Wednesday, March 13, 2013

Quantitative Sleazing

Commenting at The Saddest Chart in America, the eponymous Anonymous writes:

US debt held by the public is now at about the same level as it was when Obama was elected. The deficit spending is financed by bonds from treasury, but they are being bought by the fed.

Therefore, to be precise, we are printing new money to 'pay' for 42 cents of every dollar the federal government is spending.

Here, from the St. Louis Fed, is the chart of doom.

We won't be destroyed by the 16 trillion dollar debt. We will be destroyed by the hyperinflation resulting from the massive expansion to the money supply. Once it costs a billion or so for a loaf of bread, they'll pay off the debt.

Only a moron, an intellectually bankrupt progressive stooge, or Paul Krugman could support this madness. That which they would never do to their own families, they impose upon us with the force of law. I can not, in good conscience, stand silent while the most magnificent society ever seen on the face of the Earth is intentionally sabotaged from within.


Reliapundit said...

what can't go on forever won't.

Anonymous said...

Wow, thanks for posting that for me. I've been showing this for a few years now, and have yet to see it get anyone's attention.

The pauses in the rate of growth of the money supply are the periods between QE, QE2, QE3. The most recent is for 'operation twist', which consisted of treasury selling off all the assets on its balance sheet that it could without embarrassing the WH rather than printing fresh money.

Currently, the fed is expanding the money supply at a rate of about $85 billion per month. This is split roughly evenly between buying new treasury bonds and buying collateralized mortgage obligations from fannie/freddie (yes, they are re-inflating the very same bubble that collapsed in '08, and in pretty much the same way).

Notice that:
1) Despite periodic recessions throughout our history, no president prior to Obama ever thought it necessary or wise to deliberately devalue the dollar in response. Not one.

2) Every country that has ever destroyed the value of its own currency the way Obama is doing to the dollar has seen hyperinflation destroy their economy within a few years. There is 2000 years of precedent on this, no exceptions to the rule.

3) The economic collapse following hyperinflation is typically not followed by international war, at least not immediately. Rather, it is always followed by riots and civil unrest. In modern times, every country that has experienced this has turned to a totalitarian dictator to 'save' them.

4) The fact that the fed is, on net, buying 100% of new debt is the only thing preventing hyperinflation from kicking in. There hasn't been a real market in US govt debt for years, so the interest rates are whatever the fed wants them to be. This can not go on forever. Just like with the collapse of the housing market due to loss of faith in the collateralized mortgages, the fall will come once the collective consciousness of owners of treasuries realize what is really going on. Again, like the housing collapse, this will happen very quickly. The warning sign will be interest rates ticking up, the fed attempting to stabilize as usual but discovering that they have failed. They'll make a stronger attempt and fail yet again. Then, rates will increase exponentially.

Those guys you've been making fun of your whole life, with a 2 years supply of food, infinite sources of water and electricity, secure in a compound out in the woods? Yeah, they'll survive the crisis. Those of us in urban areas? Good luck! Just like with Greece, those living off the government will be the ones rioting in the streets.