Monday, April 27, 2015

Balance

Before launching into this post, a quick reference to the last. Engdahl correctly cites the turning point in monetary policy as the dropping of the atomic bomb upon Hiroshima. What bears reflection here is the recognition that the U.S. (as far as I know) is still the one and only country that has ever used the nuclear bomb to indiscriminately kill hundreds of thousands of innocent civilians.

Regardless of cause, let that sink in for a moment, because the "unthinkable" has already been carried out. Did the world accept our reasons then? And what does the world think of us today?

Now, as for "balance", the post at ZH about China's inevitable QE is the inspiration, but let us not mince words here. "Monetizing" the debt is the equivalent of "buying it outright for cash" to prevent default, which as we all know will collapse our debt-based global system. Debt is the essence of fiat, and when it defaults, the system defaults with it.

As a member of the gentleman's banking club known as the BIS, China - like Saudi Arabia and all other members - is not so much engaged in a "currency war" as much as a Nash equilibrium scenario, whereby an attempt is made to balance equity and debt.

The problem is that the two are hopelessly entangled in this decades long infatuation with the ability to issue (print) wealth by decree. Therefore the following simplistic statement below is grossly incorrect (though it does serve ZH's central meme well enough to sell sidebar ads).
 ... apparently $22 trillion in global central bank assets is not enough to show the world's Keynesians, who are now eager to push the world to war just to avoid being proven wrong, that QE does not work.
QE in fact works marvelously well for the .01%, and not bad for the 1% either. Even the 5% like it enough to praise its virtues - it's the other 95% who'll have a slight problem when prices are finally impacted.

And here again, this balancing act between saving the debt inherent in its currency, and protecting the equity (massively expanding physical gold reserves - which its currency bloc can call upon when the debt component fails) is the same wealth recycling juggling act that any Giant must perform.

All avoidable when debt is no longer hoarded as wealth. It won't be in the future, I can promise you that.

Unfortunately, debt must fail in order to lose that label of "wealth". It will. I can promise you that also.

Until then, we watch this balancing act between debt pretending to be wealth, and wealth being treated as a "bad investment". All performed for the benefit of gradually changing our definitions, as we evolve into a new equilibrium.

A vigorous balancing act indeed, fraught with peril. We watch.

No comments:

Post a Comment