losses would cause a huge ripple effect throughout the cabal’s TBTF global banking system. The incentive is to keep Greece paying, which gives the country leverage to gain some concessions from the IMF-ECB in bailout terms, depending on who becomes elected to renegotiate.
Greece – the world’s emblem of the sacrifice of society to debt servicing – is now 45% more in debt than it was before the austerity programs started. Global social and ecological collapse proceed in lock step with the (cabal’s) ruling paradigm’s transnational corporate and bank prescriptions, and increase in their demands, the more they fail to provide for societies life needs and development.
“The German government believes that the euro zone would now be able to cope with a Greece exit if that proved to be necessary,” reported Der Spiegel news magazine. It’s ludicrous to state with any certainty that something of this magnitude and complexity won’t matter. There are too many unknowns surrounding a Greek exit. Even if the EU were able to handle a Greek exit, there would undoubtedly be chaos before everything worked itself out. And then, it’s even more ludicrous to consider Portugal and Ireland to be fiscally sound. Not to mention that Spain could easily be the next country to fall. – “All of Europe would plunge into a deep recession. Governments, which would be forced to borrow additional billions to meet their needs, would face the choice between two unattractive options: either to drastically increase taxes or impose significant financial burdens on their citizens in the form of higher inflation.”
The truth is that nobody knows what will happen if Greece exits the euro. However be convinced Greece will never be able to repay its 300+ billion-euro “loans.” More money only further indebts an already-struggling EU economy. Ultimately, the only answer is for Greece to leave the euro. They will simply dump the euro. It’s the result of money-printing central bankers manipulating the global economy, washing over all the problems with debt. The problems don’t disappear… They’re just kicking the can down the road of oblivion for a few years, when the can will reappear, bigger and nastier than before.
If Greece pulls out, then the domino effect will hit next. Movements to pull out of the euro will rise in Portugal, Spain, Italy, Ireland, and even France. “German government experts expect a major bank run, should the Greek exit from the Eurozone happen, as the country’s citizens would storm banks to withdraw euro deposits. In such a case, the EU would be forced to secure the banking system with a bailout (or bail-in) of billions.” Writes Bild Zeitung.
So, the EU as a whole is in a comparable position as Japan, with low growth and borderline deflation. EU nations continue to argue about stimulus versus austerity. Meanwhile, left-wing populist parties have enough support to potentially cause Greece and even Spain to default, sending the EU into a sovereign debt crisis. According to Eurostat, the EU’s statistic arm, Italy, Spain, Greece, Slovenia, and Slovakia were already in deflation (depression) as of September – adding even more pressure for the ECB to act. And the bad news continues – with an economic slowdown. – Official figures show now the EU has slipped into deflation, with prices in December 0.2% lower than a year earlier, far below the ECB’s target of just under 2% inflation and worse than predictions of a 0.1% fall, which means the EU is in recession or more correctly depression.
Sanctions must be lifted now:
ECB head Mario Draghi will now have to take this new set of circumstances into consideration before deciding how to engage in a new round of quantitative easing, or end up with devalued bonds on the ECB’s balance sheet. He already provided up to a €1 trillion stimulus to Europe’s economy by purchasing private-sector debt and other bonds from European banks in hopes of spurring bank lending, that didn’t materialize. He also is willing to become more aggressive by purchasing huge amounts of sovereign debt, which secretly already is being done.
“Germany has its fiscal house in order… so it’s against Draghi’s pursuit of quantitative easing (QE). The country is pushing for fiscal discipline amongst EU nations… a pipe dream. Any government efforts to boost the EU economy will transfer Germany’s wealth to economic disasters like Greece and Spain.”
Germany has two choices: Accept Draghi’s terms, or face a EU collapse. Two weeks ago in Washington, Draghi reiterated his commitment to QE. Speaking at the Brookings Institution, Draghi said –
[The ECB is] unanimous in its commitment to take additional unconventional measures to address the risks of a too-prolonged period of low inflation… This means that we are ready to alter the size and/or the composition of our unconventional interventions, and therefore of our balance sheet, as required.
That’s why there is no surprise to seeing the ECB bond buying. That already has started with the covered bonds purchases – paper backed by mortgages and public-sector loans – from European banks.
Finally, the EU AWAKES and understand that the result of the US-led economic sanctions against Russia is far more ruining the EU. While Germany was first to acknowledge this, when its economy fainted in Q3 & Q4, now it is on the verge of a recession, and the whole of the EU will follow soon in the 3rd recession.
Former premier of Italy and the EU, Romano Prodi said last week in an interview the “weaker Russian economy is extremely unprofitable for Italy.” – “…regardless of the rouble rate against dollar, which is lower by almost a half, the American export to Russia is growing, while the export from Europe is shrinking.”
Now, there also is evidence of fundamental change in the EU. German Chancellor Angela Merkel in her New Year address for the German television publicly called for a security alliance with Russia. – Press Agency – TASS: “The European Union seeks to establish a system of security in Europe jointly with Russia that will not be directed against the Russian Federation.” What actually amounts to a complete repudiation of Nazionist propaganda trying to portray Russian President Vladimir Putin as an aggressor.
Also, according to Pentagon sources, Hungary has been threatened with a dirty bomb attack because it has kicked out the banksters, nationalized its central bank and started issuing government currency.
The French President Francois Holande also is wary about the economic impact of the Russian sanctions might have on Europe, he said in an interview; “sanctions must be lifted now.” – “If Russia has a crisis, it is not necessarily good for Europe… I’m not for the policy of attaining goals by making things worse, I think that sanctions must stop now.”
A German voice: “More Russia sanctions provoke an even more dangerous situation in Europe and have negative consequences for the entire world,” – warned German Vice-Chancellor Sigmar Gabriel in an interview. “Those who are seeking to even more destabilize Russia from the economic and political point of view are pursuing quite different goals.”
Add the EU’s cancellation of the much beneficial South Stream Pipe Line project, again the unelected bureaucrats in Brussels act on the instruction of the Crime Cabal, in sacrificing its own citizens who suffer the most. The situation won’t improve until the EU structure has been changed into a free trade agreement between independent EU nations. The economic burden of Western sanctions pushed Russia to the east in search of business opportunities, and the EU should follow.
“Russia has presented (the EU) a startling proposal to overcome the tensions with the EU: The EU should renounce the free trade agreement with the United States TTIP and enter into a partnership with the newly established Eurasian Economic Union instead. A free trade zone with the neighbours would make more sense than a deal with the US.”
Even China struggle with slower real growth:
“Due to industrial overcapacity and a housing slump, China is expected to grow at its slowest pace this year since 1990. The country has broadened its definition of a “bank deposit.” Now, funds held at non-deposit-taking institutions will be considered a bank deposit, which means Chinese banks will soon have more reserves and can make more loans against those reserves.”
This move alone means an additional $800 billion will come available to lend, according to Xinhua News Agency, the official Chinese news source. “Beijing is trying to stimulate lending and they are trying not to use strong measures.” A spokes person for the government recently said. Due to industrial overcapacity and a housing slump, China is expected to grow at its slowest pace this year since 1990.
Even with more funds available for lending, there’s no guarantee that people and businesses will seek new loans. The latest data from the Bank of China said demand for bank credit was at its lowest level since the financial crisis in 2008.
Forecast: New multi-year lows for the euro – new multi–year lows for the Japanese yen – and new multi–year highs for the U.S. dollar. While those moves can get extended at times, and corrections are possible, the monetary policy outlook between the U.S. and other countries is very different. The fundamentals for further losses in currencies like the euro remain in place. Major risks could derail the market. The debt crisis in the EU will never end, for as long the structural imbalances are not dealt with.
Meanwhile, the other major central banks of the world are ramping up their monetary inflation, in Europe, China, and especially Japan. The Chinese economy is slowing, and Japan and the EU are in recession or worse.
There is a trade-off between inflation and recession = deflation. If the economy gets too weak, just print more money, they say; the thinking is – they always can tighten when things improve. But what happens when there is high consumer price inflation and a recessionary environment at the same time? People tend to buy hard assets, including commodities. So for 2015 and beyond, hard assets will protect your wealth and even grow in real terms during a period of high price inflation.
If the Japanese people start to get scared of holding Japanese government debt, more and more of them might realize they need to get some of their money in gold. The price of gold has not gone down as much as the U.S. dollar has gone up. This is because there is still global demand for gold. In this scenario the U.S. dollar and gold are going up simultaneously, indicating that the U.S. dollar is one of the least-bad fiat currencies – even if it is still very bad. It indicates that some people are turning away from investing in instruments denominated in fiat currencies and protecting themselves with gold.
If there is a major slowdown in the U.S. economy, or a major stock market crash happens, the Central Banks probably start another round of quantitative easing. If that happens, this will only benefit the price of gold. In a sense, the Central Banks have temporarily gotten away with their huge monetary inflation of the past six years, due to the continued high demand to hold dollars, euros, and yen as result of the lack of bank lending to multiply the money through fractional reserve lending.
It is hard to believe that there could be another round of major digital money printing without people starting to lose some faith in paper currency. This can only be good for gold. Central banks will also likely help gold in other ways. They still hold gold for reserves, and these are likely to increase. Up until about a decade ago, central banks were selling gold, particularly out of England and Switzerland. Now it seems most stories are about central banks wanting to accumulate more.
Many nations want to repatriate their gold held in foreign countries. If the Fed doesn’t have the gold it says it does, which isn’t known because it hasn’t been audited, then this may trigger some kind of run on gold, similar to a bank run. Driving the gold price higher.
Silver is more volatile than gold. This means when commodities and precious metals in particular start moving up, silver is likely to have a bigger run. If silver went back to its all-time high it would mean 200% gains. Silver offers most of the same benefits as gold. The only difference is that central banks don’t buy silver.
Silver is something you could paper currency-cost average into over the next several months, meaning you would buy small amounts every month or every other month. When gold goes up, silver won’t be far behind. And given time, it will likely surpass gold in percentage gains.
As Inflation eventually wins the battle against Deflation count on more worldwide inflation. More people are going to wise up to the fact that they need hard assets to protect themselves. Advice: Start accumulating precious metals now.
Epic Rant – ‘Nigel Farage was right about the EU!’
Credit Creation out of nothing:
A short and instructive explanation. Banks have a pivotal function in the economy; they are the main creators of the money supply. In granting or issuing so called ‘loans’ to their customers they create the money that is essential to make the modern economy work. In fact says Prof Werner: ‘there is no such thing as a bank loan’ he says what happens is credit creation, when banks make the money –credit – needed out of nothing. He explains how the system works, whereby, from a miniscule deposit of funds a huge amount of money is created.