Deep Structural Cracks Manifesting within the Economic and Monetary Systems (Republicae)Submitted by Republicae on Fri, 11/08/2013 - 16:33
If any of you recall the rather heated debates on the subject of Deflation, particularly those with DP member Greed, then you will remember I said, on several occasions that the world we live in is entirely different that the one during the period of The Great Depression. I contended that the economy was a very different economy with very different dynamics than those at play during the 1930s, indeed, even money and the financial markets are completely different now then at that period. I stated that the period we now live in would be marked by not only inflation, but also deflationary pressures. It will prove to be a monster that no one, especially government appointed central bankers will be able to contend with any degree of success. It is a new world in which the universe of economic indicators will be so skewed by distortions that the forces of economic and monetary manipulations that the establishment economists will fail to either understand or come up with a viable solution to stop the slaughter of our society.
There appears to be a definite increase in the deep structural cracks manifesting within the economic and monetary system causing confusion to abound throughout the global halls of money power and the dysfunctional political asylum we are subjected to as involuntary participates. The Panic of 2008 was simply the beginning of the systemic collapse that will ultimately consume not only the United States, but will have definite socio-economic-political ramifications around the globe. What has been produced through decades of manipulation is an economic and monetary system that are completely inundated with distortions, misdirection and misallocation. The mesh of economic confusion is so tightly woven that there will be absolutely no solutions coming from official sources because they are steeped in the mire of Proto-Keyneisan, Keyneisan, and Post-Keynesian shallow-minded dogma.
We will witness a growing mix of stagflation, deflation and inflationary pressures and events, the results of these cycles will completely allude the minds of the mainstream economic establishment. They are unaware, blind to the fact that within the mix of co-existing stagflation, deflation and inflation, these pressures will not only happen simultaneously within this distortion they call the economy, but each of these pressures have formed what could be considered a symbiotic relationship, feeding the distortions in a manner what will prove to be not only unprecedented, but totally confusing to the bureaucratic establishment mentality. It is becoming very evident that these events are beginning to dominate the markets, causing confusion at the highest levels of market activity. Corruption runs rampant and is so deeply-seated that main-street has been essentially shutout of any real possibility of gain from the markets.
Accurate information on the markets, pricing, charts and various indicators, is skewed and rarely takes into account the multitude of external information that places pressures on the markets. The big quake will come when, as we have been seeing for the last few years, the U.S. Dollar hegemony is directly challenged rather than just a matter of discussion by the governments of countries that have finally realized just what such hegemony really means economically and decades of Dollar inflation has been effectively exported to shores beyond these United States.
There is a substantial global revolt taking place, mainly behind the scenes, against the world we have grown accustom to in this country and the effects of this revolt will prove to be such a shift in structural direction that this country has been taken that few will be able to cope with the consequences. That shift is just the beginning of the monumental forces that will finally place a myriad of pressures upon the economic and monetary systems of not only the U.S. but the world.
We only catch glimpses, tid-bits of what is actually taking place behind the scenes, but there are indicators that are present on the global stage, one being the massive amounts of gold that is being purchased by various countries, particularly those in the East, like China. The Dollar is rapidly losing command and the U.S. Treasury Bonds have been effectively trapped in an inescapable quagmire that is now dependent upon the Federal Reserve for the majority of purchases.
The battle over Dollar hegemony is rapidly moving from mere preparations into a full-fledged array of battlements and flags unfurled and the defenses of the Western Government sponsored Banksters are proving increasingly insufficient to ward off the invaders. The only weapons left in the arsenal is to continue the war-torn strategy of massive inflation to cover its crimes not only against the Citizens of the United States, but also of other countries who have been subjected to decades of fiat foolery! For decades they have used the corrupt system of fiat currencies to manipulate the economic systems of not only the United States, but of all countries that have been forced to use the Dollar as the world's reserve currency. The opposition is rising rapidly on a global scale, one that will be extremely difficult to restrain with what was once common tactics of the Western Banking Cartel.
The question will be what will come from all of this? At this point it's anyone's guess, but with the mounting evidence we might be able to come up with some educated guesses. There appears to be a growing call for international reforms, but reforms that will not set well with either Western governments or their Bankster patrons. These reforms could include the management of bank reserves, the manner in which sovereign bonds are structured and issued, trade settlements, debt ratings and the way in which settlements are distributed. To the shock of many in the Western financial world, there maybe a push toward eventual justice, not merely reform.
As events unfold, the commonly-held concepts surrounding inflation and deflation will no longer make much sense, especially to those who still hold that the same mechanisms that prevailed during the period of The Great Depression in terms of deflation or the period of the Wiemar Republic in terms of inflation. The interpretation of all the factors that will surround the upcoming global shift will depend on a new understanding of all the mechanisms that have come into play on the global economic and monetary stage. We are already seeing hyper-inflation as well as what can be called deflation or a decay of assets. Normal assumptions of inflation and deflation tend to float around prices, but that is not the case; inflation and deflation are monetary phenomenons. We have, especially since the Panic of 2008, seen a massive hyper-inflationary agenda by the Federal Reserve and by just about all the central banks globally, but the effect has not yet been manifested within the markets, they are currently only responding to first stage and that is the influx of new liquidity. We have seen monetary inflation on a scale that has not been matched in history, Quantitative Easing with the monetization of U.S. and Euro Bonds is only the preliminary stages of a hyper-inflationary event that will witness a simultaneous hyper-deflationary event.
In fact, several years ago, here on the DP, I stated that the historical fear of deflation is usually the impetus for central bank inflation. That was indeed the case, for they misinterpreted the bursting of the artificial bubble they created through monetary policy as historic deflation, when, in fact, it was part of the boom/burst cycle they themselves created. The response was to attempt to re-inflate the bubble, but, as usual, they have been unable to make that correction through the use of monetary inflation because the economic potency of the fiat currency has been neutralized through inflationary depreciation over the decades.
The fact is that we are in the stage of monetary hyper-inflationary and the pressure that is mounting toward eventual hyper-price jumps that we enter into the next stage of the hyper-inflationary event, it is completely unavoidable at this point. On the reverse side, there has been and continues to be type of asset deflation that is taking place in real estate, mortgage bonds and even in bank equity.
The U.S. Economy however, has become completely addicted to and dependent upon the continued monetary stimulus of the FED, we have deficit spending dependent upon the monetizing of bonds, monetary easing that is totally supporting mortgage rates and if it were not for direct monetary inflation all types of assets would crumble. The problem is structural, and no amount of monetary inflation can repair those structural issues, for the solution to the problems in this economy are not based in the quantity of money but the quality of money, thus, because of this fact, we will continue to witness both inflationary and deflationary pressures coming to bear on this economy simultaneously.
Now, another factor that is very hard to verify is all that is taking place within the vast derivative markets, that factor may prove to be one of the final nails in the global economic coffin. Add to this factor the really weak credit links within the Global Supply Chain and we have the makings of an economic implosion that is hard to even imagine, one that could quickly take civilization back six or seven centuries.
The fact is that the financial system, and the fiat economy that created it, has already been destroyed, there is no picking up the pieces because they are still falling. The problems are beginning to manifest as the cost structure within the economy continues to rise, capital is is shambles, profits are both distorted and decimated, eventually we will see liquidation on a massive scale, liquidation that will expose actual value verses the artificially inflated prices that has, until this point, seemed to be impressive. Home sales, said to be on the rise, are being artificially propped up by the vast number of institutional investors that are mopping up blocks of homes at bargain-basement prices from the big banks portfolios that are still filled with toxic assets despite the patronage of the FED to purchase $85 Billion a month in mortgage securities and bonds. Strangely, the more the inflationary pressure the more the destruction of capital, the more the destruction of capital the greater increase in the value of assets, thus the circle continues unabated. It is almost as though the FED and everyone involved in the markets are totally incapable of understanding the mechanisms that are at work in such an economy.
We live in a time when, as a last gasp for life, the powers of the world just might attempt to do what they hate to do and that is to institute some sort of gold-backed system as a last ditch effort to save a system that should have died long ago. One thing is almost certain, those involved with the official global criminal cabal will have one last stretch of notoriety as their faces appear on wanted posters: Dead or Alive!