There has been nothing like this in the History of the World.
In full view of the public, and at their expense, governments loot treasuries to enrich those responsible for committing the highest of economic crimes and the most horrific of misdemeanors.
First there was TARP. As a pretext to stem equity-market turmoil following Lehman Brothers’ collapse in September 2008, President George W. Bush signed into law the Troubled Asset Relief Program just one month later. That allowed the US Treasury to insure up to $700 billion of “troubled assets,” a.k.a., White Shoe Boy lingo for covering the massive bad bets and criminal acts made by big banks and Wall Street high rollers.
Shortly after, newly elected President Barack Obama sold the nation his $900 billion American Recovery and Reinvestment Act of 2009. The largest such plan in American history, Obama said “Four hundred thousand men and women are gonna go to work rebuilding our crumbling roads and bridges, repairing our faulty dams and levees, bringing critical broadband connections to businesses and homes in nearly every community in America, upgrade mass transit (and) build high-speed rail lines that will improve travel and commerce throughout our nation.”
The only “roads” the nearly $1 trillion repaired was Wall Street. Concurrently, the US Federal Reserve ratcheted down interest rates to record lows and launched unprecedented Quantitative Easing policies that fueled a boom on Wall Street at the cost of Main Street. The Dow soared from 8,000 in 2009 to 18,000 in 2014, while an estimated 95 percent of the income gains went to America’s wealthiest 1 percent. Yet, during that same period, Gross Domestic Product has plodded along at 2.2 percent on average, never hitting the “escape velocity” Washington keeps touting and the financial press keeps selling.
Following the Fed’s plan, Japan’s Abenomic money-pumping scheme, announced in December 2012, has achieved similar results. The Nikkei recently hit 15-year highs while Japan’s GDP fluctuates between sharp declines and meek growth.
Now, the European Central Bank has begun a QE program that will inject $1.3 trillion into the financial system over the next 16 months — and more if deemed necessary. The end result, as with the US and Japan, will be the same. The record low interest rates and flow of cheap and easy money will temporarily boost equity markets while eurozone economies fluctuate between moderate growth and deepening recession.
Among the biggest losers is the general public, with no place to put its savings, especially with more European banks charging customers negative interest rates to hold their money. And, with bonds paying negative yields, insurance companies that sell products and annuities and invest that money in government and corporate bonds — with the expectation that the return on bonds is greater than what they will have to pay to the insured — has now been destroyed.
In anticipation of European Central Bank President Mario Draghi’s QE plan, which he admits is “unconventional,” investors (high-stake gamblers) already have pumped some $36 billion into European equity markets. Meanwhile, for the man on the street, he has just seen his purchasing power dramatically decline as the euro continues its freefall from $1.39 last March to a recent low of $1.04 — and with forecasts to hit near or below parity with the dollar in the not-too-distant future.
Breaking Point 2.0
Central banks’ multi-trillion-dollar monetary injections, zero-interest-rate policies, negative interest rates, negative bond yields, and the colossal scale of cheap money that artificially pumped up equity markets and fueled the investment capital/private equity group/hedge fund gambling binge, are unprecedented in the History of the World. And, when the Greatest Speculative Bubble on Earth bursts, it will be the shock heard and felt throughout the world — for generations.