'Dominant Social Theme: Inflate! And everything will work out. -- The BIS, whatever it is, is all for printing lots of money. And the BIS is no small-time trade group. It is perhaps the most powerful (and least known) global business body in the world. Its mysteries are manifold. Its workings are well-hidden. Of course, somebody actually set up the Bank for International Settlements in the late 1930s. And since then someone has set up or helped set up about 200 central banks around the world, many of them reporting directly to the BIS. But who? And how did it happen? Dunno. Who speaks to the head of a state, asking him or her to set up a central bank? Dunno. Do you? Why is that Libya, Afghanistan and Iraq have central banks when they didn't before, or not the kind they do now? Did you read about it? Meh ... this ruinous financial system is not a plant or a tree. It did not grow spontaneously. It did not grow naturally. And we would submit to you that those who created it know what they're doing. The key as always is to pretend that one does NOT know. The key is to create cognitive dissonance. Out of chaos ... order. It is quite clear. Follow what IS rather than what you are being TOLD. The BIS wants to inflate. It ENDORSES inflation. The proximate cause is the unraveling of the current financial system. But it is "their" system. They made it.'

'It is fundamentally a problem of the politicians. They have their 'political philosophies, their 'causes', and their 'departmental interests', an eye on specific sectors of the electorate, and on top of this is simple inertia. That government must do x has become a state of mind, along with the belief that x is an absolute necessity for the government. ...they never do enough to address the problems of their reliance on borrowed money. As I have many times argued in this blog, it is a vicious cycle in which the more a country borrows, the more more the economy is structured to consume the resources of the borrowing, and the more dependent the economy is on ongoing borrowing. Increasing the borrowing sees further restructuring of the economy to service the debt, and reduction in borrowing sees the elements of the economy that are unable to survive without the borrowing exposed to the light of day. Then there is the positive feedback. The more borrowing in the economy, the more activity in the economy, the higher the GDP growth, and the greater the GDP growth, the greater the borrowing as the growth is taken to indicative of an ability to repay the borrowing. The greater the borrowing, the more the economy restructures to service the consumption that originates in the borrowing. And so it goes on.....and this is how we come to the current crisis.'

'Across the Atlantic, the global financial troubles have reached the UK, as it becomes the latest nation to feel the pinch. Rating's giant Moody's has downgraded 12 of Britain's financial firms and banks, including the Royal Bank of Scotland and Lloyds TSB. That comes after the Bank of England chief said the country's economy is at its lowest point since the 1930s if not ever. RT gets more on this from British Euro MP, Godfrey Bloom.' -- "If [money-printing] was successful, why doesn't he give money-printing machines to every family in the United Kingdom, that they could put in their attic and print money whenever they wanted to go buy something?"

'"More money printing? My masters are you mad? ... According to the BBC, the Bank of England has decided to 'inject a further £75 billion into the economy'. Who knew it was that easy? I mean, why not inject £500 billion? Or a trillion? According to the BBC's logic, it would surely make us the wealthiest nation on Earth." – Daniel Hannan, UK Telegraph' -- 'Dominant Social Theme: Let the printing presses roll. It must be done. -- Central banks are inflation MANUFACTURERS. They are money-printing factories. They are set up to produce inflation, which they do by performing their designated function, which is printing money.These paper producers fix the price of money with interest rates and money printing – and fix it downward. Over time they devalue currency and ruin the savings of the middle class. Since the Anglosphere power elites are at war with the middle class – seeing them rightfully as an impediment to world government – central banking is a great way to diminish opposition. To make people so miserable that they cannot concentrate on anything but ensuring their next meal is a recipe to implement the coming new world order. It's been going on, worldwide, for at least a century with evermore velocity and malice aforethought.'

'About 3 trillion yuan (US$470 billion) of bank loans have been channeled into underground lending in the eastern coastal provinces, China Banking Regulatory Commission chairman Liu Mingkang told a recent closed-door conference with lenders. Companies are not alone in engaging in such lending businesses; individuals are welcome to join. Liu Chumei, a housewife in Liantan town in Yunfu city, in southern Guangdong province, close to Hong Kong, said credit companies had promised her family a 7.5% interest rate per month on deposits of 10,000 yuan. "Seeing the inflation rate is higher than the [official] deposit rate, we actually loose money putting our cash in the bank ... I would put my money in such credit companies if I had any, so I called some of my relatives in Hong Kong to see if they were interested," she said. "They refused on security reasons."'

'The case of Japan is cited as the reason why inflation will not take place in the UK and US. However, there is a fundamental difference between the UK, the US and Japan. During the period of the carry trade, Japan was generating a large current account surplus, so the flood of yen onto the market did not result in significant currency weakness. By contrast, both the UK and US have been (and continue) to run large current account deficits. In both cases the currency is already sitting on weak foundations and, therefore, export of the dollar and sterling into the carry trade will simply put more pressure on the value of those currencies. They are flooding the market with currencies for which there is already a potential over-supply. At the moment, the increase in money has not entered into the real economy, but it will do at some point. I suspect that it will be through the back door of the carry trade.'

'If you are a central banker in the destination country, it might be that the flood of carry-trade money could push inflation upwards. What is the central banker or policymaker to do? The ‘hot’ money flooding into their country might be causing an asset-price bubble, or inflation. Something must be done. The problem is this: if interest rates are increased, the incentive for the carry trade is likewise increased – and might even cause the inflow of even more ‘hot’ money. If the central bank targets low interest rates, then there is the possibility that this might end the carry trade, but at the cost of creating an internal stimulus to inflation. The strengthening of the destination country’s currency might, in turn, have a negative effect on the balance of trade and the export sector of the economy. Exports will fall... Despite this, assets in the destination will be going up, while the underlying performance of the economy will be going down (albeit disguised by the inflow of money).'

Exporting inflation through the carry trade: '...if the money exits the economy via the carry trade, it will severely weaken both nations’ currencies and re-enter the economy through the back door of import-price inflation. For the proponents of QE, the lack of massive inflation is used as a justification for continuation of the policy. For those who are arguing for a return to gold, they can see that somehow, at some point in time, the massive expansion of the monetary base in QE countries must eventually see a rise in inflation. For the latter, they are not always clear in their understanding/explanation of why massive inflation has not taken place. However, their instinct that QE must eventually have a price is correct. Furthermore, the price is already being paid around the world as easy money has flooded into other economies. That in turn is creating distortions in markets, and those distortions will ripple back towards the countries that caused the problem in the first place.'

[Chart 2004–2011] -- 'If we don't reverse the current trend in food prices, we've got until August 2013 before social unrest sweeps the planet, say complexity theorists. ...Lagi and co say that high food prices don't necessarily trigger riots themselves, they simply create the conditions in which social unrest can flourish. "These observations are consistent with a hypothesis that high global food prices are a precipitating condition for social unrest," say Lagi and co. In other words, high food prices lead to a kind of tipping point when almost anything can trigger a riot, like a lighted match in a dry forest.'

'The Keynesian assumption has always been that lenders should invest money in government bonds. Government bond markets are the foundation of all Keynesian theories of counter-cyclical spending by governments. We never hear a unified cry from Keynesians in boom times that it is time to cut government spending and start paying off the government's debt. We are told that Keynes called for counter-cyclical policy in boom times, not just bust times. That meant running surpluses to reduce the debt. But we never see quotations from Keynes to this effect. We never see signed statements from Keynesian economists calling for debt reduction. There is a reason for this. Keynesian economics is welfare state economics. It has always been a cover for wealth-redistribution. Officially, this wealth redistribution has been justified in the name of helping the poor. Operationally, it has always been wealth transfers to very large banks.'

'In this MSNBC interview, Greenspan was asked, "Are US Treasury bonds still safe to invest in?" You have to listen to his answer to believe it. Greenspan sits there and utters a single sentence that basically says what no dollar-debt holder wants to hear: We will devalue your debt into the ground by cranking up the printing presses.'

'The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it's worth less than 1/200 or 0.5% of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value. Given the undeniable track record of currencies, it is clear that on a long enough timeline the survival rate of all fiat currencies drops to zero.' -- 'As you scroll through the currencies below, you’ll see some long-ago casualties. What’s shocking, though, is how many have occurred in our lifetime. You might count how many currencies have failed since you’ve been born.' -- http://www.washingtonsblog.com/2011/08/average-life-expectancy-for-fiat.html

'We think that Western central banking policies may have deliberately introduced raging price inflation in developed and developing countries. We believe the sudden advent of food scarcity (to be followed by water scarcity) may be no accident either. All these factors are controllable via money power and we it would seem to us, arguably anyway, that this controlled – and expanding – chaos is meant to be. In America, Barack Obama has added trillions to the national debt and made George Bush's profligacy look almost modest by comparison. Again, we believe that this may be a deliberate destabilization of the nation's fiscal and monetary situation. Homeland Security's authoritarian depredations are acting as deliberate incitements as well. ...we would not put it past this shadowy cabal to purposefully begin to destabilize the euro as they have evidently destabilized the dollar. Far-fetched? Sure. But no more than many other events occurring in the world today.'

'By treating the current, fallacious system as a kind of "gold standard" that cannot be taken down without an attack, one enshrines what is injurious. The conversation moves beyond remedies from reconfiguration to strategic necessities intended to defend what is evidently and obviously the Western economic system. Only it is not. The central bank economic system that has been put in place by the Anglo-American elite is far from a free-market system. It begins by printing money-from-nothing and as this fiat-currency circulates, it begins to inflate various markets, certainly the stock market. It also fools entrepreneurs into thinking times are better than they really are – and thus firms begin to over expand while other companies create trivial or non-essential products that would not have been successful in a less simulative environment. Eventually, the economy, stuffed with paper money, reaches a breaking point... People begin to wake from their Dreamtime at this point...'

'...we doubted our reaction to the news, so we went trolling the ‘Net to see if anyone shared our instinctive reaction that this was overwhelmingly bad news for the euro. Here's one comment we found: "Wait... have I just slipped into a parallel universe? Is this some sort of early April's fools joke? Doesn't this defeat the entire point of a single currency and the ECB? Were the rules changed on the quiet without anyone noticing? Greece.... Greece are going to go f***ing apesh!t. They were forced to go begging to the IMF.... when the Greek people find out the [Irish] central bank is allowed to just print money, they are going to riot and demand tax cuts and benefits rising and massive spending. The Germans... well the Germans are just going to totally lose it. They've been told they should pay higher taxes to help the PIIGS, now they are being told the PIIGS can prints EUROS at will? It's impossible to overstate the importance of this... this is it... game over." The bell tolls.'

'Nations engage in manic economic and political projects to get a "dopamine rush" that counters the depression and guilt about their success. Political paranoia and slow ego disintegration are seen in conspiratorial group-fantasies, fears of femininity [countered by persecution of homosexuals], imaginary humiliations by other nations [countered by a search for external enemies as grandiosity fails and Poison Alerts and sacrificial group-fantasies proliferate] [and Purity Crusades multiply as anti-modern and anti-child (Bad Boy) movements]. These are countered in the economic sphere by manic overinvestment, risky ventures, excess money supply growth, soaring debt and stock market speculations, and in the political sphere by jingoistic nationalism, expansionist ventures, military buildups and belligerent, insulting foreign affair behavior. As in drug addiction, each dopamine rush leaves a dopamine hangover that requires an even larger manic activity to overcome the resulting depression.'

'That depressions are self-inflicted wounds and not just the results of "mysteriously wrongheaded monetary policies" is still not admitted by most economists. The task of controlling growth panic by depressions is given to central banks, which first flood the nation with low interest liquidity to encourage overinvestment, excess borrowing, inflation and stock market bubbles, and then, when the expansion becomes too sinful for the national psyche, reverse the monetary expansion by increasing interest rates and reducing liquidity ("Taking away the punch bowl when the party gets going.") Depressions come because really people become depressed, reducing their spending and investment, and feel hopeless. ...nations enter into depressions because they feel persecuted for their prosperity and individuation by what Jungians have termed the "Dragon Mother" – the needy, "devouring mother of infancy who cannot let her children go because she needs them for her own psychic survival."

'...we went ahead and wrote that the Chinese miracle was over; that sooner or later, inevitably, price inflation was going to cook the communist party and the old men who run it. Find an article in the mainstream press even today that predicts this. They are few and far between, though moreso in the alternative press (which still casts the Chinese as an efficient ogre, the yin to the Western, dissolute yang). The mainstream media is almost relentless in its inability to spot patterns of any kind. Everything that happens in the mainstream media is a sudden, jarring surprise. North Korea goes to war (almost) with South Korea. Surprise! Sovereign debt crisis in Europe. Surprise! Economic crisis? Surprise! Chronic joblessness? Surprise! Gold up? Surprise! Silver up? Surprise! Gold and silver up even higher? Surprise! Say, when China begins to have food riots, will that be a surprise too? We are way past assuming this is merely ignorance. Or if it is ignorance, it is purposeful ignorance.'

Who will build the roads?!?!

'There is no doubt that the Chinese "miracle" is going to end badly. An economic crack-up in China would likely put paid to any "recovery" the West might hope for... With the West and Asia suffering twin economic breakdowns it is most doubtful that the outlook for the global economy would be anything other than dire. If the event is coupled with rising food prices and a kind of artificially imposed trade war that further freezes goods and services worldwide, then the results could be truly catastrophic for millions, even billions. This is when we will begin to see whether the powers-that-be are truly Machiavellian in terms of their strategies and goals. This is when we will begin to find out if there is a workable plan to introduce a one-world financial system, and even one-world government. China may be the trigger. The wild card, however, is the Internet. We do not believe the power elite had any idea of the amount of antipathy that would be generated by this new communication tool.'

'The US is technically bankrupt. It is fighting two, three or four wars, mostly unsuccessfully, and maintaining something like 1,000 bases overseas. It is threatening to unleash kill squads in Yemen, to penetrate Pakistan with helicopters and troops and to start a new war by bombing Iran. Domestically, spending continues to outstrip revenues, the "real" unemployment rate hovers between 20 and 30 percent, 40 million children and adults are on food stamps; foreclosures are at an all time high; famous cities like Detroit are literally being bulldozed to remove squalor; the entire "red" interior of America is dilapidated, filled with empty factories and crumbling infrastructure. The dollar itself, once the world's proud reserve currency is worth about a penny... and eroding still further every time Bernanke launches another quantitative easing—prints another trillion in phony money to "stimulate" the economy. And what does the American stock market do? It goes UP.'

'Why is gold such a mystery? Why is it, along with silver, kept such a mystery? Gold particularly is kept such a mystery because it is the key to unlocking the currency markets, which long have been the most efficient mechanisms of imperialism. ...you have heard about the looting of Europe that was undertaken by the Nazi German occupation during World War II. But most of that looting did not take place at the point of a gun. No, it took place through the currency markets. ...the Nazi occupation simply printed for itself and spent huge new amounts of the regular currency of the occupied country. This control of the currency markets drafted every resident of the occupied countries into the service of the occupation and achieved a one-way flow of production—a flow out of the occupied countries and into Germany. For a few years Nazi Germany had one hell of a trade deficit. But being in the position to print the currencies for occupied Europe, Nazi Germany never had to cover that deficit.'

Pay-walled. Recommended. -- When a pyramid scheme nears its inevitable end... "...the public insist on being handed the empty bag because they think they're going to make money, they want in on the game, everyone else has been making money, they feel left out so they insist on buying these things at the peak, and they are the ones who lose everything."

'Both parties want the central bank abolished. It is important to understand this crucial difference between the gold standard advocated by the Austrians and the gold standard that is advocated by bankers. The Austrians want a 100% reserve gold backed system of private currencies. A 100% reserve system means the banks essentially act like warehouses. They hold the people’s money and charge a nominal fee for this service. They don’t actually create money through lending like they do now. Inflation in a 100% reserve gold system can only occur if the supply of gold is increased, which requires a large amount of time and effort on the part of gold miners. In a greenback system, inflation is caused by government simply running a printing press and then spending that newly printed money into the economy. If government can’t control its borrowing now, it is ridiculous to think it will be able to control its printing under a greenback system.'

'There's too much uncertainty about the economy and what companies and ideas are viable. Too many bad ideas and sectors have been propped up. Too many zombie companies are still being supported by governments and forgiving central bank policy. So easing won't provide growth. But what another round of quantitative easing WILL do is continue the formation of various kinds of speculative bubbles. Businesses may not borrow; entrepreneurs may not flourish, but money will find its way into some forms of speculation, be it oil, gold, food, etc. Thus Trader Dan is correct. Quantitative easing will cause price inflation but do little or nothing to stimulate animal spirits and create jobs. Eventually, the Federal Reserve will need to confront the largest problem of all: its growing lack of credibility and a system based on fraudulent pretences that is being exposed to a larger and larger audience every day.'

'Paul Krugman is upset. :'-( ...like many Keynesians, Krugman is worried that lower prices will feed a credit crunch. He is worried that if money becomes worth MORE it will only aggravate people's over-leveraged positions. He is an inflationist, as are most people in a central banking economy, because people's buying decisions are usually based on an expectation of gradual inflation. ...what Krugman et. al are dealing with though they will not admit it is a generalized crack-up boom. The West's economies need a massive unwinding. The problem at this point is banking itself. Banking (and the financial industry generally) is the biggest bubble of all. Because the elite depends on the financial industry for monetary control, banks and other such institutions have been artificially cultivated and consolidated for 100 years. The amount of distortion, excess and waste in the Western financial system is beyond measure. It is like a metastized cancer that is poisoning the entire body politic.'

'We are told by various proponents of central banking that if central banks were only owned and operated by the state all would be well. People would have access to the money they needed and various procedures would be carried out that would sterilize the money circulating within the economy so as to avoid inflation. But in the case of both China and India – where the state itself undoubtedly owns and operates the central bank (not some outside group of bankers) – we see inflationary problems presenting themselves nonetheless. It turns out perhaps that state-ownership is not such a panacea after all. -- ...it is impossible to manage money creation. The idea that central bankers can do so is merely a power-elite promotion, a dominant social theme. Bankers have no idea of how much money an economy needs... Private or public, there are no forward-looking indicators that allow central bankers to anticipate where the economy is heading next.'

'The economy started down a depressionary slide in 2008 and hasn't looked back. It is my thesis that the inflation, deflation debate is flawed because we no longer have reliable price signals. The overwhelming domination of program trading on various exchanges has fundamentally changed the way prices are created and represented in the economy. All 'efficient market' theories are dead. In place of reliable price signals (based on the supply and demand of buying and selling) we have price signals that are generated by computer algorithms... Program traders have a virtually infinite line of credit, pay virtually zero commissions, and are backed by banks on Wall St. with strong political connections who are ready to bail out any losing bets these computers make. In place of an exchange where buyers and sellers transact with each other to their mutual advantage, we now have 'Simflation,' a hologram of fake price signals masking the worst deflationary depression since the 1930's.'

(Commented. Is fiat money inflation a meme the Bell and many others have fallen prey to by way of lazy Austrian Economics/Goldbug dogma?)

'...if the government was not borrowing, but still providing the same services, the tax rate would be far higher. As it is, the government borrowing is the borrowing of the individual, as that individual will, at some future point in time, have to pay higher taxes than they would otherwise have done. This means that, as they make each purchase, a proportion of that purchase is paid for by money the individual is indirectly borrowing through too low taxation.'

'The monetary economy has been made so complex through the ruse of central banking and a ridiculous vocabulary that unless one confronts the situation with the requisite ruthless cynicism, one is apt to be overwhelmed. This is a dominant social theme of course, one that goes something like this: "We are the great collective OZ. You may petition us, though surely you will not comprehend our toolkit, understand our terminology or appreciate our strategies. We will explain the progress being made in due course – and you better believe it!" Yes, complexity is important in that it obscures failure. The ultimate effects of US$5 trillion of additional money on the economy are ... predictable. We must draw two conclusions if such a sizeable injection occurs. First, the elite is in fact panicked about societal unrest as a result of this gargantuan bust – the "Great Recession." Second, they are willing to risk hyperinflation later to steady Western economies now.'

'Introduces the concept of the monetary vortex, how it's driven by debt, how it controls everything in our system, including inflation and deflation. It also covers the role derivatives play and addresses how sovereign money breaks the power of the vortex.' -- Two problems: Central banks create the reserves to back bank-created credit money and banks wouldn't/couldn't create that credit (well, *they* don't, of course – we do with our signatures) without the surety of the backing – thus government with its public/private mercantilist central banks 'create' the conditions for credit inflation and are ultimately responsible for continued inflation. Next, if government and its 'sovereign' money system can be taken over by banksters – as it has been, time and time again – why will such a system be immune to predation next time? Why is government the right answer this time when it has been proven to be the wrong answer time and time again? -- Still, great explanation of inflation/deflation.

'...price deflation is a dominant social theme—a fear-based promotion that is being used, in our opinion, to justify the Draconian cuts that are being called for. ...there is nothing [wrong] with deflation in a free-market environment (it eases the pain). But the EU is anything but free-market oriented and price deflation in such over-leveraged communities is often a recipe for immediate ruin, and people know it. We begin to have a greater degree of certainty, then, that the powers-that-be are using the price deflation bogeyman as a methodology to implement greater control over Europe and also, ultimately, of Britain and the US. ...it is perhaps doubtful that serious price deflation can persist in the kinds of fiat-money environments that pervade the West today. Sooner or later, inflation will become more prominent—or so we believe—and thus we see the promotion of price deflation as something of a frenetic scare tactic for political purposes before price inflation begins to surge.'

'The overall point: "We all need to get on board with paying down debt like any responsible citizen debtor would." Is this so? We believe that suggesting the individual citizen now has a moral calling to live in penury and starvation because of the planned irresponsibility of central banking policies is absurd. We believe it is a kind of dominant social theme, as follows: "Nations have been living beyond their means for decades and it cannot go on without social chaos. Austerity measures will be implemented by the authorities for everyone's good." This meme certainly shoves the blame for the current situation directly onto citizens living in the West's profligate nation states. ...the main argument of deflationists seems to be that the money "goes away" during bankruptcies, etc. But in fact, banks that are damaged by recessionary ruin will almost always receive further monetization by the West's mercantilist central banks... ' -- It's biflation and it's theft.

'...incessant credit stimulation has so distorted Western economies that even after two years, these economies have not yet returned to a point where banks and other investors can tell the difference between a legitimate opportunity and one that has been kept alive by various forms of governmental chicanery. This is why "stimulus" and "bailouts" are ultimately so counter-productive. They actually retard economic recovery. For monetarists – and other types of non-free-market economic-oriented journalists inhabiting the mainstream media the inability of banks to lend and the subsequent shrinkage of the money supply is cause for alarm. It is actually the most natural thing in the world. What many economists and financial journalists are calling for in the midst of a downturn is for the printing presses to reignite and for yet more faux-money to enter the economy in order to reinflate.'

Black Hole of Zero Interest Theory - '...why is it that the inordinate money creation by the Fed is having no lasting effect on prices? It is because the Fed can create all the money it wants, but it cannot command it to flow uphill. The new money flows downhill where the fun is: to the bond market. Bond speculators are having a field day. Their bets are on the house: if they lose, the losses will be picked up by the public purse. But why does the Fed under-write the losses of the bond speculators? What we see is a gigantic Ponzi scheme. The Treasury issues the bonds by the trillions, and promises huge risk-free profits to the bond speculators in order to induce them to buy. Most speculators believe that the Treasury is not bluffing and they buy. Some may believe that the Fed is falsecarding doubts and they sell. But every time they do they only see foregone profits. What we have here is a rare symbiotic relation between the government and the speculators. The world begs to be fooled.'

'Ah, the new terms—illegal land use and land hording! This is analogous in our opinion to the term "predatory lending" aimed especially at mortgage brokers in America who used high-pressure sales tactics to supposedly force individuals to buy expensive houses. The fault of course is with the monetary system itself, not the poor salespeople caught up in its inexorable tidal pull. But since the fiat-money/central banking mechanism that causes the problems in the first place cannot be mentioned, or identified as the culprit (for political reasons) the blame will [be passed on]. -- When one gets to a point where the only way to control price inflation is by banning purchases then it is probably already too late. One can, perhaps, puncture the boom psychology, but the result is then inevitably a bust. The power elite in the West, for a variety of reasons, has wanted to pretend that China is a "free-market" success story. But this dominant social theme is beginning to unravel.'

'We figure there is increased worry at the top that the system is going to come under another sustained attack and that MORE money printing – and other equally dramatic measures – will be necessary to bail out not just private concerns but whole countries. Once every 50 or 100 years in a fiat-money mercantilist/central banking economy monetary distortions become so bad that the whole system begins to fall apart. We increasingly believe this is such a time. If it is, all the money printing in the world will not prevent it. The trouble the elite foresees, and we see it too, is that patience is just about gone for such maneuvers. Thanks especially to the Internet, people see what's going on and they are finding it increasingly unfair. What is the elite to do if people do not believe anymore in central banking – and by extension the mercantilist money system that has been built up over this past century?'

'So many know the pattern by now. Pound billions into the stock market and trust the mainstream media to "talk up" a recovery until one finally occurs at least to some degree. In the meantime, ignore the larger collapse of industry and the increased polarization of jobs and wages. Eventually you arrive at a South American style recovery in which even people with advanced degrees are driving taxis because that's the only solid work available. We've traveled in these places. Inevitably, they are overbanked and a handful of wealthy families and individuals own most of the industrial and financial services that count. Everybody else is on the street selling phones, operating cabs or hustling short-order food. These are not pleasant economies to live in for the most part. As they spiral downwards, as they do sooner or later, politics inevitably takes an ugly turn toward populism. A new growth industry emerges: security and military affairs.'

'The implication is that if one has inflation then the repayment of debts is "easier". But as I will explore and explain here, that premise is dangerously false. -- Let's assume that Joe has $5,000 in credit-card debt. He makes $30,000 a year. Bernanke "decides" he is going to implement a policy of debasing the currency by 5% to try to "help" the economy by making it easier to pay debts. What happens to Joe? Joe's employer makes widgets. These widgets have raw materials, energy and labor as inputs and are sold on the marketplace. When Ben implements his policy the single-dimensional view of the world is by devaluing the currency by 5% means that Joe now "makes" $31,500 a year instead of $30,000, and thus has an "extra" $1,500 to make his debt payments with. But that sort of single-dimensional view is in fact wrong! When Bernanke implements his policy the following things happen: ...' -- That which is not seen

Faber on the government-created 'casino gulag' (Max Keiser): "I don't know anyone who isn't greedy. If governments have policies that encourage the increase in debt and create through inflation an environment where people are forced to abandon cash and go into assets or be left behind, then you eventually end up with the problem we have today."

'Keynesian fools are out in full force today as the following video shows.' -- And when you want to eat some food, you imagine a food credit being added to your brain's 'food eaten' account.

'...the Fed (a) suppresses the interest rate on Treasury debt and (b) refunds virtually all of the interest payments on Treasury debt held by the Fed. And remember, the way the Fed does this is through creating new dollars out of thin air, in order to buy the Treasury debt from the original investors [primary dealers ie., FRB banks] who lent [lent??] money to the Treasury. Therefore the Fed is clearly giving aid to the US government's deficit spending at the expense of everyone holding assets denominated in US dollars. When the Treasury securities held by the Fed mature — so that the Treasury has to pay back the face value in principal — the Fed rolls over the debt. Over time, the nominal market value of the Fed's holdings of Treasury debt continually grows. Barring a sudden reversal in this policy, the Treasury knows that it will never have to pay off this debt. The ultimate constraint on the Fed's operations is investor and citizen backlash in response to rising prices.'

'Bankers are destroying Capitalism. Unfortunately, most Westerners won’t realize this until five years from now, when the middle class has been forcibly relegated to the ranks of the poor. -- The monetary system today, as it has been structured by Central Bankers, is immoral. The current monetary system stifles, not encourages free markets. If a free market system facilitated capitalism in the world’s major markets today, the middle class would be healthy and robust, the poor would be transitioning into the middle class, and the rich, while still a healthy component of society, would not increase their proportion of wealth relative to everyone else every year. Instead, in the absence of free markets and capitalism, the rich seize more and more resources every year, the middle class shrinks every year, and the poor become poorer.'

'... the [keynesian] hope [is] that governments might borrow and then stealthily default on the debt by reduction in the value of the debt. The fiscal stimuli act to tide the economy over and the intention is that the true value of the debt will never be repaid. As the country emerges from the crisis, as exports once again pick up, all will be well as the debt is repaid in currency that is devalued and export growth will pick up the slack. That is the theory, but no policymaker speaks of it openly. The problem is this; the policy can only work if the providers of credit are willing to be duped. That is the essential flaw in the policy. It is the belief that the rich world countries will always be rich - that one way or another the wealth will always be there as if by some divine right. The rich world has always been rich, and always will be. This is simply a question of belief, and has no logical or empirical foundation.'

'A video to send to those who think the free market produced all the recent economic catastrophes...' -- That which is not seen: http://jim.com/econ

Brown: "People themselves create money when they take out loans. The money is extinguished when the loan is paid back, as in a community currency system. The public bank is more like a court than an "issuer" of money. This is actually the system we have now, but the middlemen are private banks, which have been allowed to pretend they are lending pre-existing money. This gives them not only unwarranted power but serious liability when they can't balance their books because of defaults, toxic assets, etc.; and because they're always siphoning profits out of the system, it has become an unsustainable ponzi scheme. In a publicly-owned banking system, the interest would return to the public, making it mathematically sound and sustainable." -- DB: "The only caveat we would have is that the playing field be level and that the public banks not benefit from any implicit backing of the government." -- That's why you need a land value tax to decentralize a central bank/government.

Bumped for the clearest explanation of the fraud of central banking yet -- 'Central banks create inflation. That's what they've been put in place to do. Inflation supercharges economies, leading to all sorts of beneficial effects for those at the very top. Stock markets boom. Valuations rise sky high. And when the inevitable bust comes, those who are the most powerfully solvent are in the position to pick up the pieces, thus leading to ever-greater consolidation and control.'

"YOU WANT CHANGE!!! Here it is: *jingle-jangles* Makes a lot of noise, but it's worth nothing! If you want CHANGE!!! you have to create it yourself!" -- O-BAM-BAM! *gurgles*

13:12: "'Cash 4 Clunkers' was a Chinese program because China wouldn't take US dollars for their exports; we had to send them a bunch of metal and steel for them to give any type of credit to the US. A lot of people don't know that."

Socialism renamed 'inflationism'.

'In the latest attempt to prove that nobody ever learns anything from history, the Bank Of England is practically betting the Devonshire farm that by putting the UK's economy on nitrous, it will recapture all the lost output during the recession, and that it will be able to time the stimulus exit perfectly, thus avoiding hyperinflation... To be sure, opening the stimulus and liquidity spigot is sure to boost any economy as a one-time event. The bigger questions are i) how long can artificial stimuli be applied; ii) what happens to the new baseline level once the temporary "sugar high" is removed; iii) how does a Central Bank have any confidence that it can time the success of output gap reduction/stimulus and liquidity measure tightening, contrary to all empirical evidence.'

A spoonful of sugar... -- 'When you strip away the fancy terminology the banks like to use—quantitative easing—what you’re left with is money printing. Or to be precise, clicking a mouse and suddenly £200 billion appears. In other words, the UK government has spent all of its tax receipts, and it has spent all of the money it has from selling government bonds… The cupboards are bare. It does not have one single dollar of spare cash left. So the only option is to do what only a government and central bank can do. It prints money.' -- ...helps the medicine go down... -- 'And they’re helped by the hopeless analysis of the mainstream press. As evidenced by these comments from BBC economics editor, Stephanie Flanders: [typical useful idiot commentary]' -- ...the medicine go down-wown... -- '... the government and central bank are in the process of unleashing the cruel fate of rampant inflation and the destruction of any wealth its citizens have left.' -- ...in a most delightful way!

'A major change is upon us. We are at a phase transition point, with multiple properties that may undergo abrupt change: will we go to steam (hyperinflation-currency collapse) or ice(deflation)? I feel that we are right on the cusp of one of these transition to crisis moments. We need to monitor the situation. Unfortunately, a currency crisis could occur quickly and preclude monitoring. If we go deflation then we can change ourselves as a solution.'

LOL. 'Deposits are insured.' Eggs rot in their shells.

'It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality. I watched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the “On the other hand, so fucking what?” sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.' -- We're from the TV and we're here to sell you.

'On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM. -- And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.' -- Hehe. Dollar-tinted glasses.

I ACCIDENTALLY A SUCKERS RALLY. WHEN SHOULD I SELL?

'If nobody recognizes a defaulted debt on their balance sheet, does it exist? What does "deflation" mean in such a world? Not much, as it turns out. At least from a monetary perspective, because money is not being destroyed at nearly the rate that would be expected or predicted by the size and rate of the defaults. Trillions in probable and provable losses quietly exist out of sight on the balance sheets of the Federal Reserve and other financial institutions. If they ever come out of hiding and onto the books, I think the deflationists will be proven correct in spades. -- Perversely, when a bank sells a ruined loan 'asset' to the Federal Reserve, it is a double shot of money to the system - the money initially created upon the issuance of the original loan which is still out there in circulation, and a second bolus when the Fed creates money out of thin air to buy the failing 'asset' from the bank.'

'#5. ..all countries which issue the vast majority of debt in their own currency (US, Euro, UK, Switzerland, Japan) will inflate. They will print as much money as they can reasonably get away with. While the economy is in an upswing, this will create a false boom, predicated on asset price increases. #6. As a result there will be a Scylla and Charybdis of inflationary and deflationary forces, which will force the hands of central bankers in adding and withdrawing liquidity. Add in the likely volatility in government spending and taxation and you have the makings of a depression shaped like a series of W’s consisting of short and uneven business cycles. The secular force is the D-process and the deleveraging, so I expect deflation to be the resulting secular trend more than inflation. #7. Needless to say, this kind of volatility will induce a wave of populist sentiment, leading to an unpredictable and violent geopolitical climate and the likelihood of more muscular forms of government.'

'Robin Angus, a director of the £200m Edinburgh-based Personal Assets Trust, said: “Quantitative easing is a phrase which bears the same relationship to ‘printing money’ as ‘terminological inexactitude’ does to ‘lie’. “It is a dishonest name for a dishonest activity. Some have even called it state-sponsored theft. “It has temporarily made the financial markets drunk on hopes of an economic recovery, but I can’t see how such a recovery can possibly be anything other than faltering, fragile [and] fraudulent. “Sometimes, [Ben] Bernanke, [Mervyn] King and their ilk seem like pushers of a miracle drug that can defer hangovers forever. The trouble is that we get hangovers for a good reason. If we didn’t get them, we might keep on drinking and drinking until we poisoned ourselves.”'

Debate between Daniel R. Amerman (Inflationist) & Michael 'Mish' Shedlock (Deflationist) -- My view: It's both: we're in a state of DISINFLATION. Only if the speed of debt destruction continually outpaces money printing is it deflation (or if you just price things in gold). The policy has always been continual inflation and the policy will be enforced. Disinflation explains why asset prices are falling whilst consumer goods are still rising. The uncertainty disinflation causes leads to price volatility regardless of actual changes in the credit+money supply.

'...even if China and US work together to avoid a meltdown, the currency markets could provide one anyway. The dollar is now being used as a "carry" currency. Traders are using low Fed rates to take out cheap dollar loans, then converting the money into currencies generating higher yields. "Carrying" credit in this way is currently the source of huge gains. No one knows the true scale, but the world has, of course, been flooded with cheap dollars. This presents serious systemic danger. A dollar weighed down by Chinese divestment, then suppressed further by carry-trading, could easily spring back. Those who had borrowed in dollars would owe more, while their dollar-funded investments would be worth less. This "unwinding" could send financial shock around the globe.'

Great interview. So right now it's both deflation AND inflation: deflation of credit, inflation of money. Deflationists assume credit loaned always leads to actual production—not so—thus 'disinflation' might be the more accurate term for current credit/debt contradiction/deflation in the U.S. In terms of prices, it's price-deflation where paper-priced goods are priced in gold (since the value of paper money has to deflate against something of real value), and price-inflation where paper-priced goods are priced in devalued paper. The bottom line: everyday consumer goods will rise in price whilst the real-terms fall in non-consumer goods prices will be masked by a generalised rise of all prices in nominal terms (house prices will rise and rise but be worth less and less) thus 'wealth' is being eroded/stolen. -- See Biflation (A simultaneous price-inflation for consumer goods and price-deflation for non-consumer goods): http://en.wikipedia.org/wiki/Biflation

Found this quote on debt, inflation and socialist hypocrisy.

Comment: Scaramanga: 'Schiff argued that prices will indeed go down in a variety of asset classes as measured in gold i.e. there will be widespread deflation but against gold only—and not against the US dollar. So when you talk about *prices* it must be prices in gold to make sense to Schiff. In his view that is the true form of deflation. I suppose he would call it "real deflation" as he seems gold-oriented on everything. So there is common ground between Schiff and Mish if we are talking about prices in gold: then they are both deflationists. But as measured in dollars...then there is the parting of ways. A fiat currency destroys our ability to gauge financial consistency, which is exactly the point.' -- Points of disagreement (from this article and others): Mish thinks that US creditors have full faith in the dollar. Schiff doesn't and thinks that if confidence collapses government *may* force the Fed to inflate its out of a debt worsened by raised rates resulting in hyperinflation.

'Peak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed. It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. No one listened to them. That is the nature of the game. The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none. Children whose parents are being destroyed by debt now, will keep those memories for a long time.'

Ut oh. 'Negative money bomb' coming. -- More on the great inflation/deflation debate: Comment: Max: "...the big problem is that the banks simply won’t say how big the black hole on their balance sheet is. if they told us then we would have an idea of when the push of trillions of new central bank debt would create inflation.. but it seems for every trillion in fresh stimulus the banks come back and ‘discover’ another 2 trillion in bad debt.. this looks like it’s going to go on for some time – with another bank stock crash possible as a means for the banks to pay themselves another huge round of bonuses.. eventually. and mish concurs, there MIGHT be a huge spike in inflation.. but so far the deflationists are making the most money."

'Bernanke spelled out the policy bluntly in his 2002 speech. "The US Government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost," he said. The "no cost" flippancy grates now. Bernanke's theoretical model is clearly wrong – since he was blind-sided two years ago – and must lead him into fresh error. The risk is that he will mismanage the Fed's "exit strategy" by tightening policy too soon on the false assumption that recovery is secure. He knows this was the Fed blunder of 1936-1937, but also seems to think he has basically licked our Great Recession of 2008-2009. Has he really? As Mark Twain put it: "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."'

'Governments have a marked preference for increasing the money stock. It is a tool of government aggrandizement. Inflation allows the state to finance its own income, public deficits, and elections, encouraging a growing number of people to coalesce with state power. One can expect the inflation bias to be especially pronounced in times of emergency. Faced with falling production and rising unemployment — the unavoidable result of fiduciary media, of inflation itself — people may all too easily consider further inflation to be the lesser evil. Hence, inflation breeds even more inflation. -- Mises: "No emergency can justify a return to inflation. Inflation can provide neither the weapons a nation needs to defend its independence nor the capital goods required for any project. It does not cure unsatisfactory conditions. It merely helps the rulers whose policies brought about the catastrophe to exculpate themselves."'

'The Telegraph's economics editor's latest article headlines that 'Mervyn King Wanted to Buy Half of the UK Government Debt Market'. It is a headline that, of itself, is worth some contemplation. That the Governor of the Bank of England should propose such an extreme measure is quite astounding. -- *pukes* -- The continuation of QE is once again built upon flimsy justifications. The simple truth is that the Bank of England is now on a treadmill in which it must continue the policy to prevent a collapse of the UK gilts markets. However, the further the Bank of England goes, the greater the build up of inflationary pressures, and the greater the danger when the policy finally unwinds.The Bank of England is supporting the fiscal irresponsibility of a bankrupt government, which is both bankrupt in terms of money and bankrupt in terms of ideas (the opposition are still not much better). The UK economy is heading towards disaster.' -- Insanity, malice, or both?

'The UK is issuing more debt as a share of GDP than any major economy. We're borrowing twice as much in 2009 as France and Germany. In recent months, banana-republic style, the Bank of England itself has bought around half of all gilts issued. Then on Thursday, following the biggest auction of index-linked sovereign debt in UK history, a massive dispute broke out, with investors publicly accusing the authorities of bad faith after the Bank hinted, just 20 minutes after the sale had closed, that it may soon stop buying gilts Such a row is almost unprecedented. It is of huge and pressing importance to this country's future status as a viable going concern. Yet it barely registered on the media's radar, receiving a mere fraction of the column inches devoted to the soap opera of Norwich North.'

'The core of the problem, the unavoidable truth, is that our economic system is laden with debt, about triple the amount relative to gross domestic product that we had in the 1980s. This does not sit well with globalisation. Our view is that government policies worldwide are causing more instability rather than curing the trouble in the system. The only solution is the immediate, forcible and systematic conversion of debt to equity. There is no other option. We believe that stimulus packages, in all their forms, make the same mistakes that got us here. They will lead to extreme overshooting or extreme undershooting. They lead to more borrowing, by socialising private debt. But running a government deficit is dangerous, as it is vulnerable to errors in projections of economic growth. These errors will be larger in the future, so central bank money creation will lead not to inflation but to hyper-inflation, as the system is set for bigger deviations than ever before.'

Hypothetical illustration: 'Production has been stimulated to some extent by lowering the reserve requirement [by 50%]; but production cannot be increased nearly as fast as credit can be. So as a result of increasing the credit supply, most prices have practically doubled. Twice the credit does not "do twice the work" as before, because each monetary unit now does, so to speak, only half the work it did before.' -- On credit inflation: '...a fractional-reserve gold system must periodically bring about business and political pressure for a further reduction of the fractional reserve required [where] a central bank, a government and a public opinion eager to keep expanding credit to start a "full employment" boom or to keep it going brings about what is known as the business cycle, that periodic oscillation of boom and bust that socialists and communists attribute, not to the monetary and credit system and central banking, but to some inherent tendency in the capitalist system itself.'

'As the dollar continues its descent, the prospects for sound money are alive, but much more so are the prospects for a new fiat currency. The top decision makers in the federal government regard the money machine as their right arm, and they aren't about to cut it off. Political money, not sound money, provides life-support for their ambitions. No need to take more money out of people's paychecks through direct taxation. Let the manipulated market forces handle the theft. The inflation will eventually drive the economy into a crisis, but most experts will blame the market itself, not the manipulators — or worse, they'll claim the manipulators are an inseparable part of the market. And the victims will often agree, seeing the crisis as more evidence that the market is indisputably a cesspool of corruption. Is it any wonder sound money is never a policy consideration, even when elected officials roll up their sleeves and declare everything is on the table?'

'China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December. Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump. -- Two facts stand out about China's green shoots. While the Shanghai composite index is up 70pc since November, Chinese imports are down 25pc from a year ago. China is still draining real stimulus from the global economy. If the world's biggest surplus state ($400bn) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.'

"It is only the purchase of gilts by the Bank of England that is supporting the gilts market. As ever, it comes as a surprise that this is not headline news. -- Another possible source of internal financing is the pension and life insurance industry. However ...if the pension funds and life insurance funds are shifting assets into the expanding gilt market, then the issuance of government debt is crowding out business investment. The same argument applies to the banks. -- ...the major banks have come under increasing control of the government. That control might come as the cost of pressure to purchase government debt. Furthermore, if the banks that have received bailout money are purchasing gilts, then the situation becomes even more worrying. The government has borrowed money to fund the bailouts, and therefore the banks would be using government borrowed funds to finance government borrowing. This would be akin to a ponzi scheme. -- The UK government is bankrupt."

"The US will suffer both higher monetary inflation and worse economic deterioration, not one or the other, but BOTH, and with steadily increasing intensity. ...the staggering direction of monetary aid for rescues of dead banks, for nationalization of dead corporations, and for stimulus to an insolvent nation guarantee more damage. The huge monetary growth guarantees that the asset prices will continue to fall, and that the great tempest will grow in magnitude and danger. Why? Because bad money drives out good money... It acts like a cancer, one that has essentially destroyed the fundamental foundation of the nation. This extremely important point will lead to the ultimate downfall of the Untied States, as their inflation will destroy too much capital in determined yet mindless application. -- To clarify most clouds of confusion, it is best to refer to ‘Falling Asset Prices’ instead of ‘Deflation’ in almost all cases."

Quoting Gary North: "Why anyone worries about price deflation is a mystery to me. With the power of money creation through the purchase of assets, there is no theoretical limit to how high prices can rise. Because people associate rising prices of whatever they sell or own as a sign of prosperity, there is always support for fiat money." -- Mish: "There is virtually no evidence consumers want to borrow. Likewise, there is virtually no evidence, none, that banks are about to go on a lending spree. Moreover, there is no evidence the Fed is attempting to force banks to lend. And finally, there is no evidence the Fed is considering charging banks a fee to keep excess reserves with the FED, or that if they did, that it would accomplish anything other than a deflationary collapse. Fears of massive inflation are at this point ridiculous."