Quantative easing, business as usual
| April 14, 2011 | Posted by dan under Money |
Th
eres an analogy that I have come across a few times on the web that goes like this:-
It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town.
He stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.
The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
So why does this not work in practice? In part 1 we explain how money is created from debt, therefore all money is debt, if you therefore take a $100 note out of your pocket that note represents an underlying debt obligation to the tune of exactly $100, I hope your seeing this clearly now. Therefore if in the scenario above one person use’s an others $100 note to pay their $100 debt then the $100 debt which gets paid vanishes from the money supply because the debt obligation has been fulfilled and so that debt is no longer there so the central banks will remove $100 of public credit from circulation to balance its books, also known as deflation and so it cannot be used again to pay anothers debt, see? In the scenario above it seems possible because it is based on the assumption that people owe debts to each other which would make sense in a sound money system but in the actual system we have all debt originates from one source namley the international banking cartel. Those who have been granted the privilege via the government to issue the publics credit.
What to do, laugh or cry?
Do you see how if we had a sound money system that was not debt based and was a constant supply of money that neither inflated nor deflated and any debts created between people were of a private matters then debts really could be settled as in the scenario above. I hope it gives you a sense of just how backwards our current money system is, and the reality of the abundance we could have right now is so far beyond what we currently experience thats its hard to even fathom what that type of abundance would be like and the effect it would have on human life and the health of the planet.
If for whatever reason what I am saying is not clear let me know because I want your understanding. I can assure you I am not doing this for the fun of it. This system oppresses me and you to the benefit of a few, if you are tired of your servitude which is guaranteed to get harder and of course will get worse as this is not going to change over night then we need to educate a critical mass of people on the topic.
Debts cannot actually be paid
Expanding further on the drudgery of this system, even when a debt is paid as explained above and so the debt obligation settled, consider what is it you use to make all payments of debt? Is it not the very credit/money which itself is debt? So then does it not follow that the debt that was just paid and removed from the system, had to, by default, create a debt just as large + its interest payment? Because whats happening of course is that all debts are being paid with debts. So in a sense the only thing thats ever really happening is a debt rollover, or an offsetting of the current debt into the future. So when you hear debating on the news about paying off the government debt realise they are talking nonsense because its immposible to pay off the debt. At most they can shift debt from the public to the private. You have to borrow money to creating a debt to pay the previously borrowed money + interest. So the government is like a crackwhore who has to crawl back to its banker pimps every now and then for a fix. Quite a harsh example on my part but a particularly accurate one nonetheless.
Which brings us onto the government , as your no doubt aware of all the government debt talk, and cut protests and whatnot. The government borrows money in exactly the same way as you borrow, but instead of signing a promissory note as you do the government issues a bond or gilt, which is essentially exactly the same thing (bond means exactly that as in bonded to an obligation like a chemical bond). So the government will have its costs for a quarter lets say 50 billion, this includes all its spending costs and as well as the interest owed on all previous money borrowed on its current national debt. So like you the government issues its bond for the amount it requires and the banks “buy” these bonds with money printed from nothing. Why with money printed from nothing because just like with you they now have a promise to pay to the tune of 50 billion and so they can then proceed to print 50 billion in public liability’s and forwards them to the government accounts.
This is why the government doesn’t seem to be listening to you does it? In fact the government doesn’t care less what the public has to say because who calls the shots in a debtor/creditor relationship? You guessed it the creditor and the government which represents the people is the biggest debtor of them all.
Put simply your government has been subverted and compromised by the banks.
Quantitative easing is standard operation for central banks
I wondered what they meant when they first started mentioning quantitative eases at the time, as it was being explained as money printing. And I thought to myself isn’t that what the banks have always done? Whats different about this quantitative easing? maybe I was wrong about the banks printing money, so I had to go check. On the bank of England website there was a recent questions and answers regarding quantitative easing to a Charlie Bean, Deputy Governor for Monetary Policy. Here
Of which he confirms in question 6 that money printing is part of its routine operations as we just explained above and QE is noting more than a label to the fact they had to do it on a larger scale than normal
Heres the answer
The key point is that the Bank is not being forced to create money in order to cover the gap between the government’s tax income and its spending commitments. If it were carried out to finance the budget deficit, it would be a violation of Article 123 of the Treaty on the Functioning of the European Union. Rather, the Bank is undertaking quantitative easing in order to meet the inflation target and will sell the government debt back to the private sector once the economy recovers, thus unwinding the original increase in the money supply.
Central banks routinely buy and sell government debt in the secondary market as part of their normal operations in the money markets and such operations are not deemed to amount to monetary financing under the Treaty on the Functioning of the European Union. The only thing that distinguishes quantitative easing from normal operations is their scale and the length of time for which the assets are likely to be held.
The government is the highest source of all wealth in the economy, which it derives from the people because we granted them the authority to tax a certain portion of our time and energy only in exchange for certain benefits. Because of the granting of authority to tax from the people to the government the government has direct access to all the wealth it could possibly need, DIRECTLY, why then does it go to a third party and borrow their private credit at interest thus indebting the people via the mechanism of the government to private corporations? Can you see how it has direct access to all the value it could ever possibly need, and never need to go into debt? It could if it wanted monetise its own debts interest free and use that as the currency for the nation.
In future I would suggest any government ever seen to go into debt to any external source be deemed an unlawful government by the people, because it has essentially sold the people out, however its hard to grasp otherwise and look outside the box because we have never experienced anything other than this perverted government and money system.
