Back in December of 2013, when the protracted rumors of the Quantitative Easing taper finally came to fruition, I posted my conjecture in SurvivalBlog that to compensate for the lost dollar value of the tapering, the Fed would make some backroom deals with one or more nations to either: A.) Swap debt purchases (their ugly paper, for ours), or B.) Secretly buy more of our own debt, through intermediaries.
“Belgium is a nation whose total GDP was reported at $535 billion (USD) in 2014, but is projected to fall to $464 billion this year, an enormous, year-over-year contraction of more than 13%. Yet what we are supposed to believe is that during a recent four-month period, the government of this faltering economy spent $161 billion ‘buying U.S. Treasuries’ (i.e. lending money to the U.S. government) at virtually no interest.
That works out to nearly 100% of Belgium’s GDP over that four-month period (at the previous size of Belgium’s economy, in 2014), and more than 100% of GDP if we look at the catastrophic estimate for this year.
There is no rational scenario we can construct where even the world’s healthiest economy would choose to lend 100% of its GDP (to a Deadbeat Debtor). Here readers need to understand that our GDP is not the nation’s ‘profits’, it’s simply a measurement of all economic activity. Thus, on a practical basis, no nation could ever muster that much capital, much less “loan it” to another government.”
Meanwhile, similar monetary hijinks have been played by the Bank of Japan (BOJ). This was documented by the editors of the Equedia Investment Research Newsletter, who wrote:
“Is it a coincidence, or an agreement between two nations, that a day after the end of US’ QE program, Japan announces yet another “surprise” increase in added stimulus, sending both U.S and Japanese stocks higher?
Is it a coincidence that the US has accused other countries, such as China, with currency manipulation, but has never accused Japan who has unleashed more QE per GDP than any other developed country in the world?”
In March of 2015 there came news that European Central Bank (ECB)’s quantitative easing purchases of sovereign debt would become ongoing, and perhaps even expand. But the details of the ECB “asset buy-up” have been sketchy. The net effect has been so severely deflationary and damaging to the currency markets that several European nations have embarked on negative interest rate policies. (Switzerland was the latest to announce NIRP–a Negative Interest Rate Policy. They claimed that they had no choice because the Swiss Franc had artificially become so strong that it was hurting their exports.)
Clearly, the central banks have been lying to us. Japan has been buying up lots of U.S. Treasury paper, to make up for China’s gradual disinvestment in U.S. Treasuries. The currency manipulations of the past two years were so large that they were difficult to hide. There has been a lot of mutual back-scratching going on, between the central banks. There obviously were indeed some back-room deals made, just as I predicted. Through their legerdemain, Federal Reserve Chairpudge Janet Yellen was able to claim victory over the QE policies of her predecessor, but only because there were countless billions of dollars flowing through back-channel transactions. The full details of this perfidy have not yet been revealed, but when they are, I predict that they will shake the currency markets, and hopefully bring into question the adequacy of the entire fiat money system. The only reason that there hasn’t been a public outcry about this is that the mainstream financial press is soft-pedalling the story. But they really should be shouting it from the rooftops. We are already in QE4 or QE5, but it is all being done sub rosa.
Be ready, folks! Diversify. Reduce your dollar exposure. Hedge into silver, productive farm land, cattle (on the hoof), guns, and common caliber ammunition. Someday there will be another credit crisis, and this one will make 2008 look small, by comparison. You need to position yourself for the inevitable crash, before it happens!
There will be some warning signs. You should watch for any of these:
- Hiring freezes and layoffs by investment banks and stock brokerages
- News of reduced End-of-Year bonuses for bankers or stock brokers
- Any “surprise resignations” by the heads of central banks
- Currency volatility
- Interest rate spikes
- Large mergers and buyouts of investment banking firms
- Hedge fund earnings warning announcements
- Either a jump in inflation or a plunge into deflation
- News reports of bank runs in any country
- Federal Reserve meetings called on short notice
- More countries adopting NIRP
- Significant stock market selloffs
- Social crises or civil war in deeply-indebted nations such as Venezuela or Greece.
Again, be ready! This time we need to be ready for “forced reinvestment” of our 401(k)s and IRAs into U.S. bonds, and perhaps even a Cyprus-style bank “bail in” of our personal banking deposits. If that happens, cash will be king. Get some cash out, now.
Any significant moves in interest rates will cause chaos in the derivatives markets, which for the past three years have become fine-tuned to react only to microscopic changes in interest rates. When the big swings in interest rates occur–and they will– then look for the U.S. taxpayer to once again become the lender of last resort. – JWR