Quantitative Easing: To Infinity and Beyond!
Written by: Jimmy Miller
For years Democrats and Republicans have debated two different options for balancing the budget, decrease entitlement and defense spending or increase tax revenue. However with neither side willing to budge, the choice is now one of default or printing money indefinitely. We have exceeded the 14 trillion dollar debt limit, and every day the government is spending 6 billion dollars it does not have. So a debate rages in Congress as to whether or not we should raise the debt ceiling. Unfortunately, more debt will not solve anything whatsoever. It only delays a bigger default later. The depression we face cannot be avoided any longer with discount credit rates and government handouts. We will have to deal with the consequences of spending beyond our means because postponing the inevitable only intensifies our problems.
Former Reagan administration budget director David Stockman’s recently appeared on Bloomberg. Tyler Durden of Zero Hedge discusses the interview in which Stockman states “Congress has been lulled to sleep by the central banks that keep buying all the debt and therefore holding down the real cost of interest on middle and long term debt that we are issuing every day.”
The real cost is that more tax dollars earned by hardworking Americans are being sucked into a black hole of interest, on money that was created out of thin air.
Stockman continues, predicting a “vicious sell off in the global market… because the fed is getting out of the market with QE2 ending.” The sell-off in the global market has already begun. However, with no one else to buy the debt, more quantitative easing can be expected.
According to Stockman, “between now and November 2012, it is virtually certain [Congress] can’t pass a large permanent increase in the debt ceiling. We’ll have periodic short term fixes; a month, two months, and then they’ll [go] back to squabbling.” Stockman believes that because of the huge expense budget, Democrats refusing to budge on reducing entitlements and Republicans refusing to waiver on tax increases, “Both parties are advocating default even as they point the finger at each other.” Stockman is wrong on this point, except for a few individuals, neither party wants default, both parties want money to continue flowing so they will not have to make tough decisions.
In a recent Daily Wave, Timothy Geithner Predicts – ECONOMIC COLLAPSE IMMINENT!!! Christopher Greene responds to Timothy Geithner’s statement, “It will come again, there will be another storm” According to Greene, “What we are going to have at the end of the day… is not only… increased global conflicts used as a distraction, we’re going to have a situation where the American people have spent trillions of dollars to bail out a system that is still going to collapse… and the people as always are going to be left holding the bag.”
In the Geithner Interview, Mike Allen of Politico asks if he would be the first treasury secretary to preside over a default, Geithner responds, “Absolutely not, I think two things are going to happen this summer. One is Congress is going to react to make sure we pay our bills; avoid default, as they say they have recognized the need to do. And second, we are going to put in place a long term, comprehensive, bipartisan, fiscal reform plan.”
We can agree that default is unlikely. However the threat of default will be prominent in the coming months as the banks posture for another power grab. Geithner’s comments are troubling because they hint of a repeat of the events that took place in the fall of 2008. Congress was threatened that the economy would collapse and there would be marshal law. Faced with that ultimatum, they approved a stimulus bill and voted away their Constitutional authority to decide how the money was spent.
When asked if Congress understands the need to raise the debt ceiling, Geithner responded that the leadership is on board, but “there’s some people [in Congress] who think there is leverage for them in threatening default.”
Contrary to Geithner’s statement, Congressman Ron Paul’s opposition to increasing the debt ceiling is legitimate and not “theater” for the sake of political leverage. In a Fox News interview Paul voices his concern:
“We’ve gotten away with this for so long because we had the perception that we are eternally wealthy, that we could borrow if we need to, that we could keep printing. Well that’s all coming to an end…and we’ll have to live within our means regardless of whether we raise the limit or not.”
Paul continues, expressing uneasiness that we are on the path toward financial ruin. “You can’t get capital out of a spigot; the Federal Reserve is a spigot. They can’t just roll the presses… and think that’s the way you stimulate an economic recovery. That is what caused our problems… because we are overtaxed and over-regulated and we have a very weak currency which encouraged capital [and jobs] to leave our country.”
Also predicting trouble in the economy this fall is Bob Chapman. In a discussion with Discount Gold and Silver, Chapman predicts the market is “going to get hit in September or October… interest rates [are likely to] rise and when that happens there will only be one place to go, commodities, and gold and silver… There is [already] plenty of buying going on in Asia, and they are not going to stop the Chinese. They are going to … dump dollars… until they don’t have any more.”
Chapman is absolutely correct on China, they have not bought U.S. Treasuries in five months and they have been selling off their dollar position for the last two years. Increasing interest rates is healthy for the economy since they have been artificially suppressed, however high interest rates mean the end of cheap credit. It is reasonable to assume the Country would be on the edge of a crisis at that point, Quantitative-easing to infinity would soon follow.