21 February 2011
To briefly summarize the facts, an unknown "trader" was able to leverage a $10 million "fund" (i.e. bet) into an $850 million dollar spread-trade, representing nearly 15% of the entire COMEX futures market, while leveraged at an absurd 85:1. It was a "trade" created to fail. Of more relevance (to this piece), I observed that such tactics would likely become commonplace with the banksters, since a mere $850 million was "nothing" to them - in a world where they can get their friend (and fellow, private banker) Ben Bernanke to simply print-up $850 million more in Bernanke-bills, and "lend" it to them at 0% interest.
A reader of my previous piece attempted to criticize that commentary by noting that the actual losses on the trade(s) would have been nowhere near $850 - totally missing the point. With the Wall Street bankers able to obtain (and Ben Bernanke willing to print) infinite amounts of Bernanke-bills, "loaned" at 0% interest, this paper has become nothing more than "confetti" to the banksters.
Several observations need to be made about the United States' "zero interest rate policy" (ZIRP), observations which (strangely) no one in the mainstream media has been willing/able to make.
- Calling the $trillions in Bernanke-bills funneled into Wall Street banks "loans" is absurd. Anything "borrowed" with ZIRP never needs to be repaid - since there is literally "zero" penalty for failing to do so. Thus every penny of these "0% loans" is simply another back-door hand-out to the greatest corporate deadbeats in the history of humanity.
- As a matter of elementary economic fundamentals, a ZIRP economy must drive the value of its currency to zero over time. It is merely simple arithmetic that the long-term value of any/every good which can be obtained at zero cost is zero. Otherwise those with access to this 0% good could literally use the "arbitrage" on this scam to buy-up (i.e. steal) all of the world's assets.
- The U.S. economy is already so insolvent that (in reality) U.S. interest rates are permanently frozen at 0%. Carrying $60 trillion in total public/private debt, raising interest rates by a mere 1% would drain an additional $600 billion per year out of the U.S. economy - equal (by itself) to nearly a 5% drop in GDP, before factoring-in the severe "multiplier effect" of draining that massive amount of capital from the economy. This means that in practical terms, the U.S. dollar is already worthless.
- The Federal Reserve has placed absolutely no limits on the amount of 0% funny-money it's willing to funnel to Wall Street. In other words, it is available to these banksters in literally infinite amounts. For reasons previously given, the present value of any/every good which can be obtained in infinite amounts, at zero cost is zero. This means on the basis of simple arithmetic, the U.S. dollar is already worthless.
The latter point should be extremely self-evident. If I could "borrow" infinite amounts of money at 0%, I would "borrow" $1,000,000 quadrillion, and "buy" every asset on the planet. I would need at least that much money to buy-up everything, since the moment all that funny-money began circulating in the global economy, it would rapidly drive-up the price of everything (kind of like what is currently taking place in the global economy after "QE2").
Of course, on a practical basis I could never buy-up everything, not even if I had a million times that previous fantasy-number. The reason? People would quickly realize that this funny-money which I obtained in infinite amounts, at zero cost was worthless - and they would no longer accept it.
Thus we have our practical reason as to why the thieves of Wall Street have not asked Ben Bernanke to print-up $1,000,000 quadrillion, and "loan" it to them at 0% - because they know the moment they engage in such a blatant scam (to steal the world's assets) that all of their money (and their entire, paper "empires") immediately becomes worthless, as the chumps figure out the scam.
This is merely one of the reasons that no nation in history has ever moved its official, national interest rate to 0%, and simply left it there over the long term (with inevitable hyperinflation being another reason). While all of our banker-dominated governments are addicted to the theft-through-money-dilution which is inherent in our "credit-based" (i.e. inflation-based) economies, none of them want totally worthless currencies - for obvious reasons.
If the U.S. government (and the bankers who operate all the levers of power) wish to demonstrate that the value of the U.S. dollar today is greater than zero, there is a very simple way to do so: raise interest rates significantly. As I have demonstrated, the failure to do so is a direct (but implicit) admission that the real "value" of the U.S. dollar is zero.
The Duplicitous Duo of Bernanke & Geithner continue to spout the ridiculous lie that the U.S. economy is "too weak" to justify raising interest rates. Again, the mainstream media cowardly refuses to acknowledge the blatant hypocrisy here. For over two years (out of the other side of their mouths), this tag-team has told us there is a "U.S. economic recovery" underway. In historical terms, the GDP "growth" being reported quarter-after-quarter constitutes a "robust recovery" (if taken seriously).
This means that in a world of responsible journalism, the Duplicitous Duo would be forced to face their blatant contradiction: that after two years of a robust "economic recovery", the U.S. economy still "needs" to have its interest rates set at the most reckless level in the history of humanity - despite the obvious and catastrophic impact this policy has on the national currency and the overall economy.
The analogy here is of a professional athlete who is critically injured, and admitted to the "intensive care" ward of a hospital. Weeks later, the doctor in charge of the athlete pronounces the athlete "recovered" - and ready to continue playing his sport - but refuses to discharge the athlete from the intensive-care unit (not even two years after the athlete's "recovery"). It is an absolute contradiction of fact, and the failure of the mainstream media to assert this contradiction (on a daily basis, if necessary) is an absolute failure of journalism.
Simply, either the "U.S. economic recovery" is 100% myth, or the "need" to keep U.S. interest rates is a complete and total lie. There are no other possibilities. It has been my position all along that it is the former position which is the "fiction", while I wholeheartedly assert again and again that 0% interest rates are the only factor temporarily warding-off the bankruptcy of both the Wall Street banks and the entire U.S. economy.
The "trap" here, and the reason that this desperation-policy must result in self-annihilation is because of what I also alluded to: the inevitability of hyperinflation. As competent economic commentators point out, hyperinflation is a "confidence" event (as is the case with the failure of any/every scam): the chumps finally figure out that the money-printers plan to print up their funny-money in infinite quantities - and they refuse to accept it.
Essentially, every episode of hyperinflation in human history is nothing more than a real-life portrayal of "The Emperor's New Clothes". Just as the masses can/could blind themselves to the fact that the Emperor is naked, so too have the masses (in real life) deluded themselves into believing that worthless, U.S. dollars still have value. And just as with the naked Emperor, the masses could very easily wake up tomorrow and decide the dollar is also "naked" (i.e. worthless).
This is why over the last decade sophisticated investors all over the world have been converting their banker-paper to gold and silver. The U.S. dollar is already worthless. Most of the other fiat-currencies are merely lagging the dollar's plunge to zero.
"ZIRP" is not the sober policy of responsible bankers, in charge of (at the moment) the world's largest economy. It is the loudest "warning siren" in the history of humanity that the scraps of paper we carry in our wallets are soon to be worthless, and a "last call" to convert that banker confetti into "good money" (i.e silver and gold).