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high-power money and socialism for the rich
In a general sense, high-powered money is gold and bank assets. Low-power money is debt money that is owed back to somebody. There are all sorts of permutations that make up Exter's Pyramid. Low-power money is debt-money that disappears upon repayment of the loan.
The Concept of High Powered Money
Low-power money vanishes with the repayment of a loan and the bank is left with the interest. In the case of a default, the defaulted amount is deducted from bank assets. Since credit grew at more than three times the rate that GDP grew, there is an enormous accumulated leverage against bank assets.
The FED sent the banks $ 2.5 trillion of excess reserves to cover contingent loan losses. They also paid them interest on the $ 2.5 trillion to give them some income. Additionally, they were give TARP money. Senator Inhoffe reports that much of the TARP money was not paid back.
The FED holds about $4.1 trillion of treasury notes that it will supposedly sell on the open market some day. NOT LIKELY.
Gold and all money that isn't debt-money technically becomes high-powered money. Jim Willie claims that the FED is creating $ 1 trillion every quarter to bail out various and sundry entities. One could surmise that $1 trillion is the amount needed to make good on all the defaults to keep them from becoming a cascade. At the same time, ZIRP is escalating the default rate. Much of the $ 1 trillion every quarter is pumped into the crashing energy markets. It's a safe guess that the claimed $ 4.1 trillion balance sheet of the FED is greatly understated.
ALL of this is done to keep the derivative monster from crashing onto the scene. ZIRP is starving the whole economy at the same time that the derivative monster threatens to eat everything.
The CB holds at bay the sister monsters of derivatives and default.
A default on a loan means that debt-money to pay the loan is not paid. The bank must make good on the default with it's high-powered money. The negative sum of debt money vanishes the high-power money. The CB money creation used to make good on a default may very well be high-power money BUT, it is turned to smoke by the shortage of low-power money for repayment.
The credit bubble must be ever-growing to produce the high-power money necessary to offset the destruction of high-power money caused by defaults.
The natural rate of interest is reckoned to be close to 2%. The FED works to produce 2% inflation. Since the bankers are "first spenders", they make an exaggerated profit from a 2% overall price inflation. (Cantillion Effect).
ALL of these monetary shenanigans eventually depend on the productive economy. The worker was flogged unmercifully to squeeze out more wealth for the bankers. Labor's share of profits crashed way down. Productivity of labor went WAY up. Wages are about where they were on 1970. The debt bubble grows furiously at the same time that the productive loop is crashing.
The worldwide bubble of low-power money is searching for a safe haven. With the productive loop well crashed, it mostly moves into mal-investment.
"The structural economic problems of stalled incomes, peaked debt and welfare make operational expansion i.e. sustainable growth extremely difficult, which has led to investment concentration in secondary equity markets. And that means the higher valuations simply represent higher risks.
The offshoot is that as such a large concentration of total asset value is dependent on the market, it becomes necessary to maintain the market at all costs. The market has become too systemically important to allow it to fail. And that means policymakers have changed the function of the market. The market left to its own devices is a consequence of the underlying economy. Today, however, the market is being used as a (false) portrayal of the underlying economy. It is intentionally using the logical fallacy of confusing cause and effect.
That is, the thermostat is no longer meant to reflect the temperature inside the house, its only use is to convince you the house is warm. That means policies are being targeted at manipulating the thermostat rather than keeping the furnace hot. The consequence is a spiralling of resource misallocation, furthering the structural breakdown of economic activity making it ever more important to keep the market looking strong. The market is no longer a market as we understand the term.
Now The Markets Themselves Are Too Big To Fail - DollarCollapse.com
The FED is backstopping all the defaults to save the banks. The East has created a new banking union and currency bloc. At what point do they no longer need the West? The dollar is way up and making it very difficult for emerging markets to repay dollar-loans. Emerging markets are defaulting. At what point do China and Brazil decide to cut their losses and dump Western debt?
In a general sense, high-powered money is gold and bank assets. Low-power money is debt money that is owed back to somebody. There are all sorts of permutations that make up Exter's Pyramid. Low-power money is debt-money that disappears upon repayment of the loan.
The Concept of High Powered Money
Low-power money vanishes with the repayment of a loan and the bank is left with the interest. In the case of a default, the defaulted amount is deducted from bank assets. Since credit grew at more than three times the rate that GDP grew, there is an enormous accumulated leverage against bank assets.
The FED sent the banks $ 2.5 trillion of excess reserves to cover contingent loan losses. They also paid them interest on the $ 2.5 trillion to give them some income. Additionally, they were give TARP money. Senator Inhoffe reports that much of the TARP money was not paid back.
The FED holds about $4.1 trillion of treasury notes that it will supposedly sell on the open market some day. NOT LIKELY.
Gold and all money that isn't debt-money technically becomes high-powered money. Jim Willie claims that the FED is creating $ 1 trillion every quarter to bail out various and sundry entities. One could surmise that $1 trillion is the amount needed to make good on all the defaults to keep them from becoming a cascade. At the same time, ZIRP is escalating the default rate. Much of the $ 1 trillion every quarter is pumped into the crashing energy markets. It's a safe guess that the claimed $ 4.1 trillion balance sheet of the FED is greatly understated.
ALL of this is done to keep the derivative monster from crashing onto the scene. ZIRP is starving the whole economy at the same time that the derivative monster threatens to eat everything.
The CB holds at bay the sister monsters of derivatives and default.
A default on a loan means that debt-money to pay the loan is not paid. The bank must make good on the default with it's high-powered money. The negative sum of debt money vanishes the high-power money. The CB money creation used to make good on a default may very well be high-power money BUT, it is turned to smoke by the shortage of low-power money for repayment.
The credit bubble must be ever-growing to produce the high-power money necessary to offset the destruction of high-power money caused by defaults.
The natural rate of interest is reckoned to be close to 2%. The FED works to produce 2% inflation. Since the bankers are "first spenders", they make an exaggerated profit from a 2% overall price inflation. (Cantillion Effect).
ALL of these monetary shenanigans eventually depend on the productive economy. The worker was flogged unmercifully to squeeze out more wealth for the bankers. Labor's share of profits crashed way down. Productivity of labor went WAY up. Wages are about where they were on 1970. The debt bubble grows furiously at the same time that the productive loop is crashing.
The worldwide bubble of low-power money is searching for a safe haven. With the productive loop well crashed, it mostly moves into mal-investment.
"The structural economic problems of stalled incomes, peaked debt and welfare make operational expansion i.e. sustainable growth extremely difficult, which has led to investment concentration in secondary equity markets. And that means the higher valuations simply represent higher risks.
The offshoot is that as such a large concentration of total asset value is dependent on the market, it becomes necessary to maintain the market at all costs. The market has become too systemically important to allow it to fail. And that means policymakers have changed the function of the market. The market left to its own devices is a consequence of the underlying economy. Today, however, the market is being used as a (false) portrayal of the underlying economy. It is intentionally using the logical fallacy of confusing cause and effect.
That is, the thermostat is no longer meant to reflect the temperature inside the house, its only use is to convince you the house is warm. That means policies are being targeted at manipulating the thermostat rather than keeping the furnace hot. The consequence is a spiralling of resource misallocation, furthering the structural breakdown of economic activity making it ever more important to keep the market looking strong. The market is no longer a market as we understand the term.
Now The Markets Themselves Are Too Big To Fail - DollarCollapse.com
The FED is backstopping all the defaults to save the banks. The East has created a new banking union and currency bloc. At what point do they no longer need the West? The dollar is way up and making it very difficult for emerging markets to repay dollar-loans. Emerging markets are defaulting. At what point do China and Brazil decide to cut their losses and dump Western debt?
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