Just as societies can change their
popular views with respect to new fads and morals
(no one makes a big deal about long hair and facial
piercings anymore these days as was once the case),
it is also this way with the accepted norms of
monetary protocols. This changing of the “monetary
morals” is already well underway. Many do not
see this as they assume that central banks will
someday unwind their interventions.
(My comment....this is a HUGE mistaken
assumption!!)
Moreover, they are blinded by the
accepted conventions of central bank accounting.
FOLLOW
THIS-----------------------------------------
To demonstrate this last point,
consider this question: If the U.S. Federal Reserve
(Fed) buys up U.S. treasury
bonds, is the debt-to-GDP ratio of
the U.S. actually being lowered? We “predict” yes.
How so? It will be an enticing solution. Consider
the mechanism. The Fed pays for the U.S. treasury
that it buys with new created money. It simply adds
a liability to its balance sheet and shoves money
out of thin air into the banking system. The cost of
capital for the Fed is virtually nil and yet it now
collects the interest
payments earned by holding the U.S.
treasury bonds. What happens to
this income? It is added to the profitability of
the Fed. At the end of every year, this central
bank transfers its profits to the federal
government. (I did NOT KNOW
this!!!!)
What has happened? The interest cost of
this debt has been lowered to the U.S. government
(effectively, getting it rebated back). And, if the
Fed never again sells down its treasuring holdings
(maintaining them at the same level), isn’t this
virtually the same as lowering the U.S. federal debt
burden? Yes, so it will be perceived. It would be
the equivalent of these bonds being retired. Yet,
the accounting convention of the central bank will
be to still show these bonds as an asset. What you
see therefore promotes a structural illusion.
If global economic torpor and
deflationary demand shocks continue, we would
expect even more treasury bond purchases by the
Fed (this applying to other central banks as
well…i.e. the ECB). Why wouldn’t policymakers
propose retiring massive amounts of government
debt in this way? This would appear to be so much
more pleasant than intolerant austerity
policies…so seemingly painless. Of course,
this perception couldn’t be more wrong, though
surely alluring and easily pandered.
My comment: Just a week or two
ago....I "hypothisized" that what if, one day, the
US Government passed a law saying 'the US government
will no longer PAY interest on the bonds HELD by the
Federal Reserive. HEY.......if the
PROFITS from the Federal Rreserve Bank are paid BACK
to the US Government at the end of each year, then
in effect I WAS RIGHT....and it is ARLEADY
happening.
IF interest PAID on US Government bonds
held by the Federal Reserve, thus ADDING to the
profitability of the Federal Reserve Bank......and
the Federal Reserve Bank then PAYS that interest
BACK to the US Government...........in essence,
THERE IS NO INTEREST BEING PAID OUT TO US GOVERNMENT
BONDS HELD BY THE FEDERAL RESERVE....and then,
As the article sufggests..
WE CAN EXPECT TO SEE MORE AND MORE
PUBLIC POLICY TO USE THE FEDERAL RESERVE TO BUY UP
MORE AND MORE US GOVERNMENT BONDS...
AND.....IN FACT...
WE ARE.......AREN'T WE?
CERTAINLY....WE ARE SEEING THIS. More and more
WITHOUT END...right?
Holy cow...... what a
great article!!
Every central bank in the world is
BUYING UP their nation's bonds...WOW!
TICK
TOCK....................................
The first article suggests that even
the fall of the Roman Empire was caused by:
1) Moral failures...........and
2) Public policy MONETARY Failures.
Mr Hahn points out that in the end, the
"amount of silver in Roman coins was lowered."
In other words.......
1) The Romany currency was NO LONGER
backed by as much SILVER as before.
Hmmmm.......remember when the US came OFF the Gold
Standard, to back the US Dollar in the
1970's?????
and,
2) You can infer that WE ARE DOING EVEN
WORSE to our US Economy...and thus to the WORLD
economy......by ALL OF THE LEADING COUNTRIES
"printing money" by using the central bank to buy up
government bonds WITH NO MONEY really being paid to
buy those bonds.....
Hmmmmm...can you say "death
spin?" AS in an airplane that goes into
a spin, and with each successive 360 degree spin,
the spin gets tighter and tighter and faster and
faster......
Mr Hahn says "All of the problems we identify today
are the direct consequence of past choices and
unwise policies." (Each decision makes the
spin tighter.....and faster"
THUS...TICK
TOCK!! The domioes are ALL LINED UP!)
and..
" If
anything, the ultimate crises and collapses will
be worse than they needed to be, due to the many
techniques used to kick the proverbial can down
the road."
I strated this post with the intent to
just post the link to the articles.....
But, I got INTO THIS......
Question:
Over the past 40 years......did the monetary and
political policies of the United States "really"
cause the US Stock Market to go up as it has from a
DOW Jones level of 2000 in 1987.....to around
13,000 now? Or have they just
"juiced" the system again and again and
again???? If the answer is "juiced"
........ what happends with the party
ends??