The Fed & the Misinformation – Investment Watch

by Martin Armstrong

QUESTION: Marty, I used to be there at your Berlin conference when one in every of the attendees openly admitted he was from the Bundesbank. He was very open about it. There have been other central bankers at your WEC. I suppose they must attend simply to get a whiff of the trend. Powell has come out and asserted the Fed’s independence and it should not make policy based on climate change. That was very refreshing.  The majority of analysts still cry concerning the creation of cash on the Fed are insisting that a recession is coming because when the Fed stops printing, we are going to see a correction worse than 2008. Some call this a confetti party. Many claim to be fed watchers, but have never stepped inside their door. Meeting the people I even have at your WEC events, you might be at all times in the middle and I can see it isn’t your opinion but Socrates that they wish to hearken to for an unbiased view. So will there be an enormous correction when this party is over or have the fed watches been talking sophistry with no real insight?

HD

PS: What a couple of Dubai WEC since the world imposes vaccine passports?

ANSWER: I do know, That is the everyday myopic domestic view that the Fed is in a really dangerous situation and a improper move in any direction could cause a economic system meltdown worse than 2008. The argument is that since we now have a debt-based monetary system if the Fed stops increasing the cash supply this can result in an economic withdrawal process that might be worse than 2008-2009. Over again, this is barely the domestic economy. They live with blinders on and don’t see the world around us with respect to the globalization policies which might be all in chaos.

Even at Davos in 2003, Alejandro Toledo, then President of Peru, urged the participants to hearken to the voices of those protesting outside and to construct a bridge with the participants of the Porto Alegre anti-globalization conference. “We must give a human face to the worldwide economy and globalization,” he said. “Managing the economy isn’t an end in itself, but a way to enhance the standard of life. Globalization is meaningless if it doesn’t contribute to reducing poverty everywhere in the world. “ Schwab preaches equality but at the value of Authoritarianism and the lack of individual rights.

The Fed isn’t between a rock and a tough place domestically. It just made it clear that it isn’t just like the ECB and isn’t within the climate change business. The Fed is INDEPENDENT and is not going to be bullied by Biden. The Fed understands that it has change into the world’s central bank and its actions in raising rates have had a far greater impact externally particularly in emerging markets because so many other nations issue their debt in US dollars.

The main focus isn’t entirely on the nonsense of the domestic variety of the cash supply. If a foreigner buys property in the USA, they convert their currency to dollars, and in effect that increases the domestic money supply for that capital now frees up money domestically. The Fed has no control over that aspect and central banks have change into aware of this effect which isn’t taught in economics class and never factored into the doomsday forecasts all based on the identical reasoning endlessly.

All of the evaluation is continuously based on the Quantity Theory of Money which not works in our global economy. That was the muse of the cash theory that emerged with Sir Thomas Gresham who was the agent for the British crown. He saw that when Henry VIII debased the coinage, the worth declined in Amsterdam when the exchange rate was solely based upon the metal content of the currency.

All we now have ever heard is that the Fed has the facility to create money out of thin air. They never explain why the Fed was provided that power. You can not have a set money supply because the population increases, you then find yourself with DEFLATION which is the rise in the worth of cash. They’re married to the argument and nothing you may do will deter them from that pondering process. Through the Great Depression, people hoarded their money and didn’t spend it. That was why the ECB went to negative to attempt to force people to spend money in 2014. You possibly can DOUBLE the cash supply but when the people hoard it, you won’t ever create inflation.

Because people hoard their money, there was an enormous contraction in the rate of cash in the course of the Great Depression. This resulted in massive shortages and it led to over 200 cities issuing their very own money to attempt to enable a neighborhood economy to still function for there was not enough money to even pay anyone for services.

INFLATION is definitely the decline within the purchasing power of the currency as measured against assets. DEFLATION is the rise in the worth of cash and the decline in the worth of assets. The way in which the term “inflation” is handled today, the federal government puts the blame on the private sector. During DEFLATION we’re blamed for not spending our money.

All this discuss bail-ins and bail-outs misses the purpose. They act as in the event that they ultimately really matter. HYPERINFLATION won’t ever arrive based on increasing the cash supply. It arrives with the collapse of CONFIDENCE in the federal government. Germany imposed a forced loan and confiscated 10% of everyone’s assets in December 1922. Germany lost the war and in 1918 there was a Communist Revolution that led to the creation of the Weimar Republic. The cash supply increased 10 fold during 1922 once they were struggling to satisfy the reparation payments. That undermined the arrogance in the federal government. Nevertheless it was December 1922 when the Weimar Republic confiscated  10% of everyone’s assets. Note that the hyperinflation took off in 1923 after that forced loan. It was not protected to have assets in banks.

People were buying the whole lot on the asset side from coins and stamps to art and land. They began to make use of the coins of other countries just as Japan saw when the emperors devalued the outstanding money supply to issue their very own latest coins.

This concept that we’re headed into so black hole all since the Fed creates money is insane. This misinformation that the German Hyperinflation was all due to printing money was totally absurd and a lie. Once the federal government stole 10% of everyone’s assets, that was the ultimate straw. They then needed to print simply to attempt to cover costs and meet reparation payments.

The Lesson of Germany is seriously distorted and has infected the view of cash supply and inflation which ignores the actions of the federal government. That’s the true issue.

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