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Wednesday, September 2, 2015

Understanding Fed Mindset of Why QE was Strategy to Fight Recession

We've talked ad nauseum about the the global monetary policy QE causing artificially rising stock markets followed by more QE as soon as there's a lull or market dip

And we pointed out the greed factor among the 1% and the institutions (banks, corps, etc) that excessively profit from it and how the central banks like the Fed only are interested in protecting its own at the expense of the citizen who ultimately pays the bill..

But there's another reason why the decision from the higher-ups is to pump as much liquidity into markets for the benefit of the present at the ultimate detriment of the future.

There is a mindset among some economists and academics, former Fed Chair Ben Bernanke among them that what caused the Great Depression of the 1930s wasn't the market crash of October, 1929 when shares dropped 24% in value over the span of two days.
To these know-it-alls, what caused that colossal economic slump when US GDP fell by 25% along with 25% unemployment was the failure of thousands of American banks and more importantly the abject failure of the US authorities to ensure there was enough money circulating in the economy.

So by not "pumping" as much cash into the System as humanly possible as quick as possible and basically paying off all the losses of all the most important banks, the Depression occurred.

Which is basically giving justification to the concept that someone who say goes bankrupt at the casino should automatically be reimbursed the losses if he/she is holding the people in the casino hostage.

Now these so-called experts are completely totally wrong about what caused the Depression...
When the crash occurred stocks dropped from around 375 (yes the Dow which today is over-inflated at 16,500 or whatever was at 375 in October 1929 after a very prosperous 1920s) to a low of around 200...

Then it started going up and up over the span of a year so by October of 1930, the market recouped around 65% of its value to hold at around 300.

The real crash of the stock market occurred between 1931 and middle of 1932 when the market low was 45..

So what caused the market to depreciably drop during those 18 months?
It was lack of liquidity in the system but it was because most of the sources of that money dried out..

Let's go back to the end of World War I in 1919 when the US was actually a major Lender nation.. we lent money to France, Britain, Belgium, Italy, etc to finance and fight their needless war..

And after the Armistice all of Europe was bankrupt so in order to repay their debts, they put their financial burdens upon Germany in the form of war reparations.   Germany paid France and England and they in turn re-paid the US

Then in 1931, Germany's economy collapses and spun into hyper-inflation and they were no longer was Germany to re-pay those debts.
So Germany stopped paying, the rest of Europe never forced compliance, so they let it go.  Their economies took a major tailspin and the US stopped getting re-paid

And now there was no new money circulating into the economy from abroad by 1931 and the market along with economy on the whole, took a plunge.

Ironically what started the US on the road to economic recovery was when evil Hitler came to power in 1933, his Nazi government entered into many business contracts with US firms and banks so as he built up his Reich, American jobs were created as industries and financial services worked to bolster Germany.

And of course we all know what officially got the US out of depression was WWII.
But back to the present..

The reason QE fails so miserably at its endgame is they pump a ton of money for the well-to-do to siphon from but there is no apparatus in play which forces the entities getting all this free money from working it down the system to the everyday person..

A corporation's profits may grow exponentially but QE doesn't force businesses to hire people full time with benefits or provide careers.  They can still go the temp and part-time route and short change their workers for Their benefit.

Banks can have all their debts basically repaid yet not be obligated or forced to lend the money to others, or lessen requirements in a period where over 25% of the nation has gone bankrupt in the last 10yrs..
QE helps those invested in the stock market, which most Americans are truly not.  And of those who do, most people have less than $10k invested in stocks or commodities, so how does an inflated market number really help anyone in any real every-day life way?

We say it repeatedly and we know we get looks and weird smirks...

But every day we wish and hope and pray the market dramatically drops and keeps dropping

Not because we want another depression or to see people suffer..
The simple fact is that from the Great Depression A LOT of good came about from Social Security to the government hiring masses to rebuild and strengthen this nation's infrastructure

We need another 1930s-like Great Recovery and we really needed back in 2008 another FDR instead of this piece of shit Wall-Street step n' fetch Boy named Obama

And unfortunately unless someone like Bernie Sanders is elected, it will take a massive market drop along with an impotent, powerless Fed to get the people to Demand real economic change

In life it takes squeaky wheels to  get the Grease and when it comes to the economy, most are delusional about where the nation is and how truly weak their situation is if there was no job tomorrow.