Forget QE III, Fed's next move to Expand US Bank Credit?

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ScottJ
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Forget QE III, Fed's next move to Expand US Bank Credit?

Read the full story here:

http://financeandeconomics.org/Articles%20archive/2011.08.17%20Bank%20Credit%20Repo.htm

The upcoming expansion of US bank credit

Since the FOMC meeting, there has been a noticeable silence over the Fed’s monetary policy following QE2. But there is some evidence that the funding of government debt at low interest rates will shift to the repo market, rather than a new round of quantitative easing.

The silence on this subject may be partly explained by the monetary focus shifting to Europe. However, it is likely that the Fed has no intention of introducing QE3, given that the expansion of narrow money so far has led only to a degree of price inflation, without much benefit to asset prices. And with the ECB still reluctant to print euros, QE3 would probably collapse the dollar/euro rate and propel gold considerably higher, putting unwelcome strains on the financial system. The Fed also finds itself having dramatically expanded the monetary base for little economic benefit: against all its expectations, the economy is sliding into recession again. Perhaps it is a case of all the people being no longer fooled all of the time with respect to what QE actually is. No, another approach is called for.

To the Keynesian mind the obvious alternative must be to expand bank credit, particularly when there is an accumulation of non-borrowed reserves sitting on the Fed’s balance sheet. The NBRs represent the excess capital owned by the commercial banks, which have not been drawn down for use as the capital base for the expansion of bank credit. They currently stand at about $1.76 trillion while in normal circumstances NBRs would be no more than a few tens of billions. High levels of NBRs reflect the reluctance of banks to lend and bankable borrowers to borrow: they are symptomatic of an economy that refuses to expand.

It is against this background that Ben Bernanke announced at the recent post-FOMC meeting press conference that interest rates would be held at current levels (close to zero) for the next two years. This could be the basis for shifting the funding of government debt from printing raw money to expanding bank credit. The public do not understand the inflationary implications of expanding bank credit as easily as they do that of printing money: switching to bank credit as a funding route for government debt allows the Fed to fool all of us a while longer.

Continued here:

http://financeandeconomics.org/Articles%20archive/2011.08.17%20Bank%20Credit%20Repo.htm

Edited by admin on 11/08/2014 - 06:04
ScottJ
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Also from the

Also from the Article:

Importantly, it guarantees yet more price inflation down the road: bank credit expansion always has in the past, and it always will in the future. Above all, it guarantees the next leg upwards in the precious metals bull market.

lilbromarky1
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The us banking system has

The us banking system has been nothing but credit expansion since the creation of the fed in 1913.  One realization that has helped me understand what's happening today is that for the system to survive, the bankers must always, no matter what, find a way to expand the money supply and create more debt. 

If this means 30 year mortgages on homes, they will do it. 

If this means the creation and distribution of credit cards, they will do it

If this means creating highly inflationary money market accounts they will do it

If this means creating quadrillions in leverage and derivatives they will do it

If this means expanding the entire money supply by massive percentages they will do it

The mandate is that the amount of debt in existence must always increase because the day that it starts to decrease is the same day the system lies down on its death bed.  We've now reached the point where its almost meaningless to price precious metals in terms of dollars.  Last year it was theoretical for someone to say "count your ounces worth, not your dollars worth".  Now its real.  I can imagine any dollar amount I want on that kitco price board.   It doesnt matter and it doesnt change anything.  Its just digits.  They are about to burn this place to the ground.

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ScottJ
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Very True Libro~

lilbromarky1 wrote:

The us banking system has been nothing but credit expansion since the creation of the fed in 1913.  One realization that has helped me understand what's happening today is that for the system to survive, the bankers must always, no matter what, find a way to expand the money supply and create more debt. 

If this means 30 year mortgages on homes, they will do it. 

If this means the creation and distribution of credit cards, they will do it

If this means creating highly inflationary money market accounts they will do it

If this means creating quadrillions in leverage and derivatives they will do it

If this means expanding the entire money supply by massive percentages they will do it

The mandate is that the amount of debt in existence must always increase because the day that it starts to decrease is the same day the system lies down on its death bed.  We've now reached the point where its almost meaningless to price precious metals in terms of dollars.  Last year it was theoretical for someone to say "count your ounces worth, not your dollars worth".  Now its real.  I can imagine any dollar amount I want on that kitco price board.   It doesnt matter and it doesnt change anything.  Its just digits.  They are about to burn this place to the ground.

Great Rant + information + understanding

Reminds me of the opening of the article I just read through, by a man with liberty on his mind:

The money that the world uses today is created by private banks lending non-existent money called credit. This credit has never, does not and will never exist, except in theory on computer screens. People starve and die all because they do not have enough digits on a computer screen. All of this credit, created by the private banks, is owed back to those same banks, plus interest. By design, there is never enough credit in circulation to pay back all the principal plus interest on the loans outstanding, which is why the concept of bankruptcy is built into the system.

Using the simple system above, banksters are given the ability to manipulate the world’s economies into ‘boom and bust’ cycles. In essence, the only difference between a boom and a bust is the amount of credit in circulation, or rather, the net amount of numbers on people’s computer screens. Initially, banksters create a boom by increasing the supply of credit in the economy. During this boom period, individuals and businesses are encouraged to take on more debt as they are more confident of increasing their income in the future. All this extra credit in the system leads to more activity, which in turn creates more confidence in the system, with many getting into more debt. This boom is akin to a fishing trawler, the bankster throws out a credit line and waits, once the bait has been taken the bankster begins to wind in the credit by taking credit out of circulation, it’s gone. The economy then moves into a slump or recession, simply because there are not enough units of credit in circulation. The banksters are then able to trawl from people the wealth that does exist, in exchange for money that never existed in the first place. [1]

Source: http://dont-tread-on.me/money-banksters-and-august-2011-%E2%80%93-the-coming-silver-revolution/

Rico
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Scott, That article is a

Scott,

That article is a GREAT find--thank you!!!

lilbromarky1
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ScottJ wrote: lilbromarky1

ScottJ wrote:

lilbromarky1 wrote:

The us banking system has been nothing but credit expansion since the creation of the fed in 1913.  One realization that has helped me understand what's happening today is that for the system to survive, the bankers must always, no matter what, find a way to expand the money supply and create more debt. 

If this means 30 year mortgages on homes, they will do it. 

If this means the creation and distribution of credit cards, they will do it

If this means creating highly inflationary money market accounts they will do it

If this means creating quadrillions in leverage and derivatives they will do it

If this means expanding the entire money supply by massive percentages they will do it

The mandate is that the amount of debt in existence must always increase because the day that it starts to decrease is the same day the system lies down on its death bed.  We've now reached the point where its almost meaningless to price precious metals in terms of dollars.  Last year it was theoretical for someone to say "count your ounces worth, not your dollars worth".  Now its real.  I can imagine any dollar amount I want on that kitco price board.   It doesnt matter and it doesnt change anything.  Its just digits.  They are about to burn this place to the ground.

Great Rant + information + understanding

Reminds me of the opening of the article I just read through, by a man with liberty on his mind:

The money that the world uses today is created by private banks lending non-existent money called credit. This credit has never, does not and will never exist, except in theory on computer screens. People starve and die all because they do not have enough digits on a computer screen. All of this credit, created by the private banks, is owed back to those same banks, plus interest. By design, there is never enough credit in circulation to pay back all the principal plus interest on the loans outstanding, which is why the concept of bankruptcy is built into the system.

Using the simple system above, banksters are given the ability to manipulate the world’s economies into ‘boom and bust’ cycles. In essence, the only difference between a boom and a bust is the amount of credit in circulation, or rather, the net amount of numbers on people’s computer screens. Initially, banksters create a boom by increasing the supply of credit in the economy. During this boom period, individuals and businesses are encouraged to take on more debt as they are more confident of increasing their income in the future. All this extra credit in the system leads to more activity, which in turn creates more confidence in the system, with many getting into more debt. This boom is akin to a fishing trawler, the bankster throws out a credit line and waits, once the bait has been taken the bankster begins to wind in the credit by taking credit out of circulation, it’s gone. The economy then moves into a slump or recession, simply because there are not enough units of credit in circulation. The banksters are then able to trawl from people the wealth that does exist, in exchange for money that never existed in the first place. [1]

Source: http://dont-tread-on.me/money-banksters-and-august-2011-%E2%80%93-the-coming-silver-revolution/

I like that fishing analogy!  I never heard it put that way before but its true.  If you want some visible proof, look around the next time a senior citizen in your life or a friend's life passes away.  I remember back in the day inheritances were common.  Now when grandparents or great grandparents are gone, there's usually just debt owed in one way or another.  I've seen many stuggles in my family because of this and its tough to see it happen after losing someone you love

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ScottJ
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This still in the cards?

Thoughts anyone?

Dr Durden
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Yeah, I got a thought. All

Yeah, I got a thought.

All assets return to their intrinsic value. Create all the nothing you want, but in the end, don't be surprised to when you're back where you started: nothing.

Seems to me we hit debt saturation in 2007. More money used to mean growth of something. Now more money just chases it's tail. Kind of like Lib said, if you're in the business of making debt, you're going to make as much as you can, while you can until the music stops. 

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infinite_easing
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bottom line go-to option has

bottom line go-to option has not changed: print to the bottom, print to infinity. 

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