The first of the aftershocks are on the horizon
When in 2008 Freddie Mac, Fannie Mae, MF Global, Lehman Brothers, Bear Stearns, AIG and others started falling apart like houses of cards, many analysts suggested that the overseas-based financial casino should be allowed to go bankrupt, thus ushering in a new economic cycle. But the U.S. Treasury and the Federal Reserve System had a different view. The injection of more than 20 trillion unsecured U.S. dollars into the global financial system, which they initiated, was supposed to recapitalize banks and improve the situation on the stock market.
However, in fact, the situation hasn’t improved. And while the banknotes are being printed in the United States, the bubble doesn’t just inflate there. All in all, the world still needs the dollar to do business and pay for black gold. These excessively printed notes get back to Wall Street, ensuring low interest rates, artificial overvaluation and «stable» prices.
As Terminal wrote before (No.33/2011), the current «growing» market is in fact nothing but a mirage. If valued in gold, the Dow Jones Index has been falling since 2001, having updated the March 2009 minimum in August 2011 (05.03.09 – 7.04 in gold, 22.08.11 – 5.78), despite the fact that its face value in dollars shows that the U.S. economy (coupled by the global economy) has been successfully overcoming the crisis. The same situation is seen with oil: its price has been falling since April 2011 despite the «stability» of quotations on exchanges.
In fact, the «growth» observed today is no more than the accumulation of fresh debt, rather than the recovery of the real economy, which is still being fed by only a small flow of funds injected into financial institutions. But «more money» means «more debt» (and higher interest, which is pumping out more funds in order to ensure repayments to banks), and the system is unlikely to withstand this. The debt bubble, being the core of the global economy (about $129 trillion), has nothing else to do but burst. However, bankers earning record high profits claim that to support the economic growth» they will need another $100 trillion until 2020.
Hailing the measures taken at the 2011 Cannes G20 summit to being the eurozone out of crisis, the European Central Bank is also about to switch on the printing machine. Nevertheless, the debts that are to be written off will still be on the balance sheets of financial institutions, although the creditors have long been unable to repay them.
There are only two simple ways out of this situation: either default or money fraud. But there is no politician who is eager to push the default button, and if there is a volunteer, the banks (pulling the strings of their puppets) won’t allow it. All that’s left is the printing machine.
The truth is that the appearance of fresh trillions will inevitably push up prices of foods and raw materials, which are critical for many. Even in the «financially sound» United States, food stamps are assigned to 49 million out of 312 million people (more than the whole population of Ukraine!). Therefore, even if a total collapse in 2011-2012 is avoided by issuing loans to prevent countries from defaulting, the lives of people (mainly in transit economies) are unlikely to improve. Their standard of living will worsen with every dollar and euro printed.
You can read full article at the journal “Terminal: oil review” №45(579) 17 Nov 2011
