People are already calling for QE∞2? It seems incredible on one hand. On the other, as we discussed last week, these manipulative efforts can’t hold the economy up forever.
Eventually there will be a reckoning; a time when true values are realized. And, due to the propping, printing and pumping up of the monetary bubble that continues to devalue the dollar, those true values will be much lower when an eventual correction does materialize.
With QE∞ focusing on mortgage-backed securities, what would a QE∞2 look like? That’s a topic of much discussion among financial gurus, actual and self-proclaimed alike.
Mike Foil’s Canada Free Press article proposes that QE∞2 will target bonds; and in fact already does. It’s just not announced. In fact, this may simply be an infinite continuation of part of QE1 that isn’t discussed as much.
The idea is that the FED is buying mortgage backed securities in an effort to promote lower interest rates. While that may not work, depending on if the banks are willing to lend at lower rates, there is another step that can, and likely must, be taken. If the FED relents in its continued purchase of bonds, the U.S. Treasury will then have to raise rates to attract other buyers. But, as long as the FED remains a net buyer, these interest rates can remain low.
Of course, it’s quite a racket for the FED. They print cash from thin air (or electronically) and then loan these “nothings,” plus interest, to the UST. The UST then sells them to the FED, guaranteeing more interest on the same dollars. In the meantime, the FED is using these dollars (i.e. empty promises) to buy hard assets such as mortgage backed securities (backed by the properties mortgaged), precious metals and whatever else they can accumulate.
This results in a net consolidation of wealth into the FED coffers. Nobody really thinks that these loans can ever be paid off if the people default. But a FED that has been able to acquire such vast amounts of properties with a currency they can print ex nihilo (from nothing) can amass an incredible amount of wealth through their efforts.
If you don’t recognize this as robbery, please allow me to send you some GI currency I can print with my HP, in exchange for however much gold you’re willing to part with. It’s a Ponzi scheme that systematically rapes the people of the U.S. of their wealth. And it’s the same sort of scheme we see happing with the ECB, CCB and any other central bank around the world.
You can’t beat them. But you can join them, to a point, by acquiring hard assets of your own. To this end, consider carefully what they’re accumulating and whether or not you’d do well to mimic them. There simply is no replacement for hard assets.
For your prosperity,
J. Keith Johnson
The Gold Informant