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Wednesday, November 10, 2010

QE2: A Monetary Boat Ride to Economic Disaster

"Those who cannot learn from history are doomed to repeat it." - George Santayana

Never have those words been more relevant than today, in regards to the current 'Quantitative Easing 2' massive debt monetization by the U.S. Treasury and the Federal Reserve Bank. Not coincidentally, after the biggest American wave election since the 1930's, a small article on the 'QE2' was buried in the depths of most newspapers (including this one). Given it's portent for changing (and ultimately destroying) the American way of life as we know it, it is no wonder that those who wish to foist this reckless and historically discredited monetary scheme upon an unsuspecting public chose this furtive means to unveil it in relative obscurity.

Now, most articles in the media discussing economics tend to be put in terms too technical and (unnecessarily) complex for the average reader (sometimes even for the writer!), and seem designed to put the reader into a glassy-eyed intellectual catatonic state. But in reality, the Economics practiced by the Federal Reserve Bank and the U.S. Treasury are neither complicated nor boring. In fact, they are incredibly simple to understand, and seriously provocative in a way that endangers both the U.S. Economy and every American's personal economic situation.

On June 3rd, 2009 Federal Reserve Chairman Ben Bernanke promised in
sworn testimony before the U.S. Congress that the Federal Reserve would NOT monetize the debt of the U.S. Government. Debt monetization is the process of a country financing it's deficit spending by issuing, and then purchasing it's own debt. History is replete with examples of this taking place, and none have ended well. Look to modern day Zimbabwe, where this practice has led to a currency devaluation of 98.0% PER DAY. A Harare restaurant will require you to pay in advance, since your meal will rise in price by at least 4% in the time it takes you to eat it. There are the infamous pictures from 1930's Germany, where shoppers used wheelbarrows of Deutschemarks for grocery purchases, as the Weimar Republic currency lost it's value at a yearly rate of 29,500%. From Hungary, Greece and China in the 1940's, to Yugoslavia in the mid-1990's, all of this rampant inflation and devaluation of the currency followed a Central Bank's desperate move to Monetize it's debt. Despite Chairman Bernanke's sworn testimony to the contrary, the U.S. Treasury is today embarked on a foolish and massive Monetization of U.S. Debt on a scale unprecedented in World history.

In more down-to-Earth terms, by issuing, and then re-purchasing (through the Fed) over $600 Billion in Treasury notes this week, the U.S. Treasury INSTANTLY devalues the U.S. Dollar by at least 20%. What costs a dollar today will cost at least $1.20 very soon, and the Fed and Treasury say they plan to issue at least $75 Billion PER MONTH for the foreseeable future! Where is this 'Fiat' or 'money created out of thin air' going to? Directly into the coffers of banks that are members of or participants in the Federal Reserve system. They in turn- rather than lending or investing them in job-producing sectors of the economy- are instead lending the money to other elite Financial Institutions who are then buying up massive amounts of their own stock (at bargain-basement prices); the stock of other companies (or whole companies!); and are following what the Chinese, Indians and other countries and large multinational companies are doing- taking their dollars and dollar-denominated instruments and buying massive amounts of commodities, such as petroleum, foodstuffs, precious metals, and other solid-value investments such as real estate and mines.

What this means for the average person- not just in the US, but around the World- is higher prices for EVERYTHING; food, fuel, utilities, finished goods and on and on. Who among us has not remarked that prices for food, fuel, utilities and health care have been steadily climbing for years now. Of course, if you believe the Government statistics, inflation has been from just 1 to 3% over the last several years. However, changes in methods of calculation and products and services that go into the Consumer Price Index over the last 30 years have distorted what the true inflation rate is. Calculated using the 1980 CPI methods, inflation has been clipping along at about a 10% annual rate for several years now. Just ask any Social Security recipient on a fixed income whether they have seen no inflation over the past two years, as the Government Bureaucrats and Private Central Bankers claim. This foolish 'QE2' debt monetization by the Treasury and Fed (on top of the massive amounts already 'created') will make any recent inflation seem minor- whether you use the 'cooked' inflation figures issued by the government, or the real-world hardships from actual inflation visibly inflicted on all Americans.

Founding Father Thomas Jefferson once warned his and future generations that “A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army...We must not let our rulers load us with perpetual debt." Jefferson felt as many Americans did that a Central or National Bank would concentrate too much economic power and control in the hands of too few, and saw it as an engine for speculation, financial manipulation, and corruption (financial 'bubble' anyone?). The history of Central Banks in America is replete with corruption, manipulation and speculation, and since it's secretive origins in 1913, the Federal Reserve has not deviated from this destructive path.

The 'Boom-and-Bust' economic cycles and speculative bubbles the Fed
creates and manipulates (such as the S & L crisis, the high-tech bubble, the Mortgage crisis, ad nauseum) merely serve to enrich the international financial banking elite and their corporate and political allies, at the expense of the average American. It is long past time to end this unconstitutional and destructive monopolization of the U.S. Economy by ending the Federal Reserve System once and for all. With a return to a sound and stable historically-proven monetary system- Americans will once again be confident and prosperous, knowing that their country's reins of government financial power are once again Constitutionally controlled by the American people, and NOT a secretive cabal of PRIVATE banksters, bureaucrats and special interests.

From: Thaddeus S. Kaczor, Jr.

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