In a few days the Swiss people will go to the polls to decide whether
the Swiss central bank is to be required to hold 20% of its reserves in
the form of gold. Polls show that the gold requirement is favored by
the less well off and opposed by wealthy Swiss invested in stocks. http://snbchf.com/gold/swiss-gold-referendum-latest-news/
These poll results provide new insight into the real reason for
Quantitative Easing by the Federal Reserve and European Central Bank.
First, let’s examine the reasons for these class-based poll results.
The view in Switzerland is that a gold backed Swiss franc would be more
valuable, and a more valuable franc would increase the purchasing power
of wage earners, thus reducing their living costs. For the wealthy stock
owners, a stronger franc would reduce Swiss exports, and less exports
would reduce stock prices and the wealth of the wealthy.
The vote is clearly a vote about income shares between the rich and
the poor. The Swiss establishment opposes the gold-backed franc, as does
Washington.
A few years ago the Swiss government, after experiencing a strong
rise in the exchange value of the Swiss franc as a result of dollar and
euro inflows seeking safety in the Swiss franc, decided to expand the
Swiss money supply in line with the foreign currency inflows in order to
stop the rise of the franc. The liquidity supplied by the central bank
creating new francs has stopped the rise of the franc and supports
exports and stock prices. As a vote in favor of a gold backed franc is
not in the interest of the elite, it is unclear that the vote will be
honest.
What does this tell us about the Federal Reserve’s policy of
Quantitative Easing, which is an euphemism for printing an enormous
amount of new dollars?
The official reason for QE is the Keynesian Phillips Curve claim that
economic growth requires mild inflation of 2-3%. This false theory was
put to death by the supply-side policy of the Reagan administration, but
the misrepresentation of the Reagan administration’s policy by the
Establishment has kept the bogus Phillips curve theory alive. http://www.paulcraigroberts.org/2014/11/14/global-house-cards-paul-craig-roberts/
The claim based in disproven Phillips Curve theory that the Fed’s
policy is directed at helping the overall economy is another example of
the deception practiced by US authorities. The real purpose of QE is to
drive up the wealth and income of the one percent by providing the
liquidity that flows into financial asset prices such as stocks and
bonds.
Since the 2008 US recession, skeptics of the Fed’s explanation of QE
as support for the US economy have stressed instead that the purpose of
US economic policy has been to support the federal deficit at low
interest rate costs and to support the balance sheets of the troubled
banks by pushing up the prices of debt-related derivatives on the banks
balance sheets.
These have been important purposes, but it now appears that the main
purpose has been to make the rich richer. This is why we have a stock
market whose high values are not based in fundamentals but, instead, are
based on the outpouring of liquidity by the Federal Reserve. As the
economic policy of the US is entirely in the hands of the rich, it is
not surprising that the rich use it to enrich themselves at the expense
of everyone else. The Fed’s monetary policy that enriches the rich by
driving up the prices of stocks and bonds also has robbed retirees of
hundreds of billions of dollars, perhaps trillions, in lost interest
income on their savings. http://www.lewrockwell.com/2014/11/bill-sardi/how-10000-in-a-bank-in-2008/
As Nomi Prins and Pam Martens have made clear, QE is not over. The
Fed is rolling over its interest and principal payments on its $4.5
trillion bond inventory into new bond purchases, and the banks now
infused with $2.6 trillion in cash from the Fed are purchasing the bonds
in place of the Fed’s QE purchases.
According to the latest news reports, Mario Draghi, the head of the
European Central Bank will print all the money necessary to support
financial asset prices. http://www.marketwatch.com/story/draghi-says-ecb-will-do-what-it-must-on-asset-buying-to-lift-inflation-2014-11-21?dist=beforebell
Draghi, like the Federal Reserve, masks his policy of enriching the
rich in Phillips curve terms of driving up inflation in order to support
economic growth. Of course, the real purpose is to drive up stock
prices.
Like the Fed, the ECB pretends that the money it prints flows into
the economy. But given the poor condition of the banks and potential
borrowers, loan volume is low. Instead the money created by central
banks flows into paper financial asset prices. Thus, the monetary policy
of the Western world is directed toward supporting the wealth of the
rich and worsening the inequality in the distribution of income and
wealth.
The rich are far from finished with their pillage. In exchange for
campaign donations, state governors are turning over state pension funds
to the management of high-fee, high-risk private pension fund managers
who do a better job of maximizing their fee income than protecting the
nest eggs of retirees. http://www.informationclearinghouse.info/article40287.htm
Throughout the Western world economic policy is run for the sole
benefit of the one percent and at the cost of everyone else. The greed
and stupidity of the rich are creating ideal conditions for violent
revolution. Karl Marx might yet triumph.
Source: Paul Craig Roberts, 24 November 2014
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