Quantitative Easing: Economic Suicide Pill

By Jeff Nielson, Bullion Bulls Canada

The question being asked all across the world of business news is “will QE2 be successful?” Because this policy is literally economic suicide, the question becomes “will the Federal Reserve be successful in the assisted economic-suicide of the U.S. government?” I find this an utterly appalling question – which highlights the intellectual bankruptcy of government policy-makers, and the bankers which goad them onward.

“Quantitative easing” is nothing more than a euphemism for printing money “out of thin air”. Its one-and-only purpose is to destroy the currency being printed. It is pure dilution, and absolutely no different than a corporation vowing to improve its fiscal performance simply by printing-up a lot of new shares.

We can illustrate the inherently evil nature of this monetary abomination by working through the “mechanics” of this policy. First, the explicit goal of “QE2” is to increase inflation. By now, all readers should be familiar enough about “inflation” to know that it is literally nothing more than the speed with which our currencies are being destroyed.

In the case of the Federal Reserve, we understand all too well how “successful” it has been in creating inflation. Since it was invented in 1913, the Federal Reserve has been directly responsible for the U.S. dollar losing 97% of its value  (i.e. inflation has raised prices by more than 20 times what they were in 1913) – despite the official mandate of the Federal Reserve for “price stability” (i.e. protecting the dollar). Now, Ben Bernanke (the Fed’s latest and most potent dollar-destroyer) is vowing to “succeed” in destroying the remaining 3% of value of the world’s reserve currency.

Here is how printing-up money accomplishes Bernanke’s “goal”. First of all, as with any kind of dilution, printing-up new dollars makes all of the ‘old’ dollars worth less (worthless?). So, right there, the Federal Reserve is already 100% guaranteed of “success”. In fact, the Federal Reserve has already been “very successful” in creating inflation – in the real world.

Visit Shadowstats.com, operated by respected U.S. economist John Williams, and you will hear that U.S. inflation has been in the range of 8.5% – 9.5% all this year. Williams performs his calculations using the exact same methodology used by the U.S. government a generation ago, before the U.S. government intentionally incorporated various statistical lies into this measurement.

Understand the enormous “rewards” which a government receives for lying, by grossly under-stating the rate of inflation. Pay-outs on $100’s of billions of U.S. government benefits per year are indexed to the rate of “official” inflation. By grossly understating inflation (and cheating all of the recipients of those benefits), the U.S. government can get an instant, multi-billion dollar windfall from that one lie, alone (every year).

Secondly, every quarterly and annual GDP report must be “deflated” by the real rate of inflation. The raw data must be stripped of all inflation, in order to accurately represent real, economic growth. By grossly understating the rate of inflation, the government falsely inflates the rate of GDP “growth” by several percentage points – et voila we have a “U.S. economic recovery”.

Immediately, we see Bernanke exposed for the charlatan that he is. He claims there is U.S. “economic growth”, when all that “growth” actually represents is an illusion of doctored numbers. He claims the Federal Reserve has “failed” to create enough inflation (i.e. to destroy the U.S. dollar fast enough), when in fact the real data shows that Bernanke has been doing a wonderful job of destroying the dollar.

However, the ultimate “indictment” of “QE2” as failed policy comes from the fact that “QE1” never ended. Of all the fraudulent shams perpetrated by the U.S. government and the Federal Reserve, none of them are as obvious as the U.S. government’s manipulation of the market for U.S. Treasuries.

Here are the facts. Previously, the U.S. government was able to find (real) buyers for its Treasuries, due to the need of other governments to recirculate/reinvest the money from their trade surpluses and fiscal surpluses. Thanks to the Wall Street-engineered “Crash of ‘08”, the vast majority of those surpluses have disappeared.

At the same time, the U.S. government is cranking-out much more “supply” than at any other time in the history of the United States. Thus, we are told by the U.S. government (and the Federal Reserve) that there are more “buyers” for U.S. Treasuries than at any time in history – despite the fact those buyers have no money. But that is literally less than half of this farce.

Not only are we being told that buyers-with-no-money are purchasing more Treasuries than at any other time in history, we’re also told that these buyers are joyfully paying the highest prices in history (by a large margin) for these debt instruments. However this still doesn’t capture the absurdity of this scenario.

More articles from Bullion Bulls Canada….