The US Powers That Be cannot fix their Dollar system – but then, they are not trying to. Americans get very upset about how “stupid” their government and central bank are, naively assuming that the main objective of these bodies is to fix the system for the benefit of the people. However, turn this on its head and assume instead that the banking Elite are actually planning a controlled crash of the dollar system to benefit themselves: then all their activities suddenly make horrible sense.
Imagine for a moment that, instead of trying to lead America to a new era of prosperity, Obama is the front man for a very well organized campaign to destroy free market capitalism in America and replace it with a banker-engineered form of authoritative socialism (this has NOTHING to do with liberating the proletariat). It would be achieved by means of a series of orchestrated crises, which would lead to the collapse of the state welfare system through an overwhelming burden of new claims upon it by desperate people. This subversive approach was first outlined by two socialist academics in 1966 (click link for Google search on Cloward-Piven Strategy). It would certainly explain why the USA is utterly failing to address its massive government overspend - there is no intention to.
The purpose of Quantitative Easing (QE) is NOT to monetize the National Debt (i.e. create new dollars and exchange them for government debt). The main purpose is to fend off unscheduled dollar collapse by keeping interest rates low, so that the interest payments due from the US Govt on their bonds can remain as low as possible. In shock news yesterday, it turns out that practically NONE of the $600bn issued under the 7-month QE2 program which started in November 2010 has gone to help recapitalize US banks - almost every dollar has been spent in propping up European Banks instead! (see Zero Hedge article). But remind yourself that the Fed is a private bank, with very wealthy European shareholders... and, once again, it all makes sense.
And while that continues, the Federal Reserve actually wants an “orderly” rise in the value of gold – say 10% a year – so that the dollar’s value is eroded over time and the US Govt debt commitment is diminished in real terms.
For political reasons, the Fed does not wish to appear weak, so they will not launch QE3 without being forced to by an agitated Congress. Their QE2 campaign officially ends on June 20th, so there will be no more official funds made available to their favored (apparently non-US) primary dealers. This drying up of cash, coupled with weak second-quarter results for all big corporations which rely upon Japan, will very likely cause an immediate slump in US share prices. If this should coincide with some other non-financial crisis, such as more extreme weather, seismic activity or aggressive foreign overtures, then most Americans will beg for “stimulus” to be restored.
The biggest problem will be if events should accelerate beyond the control of the central planners and the Fed's “orderly” process is derailed from its preferred path. Japan’s recent crisis and their sudden, acute need to sell their US Treasuries (they hold over $800bn worth) to pay for the tsunami recovery work, could well trigger this. Expect an unannounced initiative from the G8 countries to print money and buy US Treasures in a coordinated way, such that no one country drives the dollar over the cliff. There will be no publicity - but the evidence will be there on the accounts of central banks for those who care to look.
This is political dynamite because it's so big. It will dwarf the already enormous scale of what the Fed has done to date, and practically guarantees hyperinflation in most Western countries. You might want to call this Global QE, because despite the fact that this clandestine maneuver will not be given a public name, that is effectively what it will be.