Sunday, 1 December 2013

Stating the bloody obvious, or am I?

Only in the last couple of years has the term 'printing money' come into use, probably the first time since post 1st world war Germany, and we know what happened there as the almost inevitable result. And where else did the result happen with other causes? Zimbabwe. That example of taking a thriving and successful country and turning it into a nuclear waste without the radiation. I must sneak in a small dig at Obama who is doing the same to America as Mugabe did to Zimbabwe simply as I will now demonstrate its veracity, but that is just an aside.

I will add debasing currency is still part of the long list of how to commit treason, and if anyone chooses to try as a result I welcome the result. Let's sort out some specifics on what is poetically called 'quantitative easing' and remove all the preconceptions.

First and most, they are not putting real money into the economy.

How can they? Where would it come from and what would it represent in capital terms? As a failed accountant (I still took the foundation year so know a bit) the assets column must balance with the cash. Fail. QE simply pumps up the cash without changing the assets. Not just pointless but normally criminal. Exactly what Enron did and look at the results.

Had they been actually putting cash in the economy it would be from tax revenues and the like (I passed economics!). Alaska is the only current example of this, every person gets a cut of the oil share as the company is state owned and every resident who qualifies gets an annual dividend. This is real money as it relates directly to the annual company earnings. QE however is adding numbers without any new earnings.

The proof: If QE grew an economy (as does Alaskan state enterprise) then the money could be paid directly into the citizen's bank accounts. It is not. Where does it go? Back to the state of course. This got Bernie Madoff in jail as unlike Enron's creative accounting, where future profits got dragged into the present, although they never existed, Madoff ran a pure Ponzi scheme which simply moved around money in a cake which never changed size. This is a Ponzi scheme as all the government is doing is shifting exactly the same money around different accounts and telling us it's giving us a donation. Imagine a government really could create unlimited months of billions of pounds or dollars as a donation? We wouldn't need oil or gas revenue, or even taxes, they could just create all the money we needed, as could the third would, who wouldn't need to borrow real money but just print it.

Of course they bloody well can't.

So QE is not real a) as it adds nothing to the economy b) if it was they could pay it to us directly

Since 2013 this coin has grown another side. Although technically all governments can, like the Co-op (until now anyway) share their profits and return them to the citizens, no others have. Just because only Alaska does doesn't stop any state or country in the world, after all, it is our money anyway. But they don't. But now, for the first time ever, they can take it out. Yes, when the country is in debt, they can now take it from the bank accounts directly, as Cyprus has, but they are not putting it back anywhere. Since Cyprus the EU has made this law for every member of the Euro, while New Zealand quickly followed and wrote it into their law. I am pretty sure this precedent will be followed very quickly, while Alaska's is only having its first vote elsewhere for a citizen's bonus this winter in Switzerland, around 40 years since Alaska created it.

I have already explained why QE happens, as it is to reduce the debts of the banks and governments as it forces the interest rates they pay (not us, Britain currently has rates up to over 5000%) to almost zero, and means they can borrow and speculate and make so little profit to make it a success compared to if they made 0.7% and paid even as little as 1%. On a few million a day that is a huge difference. But QE does not help you or me, it only helps the government and bankers as no one else can borrow at base rates and carry such risks to profit from it.

The rest of us are shafted to allow them to do so. This is not a helpful policy, it is burglary.

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