Hi Jim,
Given today’s Federal Reserve balance sheet policy, could this be The Playbook?
1. The Federal Reserve feels constrained in their ability to purchase treasuries if they have to wait for mortgage backed securities to mature. They decide to sell this junk paper to free space on their balance sheet.
2. The Federal Reserve offers to sell the junk mortgage paper back to the Big Banks whom they purchased it from in the great bailout of 2008-09.
3. The Big Banks only offer to pay market rates for the worthless paper, quite a discount to what is on the Fed’s books and what they were paid a short while ago (good news, an audit of the Fed on this is not likely).
4. The Federal Reserve clears substantial worthless dollars from their balance sheet which allows for quite substantial purchases of treasuries.
5. The Big Banks, realizing the last "dip at the bonus well" may have passed, devise a revitalized pretend and extend and mark up the recently purchased worthless paper back to a "reasonable mark to model level."
6. The Big banks report record paper profits and more importantly, record bonuses.
7. Main Street remains asleep as this policy is reported as non inflationary.
8. Quantitative Easing accelerates toward infinity.
I doubt this playbook would make much of a stir with Main Street. Who cares, right? "They" are just trying to help us, right?
Perhaps a cheeseburger for $300 is the only thing that will get through to anyone. At that point, it’s too late.
CIGA Glen
Dear CIGA Glen,
You have put it all together. If this was not the playbook, it sure as hell is now.
Regards,
Jim
http://www.jsmineset.com/
Dear CIGAs,
In support of the hyperinflation thesis outlined by the three teaching illustrations:
Under a situation from the European view in 1931, the only thing to survive was tangible assets. This is not merely gold, but shares in corporations with tangible assets. Velocity is always the key for as it declines due to people then hoarding money, you get deflation. When people are afraid money will become worthless (paper of debased coinage) they spend it faster before it depreciates and that creates hyperinflation. It all depends where confidence stands – with government or within the private sector. We are headed into the later.
Martin Armstrong.
“Staring into the Abyss”
July 31st 2010
http://www.martinarmstrong.org/files/Staring-into-the-Abyss-7-31-2010.pdf
Check out Root causes of hyperinflation
From http://en.wikipedia.org/wiki/Hyperinflation
