Central banks around the world are following one core mission. That mission revolves around expanding debt to goose equity markets
and attempting to solve a debt crisis with more debt. Even the more
conservative European Central Bank bowed down to easy digital money
printing by announcing they too would follow in the footsteps of the Fed
and Bank of Japan. Global banking is now fully addicted to non-stop
debt. Every dollar of debt is having a smaller impact on what it can do
to the real economy. The Fed’s balance sheet is now well over $4.3 trillion
and while talks of tapering are made in public, there is no visible
action being taken to show this is the intended goal. At the core of the
global crisis was an expansion built on too much debt. Banks attacked
this issue as one of liquidity but in reality this was a crisis of
solvency. Banks never dealt with writing down assets but have decided to
use modern day inflation methods
to boost banking profits at the expense of working class families.
Global debt has now reached a terminal velocity mode and central banks
have no choice but to continue to expand their balance sheets.
Central banks follow one mandate
Some people act as if the crisis never happened. US stock markets are
at record levels and those with access to wealth continue to get
richer. The policies that are creating a massive low wage economy
in the US are also part of the other side of the coin expanding debt
based bubbles. It is no coincidence that items financed by debt (i.e.,
college, housing, cars, etc) are seeing inflation many times higher than
that of wages. In fact, wages are stagnant. Central banks realize that
keeping interest rates low through whatever means necessary is the only
endgame for their current charade.
Would you lend someone money if you knew you would never get paid
back? Probably not. Yet this is the trajectory being followed by central
banks. Take a look at the below illuminating chart and tell me if
central banks are operating as if we are in a full recovery:
Central banks are taking on policies that appear to indicate a deep
and profound recession. The only issue with this is that the US
recession ended in 2009. Why continue expanding at such an aggressive
pace? The chart above shows continued aggressive expansion of central
bank balance sheets. First, many US banks were fully insolvent. That is,
they had overplayed their hand and were holding onto assets that were
way overvalued. This led to the foreclosure crisis. But a funny thing
happened. The US allowed these toxic assets to fall into the Fed’s
balance sheet and policy makers allowed mark to market accounting to be
suspended. Little by little banks inflated the housing market back up.
This dramatically helped banks stay afloat while fully manipulating the
market at the public’s expense. Keep in mind millions of people lost
their homes yet every large major bank actually has become bigger and
salaries of these financiers are back to where they once were. In an
incestuous twist, many of those foreclosures are now owned by the new
rentier class as they chase yields in every asset class.
The Fed’s balance sheet only continues to grow since they essentially own the US mortgage market:
Where is the taper talk being reflected in the chart above? The Fed
now has a $4.3 trillion balance sheet. The Fed is operating in full
crisis Great Recession mode. Don’t believe any of the hype that the Fed
is in control here. Look at the Bank of Japan and you will realize that
when you are a debt making hammer, everything looks like nail.
The global markets are controlled by central banks. This is a central
bank market rally. It is also, once again, causing global property
bubbles from Canada, China, Australia, to the United States (again). The
small globally connected elite realize this and that is why you have
foreign money buying condos in New York, flats in London, and single
family homes in California. They understand what is playing out and are
doing their best to purchase real assets before the public starts waking up to this slow inflationary robbery despite what official statistics show.
Central banks have no desire to taper. Once you give a market low
rates, an addiction takes hold. Similar to low wage capitalism, once
people get used to a low price good luck trying to push higher costs.
Everything gets driven down for the prosperity of the few. We live in a
world of limited assets and central banks dealt with this debt crisis by
creating more debt. So it is no surprise that global property bubbles
are once again raging.
The fact that tapering talks have been going on for some time with no
real reversal (take a look at the Fed balance sheet chart above), you
start to realize central banks are in full terminal velocity mode. They
only have one hand to play. Convince the public they have all of this
under control until it spirals out of control, again. Keep in mind Ben
Bernanke thought the housing market issues were confined to the subprime
market in 2007, right at the peak of all the global debt madness. All
central banks are playing out of the same rule book; keep pushing rates
lower for the main purpose of keeping wealth inflated for those that actually have wealth higher by simply going into deeper debt.
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