RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street's V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.

The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month.

Government actually has the following ways to solve the current economic problem :

* Increase spending, increase taxes ( Krugman’s solution )

* Increase spending, decrease taxes (Bush’s solution when he first took office )

* Decrease spending, increase taxes ( the European solution )

* Decrease spending, decrease taxes ( The Steve Forbes/Larry Kudlow Solution )

I don’t think the Forbes/Kudlow or Bush solution is on the table anywhere today.

The Fed will print and then evil little timmy and zer0 will suck it back in through increased taxes and regulation (that boot on the throat of the private sector). That way, they can temporarily avoid inflation by depressing consumer spending and taking money out of the private sector through taxes.

The Suntrade Institute has claimed the following over and over, and will continue to do so until the majority understand, and dismantle the centralized control of authoritarian government over individual creativity and productivity - Inflation and Deflation are two forms of the same thing, impoverishment; with the only difference being how a government wants to hide it.

Academic economics is a pseudo-scientific joke. Considering the Soviet Union how obvious is it?

Johnny Suntrade

RE: The Bureau of Printing and Engraving better design a new $1,000,000 note as that is what we will soon need to by a loaf of bread and we won’t have room in our wallets for enough smaller bills.

Imagine you own an Armani clothing store. Business is good. You sell out of all the clothes in your store except one shirt. The shirt has a price tag of $120.00. Then, the next day a celebrity is seen wearing the same shirt. It’s last year’s model, so they don’t make any more. You now raise the price tag to $220.00. It turns out that this specific shirt was hand signed by Armani on the label, and he was wearing the exact same shirt at the Ritz. So, you now raise the price tag to $480.00.

It turns out that the gold stripes in the shirt were made from a cloth that actually had gold in it, and it was supposed to be a one and only shirt for a special gala to which you were not invited. You now raise the price tag to $5000.00. And then, it turns out that the shirt came with diamond cufflinks. You now raise the price tag to $100,000.

Your net “wealth” has gone up by $100,000 in 2 days!

Later you find out that the celebrity was wearing Hugo Boss, the signature was a fake, it wasn’t made from gold thread, and the cufflinks were actually glass.

Did you really “lose” $100,000?

Only perceived value can be created and destroyed, but the money itself, unless paid back or if the money supply shrinks or decreases, cannot be destroyed.

It is only transferred. So, it is only perceived value that is created from nothing. And, stock prices, or any prices, are perceived values floating on clouds of hope.

“It’s different this time” they will tell you. Maybe it is. But there are a lot of similarities. And differences. The differences are that American families are actually paying down debt, while the government is making debt bigger to make up for the families paying down debt.

My main advise to anyone who asks me what to do with their finances today is this ——

* Immediately stop spending on things you don’t need. That means soda pop, movies, and even cable television (you can get an Apple TV box for $229 and watch youtube all day long).

* I would also really advocate having about $2000 in silver coins for commerce in case the government and the Fed go bananas and shopkeepers stop accepting Federal Reserve notes.

* Also, why not try an experiment? Find something for $40 and offer a 1 ounce silver coin instead? You could get bargains everywhere. If you own a store, then have a sign that reads, “payment also accepted in silver coinage”.

The Dow low in 2009 was 6547.05. The high this year was 11,309. That’s a 63% retracement to the all time high. In 1929 it was a 60% retracement.

Can you say Deja Vu?

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