A New Debt Hypercycle.
From Greg M
A New Debt Hypercycle.
By Gregory Mannarino TradersChoice.net
In what may be one of the greatest lies ever sold to an unknowing public, is yet again another off the Richter Scale debt hypercycle mechanism unlike anything which has ever been seen before- all in an effort to keep the global debt-based central bank system going.
This new debt hypercycle got started just last week when the European Central Bank began AN UNLIMITED BOND BUYING spree which has now expanded to every single area of the Eurozone. Consider what this means for a moment. For the ECB to purchase an unlimited amount of Eurozone bonds, the ECB must then create an unlimited amount of Euros to do it- a process which is massively inflationary.
Consider this. When any central bank creates currency out of thin air, how does the newly created currency achieve its purchasing power? It’s simple. When a central bank creates currency, for the new currency to have any purchasing power at all it must steal a fraction of a fraction of a fraction of purchasing power from every single other previously created bill. Therefore, as the “money” supply grows, collectively it loses purchasing power- this creates inflation.
Simply put, when a central bank makes currency, it will now take more bills to purchase the same amount of goods. Now, just this past week the ECB raised rates all the way up to ZERO, yes ZERO, from negative. The mainstream narrative is this; even though according to their own numbers, Eurozone inflation is close to 9%, by raising rates to ZERO, this is somehow going to tame inflation. Well not only is this impossible, but the ECB is also guaranteeing higher inflation. You cannot raise rates to zero in a nearly 9% inflationary environment and expect inflation to slow down AT ALL, in fact you are assuring higher inflation. Moreover, by the ECB now having to create an unlimited amount of currency to buy and unlimited amount of bonds, much higher inflation is guaranteed.
In the U.S. markets yet another “phenomenon” is occurring, bond yields are dropping precipitously. For bond yields to drop, some entity must buy the debt. This would have to be an entity with unlimited firepower- the Federal Reserve.
Central banks possess the ability to do only one thing, that is manipulate debt. By manipulating debt central banks can artificially create either an environment of risk, that is push cash into equities/stocks, or push cash into risk-off assets like commodities. The premiere way in which a central bank can inflate both the stock market and real estate is by artificially suppressing rates. Central banks suppress rates by means of buying debt. Central banks have used quantitative easing, or artificially suppressing rates/buying debt, ever since the 2008 global financial crisis in what has been a VERY successful scheme to re-inflate both a stock market bubble and a real estate bubble. This same mechanism is continuing today, but on a much larger scale. Both the ECB and the Federal Reserve are, make no mistake about it, fully engaged in another round of quantitative easing MUCH BIGGER THAN BEFORE. This new QE cycle, along with the new crisis-to-crisis economic model, IS a new Debt Hypercycle-which will vastly inflate the global debt crisis to heights beyond anyone’s wildest imagination.