Economic Implosion Ahead

One Last Look At The Real Economy Before It Implodes - Part 4 Submitted by Tyler Durden on 04/10/2015

Submitted by Brandon Smith from Alt-Market, (click here for Part 1, Part 2 and Part 3)

In the first three installments of this series, we examined the realities behind supply and demand, unemployment and personal debt, and national debt. As has been proven in each consecutive article with ample evidence, mainstream establishment numbers are, for the most part, utter garbage. They are not legitimate. They are meaningless.

The figures and stats that do have some truth to them are so obscured from the public view and unreported by the media that they may as well be state secrets. The average person has no clue of their existence because his primary sources of information are establishment-dominated. Even MSM talking heads and economic “analysts” are so mesmerized by the false version of the economic world that they have no point of reference when suddenly confronted with singular facts. Some people call this catastrophic behavior a “positive feedback loop.” It is a mainstream echo chamber that has become a financial tomb.

Now that I have covered the lies within our economy that I can prove absolutely, it is time to move on to the lies that are more difficult to pin down. These lies often slip past our investigations because the hard data that could be used to expose them is simply not available to the general public. In fact, much of the data is not even available to government officials. I am, of course, talking about the hard data behind the activities of central banks across the globe — the International Monetary Fund, the Bank for International Settlements and the Federal Reserve in particular. In this installment, we will explore the purpose of these lies; to hide the imminent destruction of our currency — by hook, by crook and by fiat.

In Part 3 of this series, real U.S. liabilities were revealed to far exceed official stats given by the Treasury Department (upward of $200 trillion currently owed, not owed in some distant future where none of us will be alive to worry about it). The debt singularity most responsible for this problem has been created through entitlement programs, as well as a Social Security program that the government uses as its own ever-cycling taxpayer supported personal slush fund, triggering a debt accumulation of more than $8 trillion per year.

How does our government (or any government with a central bank) continue to function monetarily if it is generating far more debt than it will ever be able to pay off in tax revenues? Well, our system does not really “function.” It just refuses to fully die. And, it does this through fiat money creation.

The quantitative easing programs, which allowed the Federal Reserve to conjure massive stores of fiat money out of thin air and purchase U.S. Treasury bonds (among other things), were a blatantly open admission by bureaucrats and central bankers alike that the government has not been capable of sustaining its own operations without fiat aid.

I’ll say it again: QE programs are in and of themselves hard evidence of government insolvency.  Solvent governments do not need to monetize their own debt obligations with a printing press.

After the limited TARP audit, which reveled a money creation scheme in excess of $16 trillion (overnight swaps are still a devaluing action though some MSM pundits argue they are not "debt creation"), there has been little information available to the public in regards to the true level of paper and digital money conjured from the ether.  We have no idea to what extent the dollar has ultimately been devalued, and we won't know until foreign investors and banks finalize their decoupling from the U.S. (a process that will likely accelerate this year).

One might argue, though, that since the finalization of the taper and the end of QE3 and the bailout programs overall, our system must be amply flush with cash yet again and the printing bonanza must have been worth the risk. Why else would the taper have been instituted at all? I would argue and have argued in the past that the taper was instituted not in preparation for economic recovery, but in preparation for economic collapse. The QE bailouts have stopped because they no longer serve any purpose in propping up the false economy.

For instance, the inspector general for the Federal Housing Finance Agency (FHFA) is now suggesting yet another bailout for socialist New Deal failures Fannie Mae and Freddie Mac, after the Obama administration reserved the right to take all profits from the conservatorship beginning in 2012. That's right, all that money that Fannie and Freddie supposedly made and paid back didn’t make an ounce of difference, as the federal government now steals profits in order to pay off other debts. In the meantime, companies like Blackstone reap the benefits as they purchase and bid on hundreds of thousands of homes for pennies on the dollar, turn them into rentals and artificially support the illusion of a housing recovery in the United States. (I would also note that Blackstone has conveniently served as an “adviser” to the U.S. Treasury throughout the Fannie/Freddie bailouts.)

As referenced in Part 1 of this series, stimulus measures have absolutely failed to inspire any semblance of recovery in consumer demand, and global demand for goods is imploding.

As referenced in Part 2, real employment has not improved throughout the duration of the Troubled Asset Relief Program, quantitative easing and zero interest-rate policy. In fact, it only seems to have stalled unemployment at about 23 percent.

As referenced in Part 3, stimulus actions have only served to create even more unmitigated debt while producing no tangible results other than a massive bubble in stock markets.

Poverty is at record levels. Welfare demand is at record levels. Average wages are falling, and prices on essential goods (except oil at this time) are rising. Global demand is visibly sliding into the same territory as in 2008/2009. Housing markets have become a corporately boosted feudalistic farce. And unemployment continues at a depressing level; meanwhile, people aren’t even counted as unemployed anymore because they’ve been jobless for so long.

At this point, at the onset of spring 2015, I think it is safe to say that alternative economic analysts have been right all along in our assertions that central bank stimulus measures are completely useless. Though some of the slimier day traders like to argue that they “tripled their profits” during the stimulus period and our “doom and gloom” means nothing to them, in their naivety they would be missing the bigger picture. You don’t play the collapse. In the end, the collapse will play you.

Now, it would seem as though the Federal Reserve has failed in every aspect of its bailout quest. But what are the consequences of this debacle?  The result is the displacement of U.S. economic standing. The U.S. is being made economically irrelevant.

China has surpassed the U.S. as the world’s largest exporter/importer and has long been far superior to the U.S. in manufacturing capability, making China the most valuable economic partner in the world. According to the IMF, China is now superior to the U.S. in trade standing and is soon to be the largest economy on the planet.

China has recently launched its regional Asian Development Bank, a kind of Asian World Bank. And nearly 50 countries, including European allies to the U.S., have rushed to sign on.

The talk is even growing within mainstream circles that China is about to decouple from the U.S. economy and, along with the BRICS nations, structure a new Asian-centric financial system that will “stick it” to the Western financial elites. This, however, is too simplistic a notion.

We are talking about the REAL economy in this series; and in the real economy, no nation with a central bank actually “breaks” from the New World Order. In fact, all conflicts between the East and West are only serving to further the cause of globalists and Fabian socialists.

China alone does not have the capacity to replace the U.S. as a primary driver for the global economy, nor does the Yuan have the capacity to replace the dollar as a world reserve currency. However, this is not China’s goal. It never has been China’s goal. China’s only purpose in its historic fiscal expansion has been to achieve inclusion in what the IMF calls the “global economic reset.” Part of this reset is the introduction of the IMF global currency basket system, or Special Drawing Rights (SDR), as a kind of centralized control mechanism for all currencies around the world. The IMF and China have continuously called for the SDR basket system to replace the U.S. dollar as the world reserve currency.

I covered this developing scheme in great detail in my article 'The Economic End Game Explained'.

Despite the hopes of some alternative writers that China will somehow break the chains of the central banking monopoly, every Chinese action since at least 2008 has been in preparation to become a full slave nation under the control of IMF policy. China has now officially submitted its currency (the Yuan) for inclusion as a reserve currency in the SDR basket.  China's central bank has openly called for the IMF to take a dominant role in the management of the world's currencies through the SDR basket system:

The world economic crisis shows the "inherent vulnerabilities and systemic risks in the existing international monetary system," Gov. Zhou Xiaochuan said in an essay released Monday by the bank. He recommended creating a currency made up of a basket of global currencies and controlled by the International Monetary Fund and said it would help "to achieve the objective of safeguarding global economic and financial stability."

The IMF conference on the SDR, which takes place every five years, is set to begin preliminaries in May and finish in October or November. It is widely expected that China’s currency will indeed be included in the SDR this year, that this will adversely affect the dollar's standing as the world reserve currency, and that the U.S. will have little capacity to stop such a development. That’s because American veto power within the IMF is likely to be removed, due to a lack of approval on funding measures and policy changes put to Congress in 2010.

In numerous articles over the past couple of years I have warned that the destruction of U.S. position within the IMF would be blamed on "political gridlock" over the refusal by Congress to confirm policy changes from 2010, and the brunt of the blame would be placed on "conservatives".  This past week my suspicions were supported by the statements of Larry Summers, a former Treasury Secretary and elitist who was partially responsible for the end of Glass-Steagall and the creation of the derivatives bubble, and the man who claimed "history will overwhelmingly approve QE".  Summers decried the end of the U.S. as the "underwriter of the global economic system",  also stating:

"Largely because of resistance from the right, the US stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their new economic heft..."

 

"With China’s economic size rivalling America’s and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the US have rendered it increasingly dysfunctional..."

Avid enthusiasm for China’s new regional bank has put the U.S. on the defensive, as supposed allies are joining the chorus calling for China to join the SDR.

This would make the Yuan the first currency not fully convertible to join the SDR basket. Meaning, it is difficult to directly invest in Yuan compared to investing in dollars. But this is exactly what the IMF wants.

The Asian Times put it rather bluntly but honestly:

"Currently, central banks can’t include yuan holdings in their foreign exchange reserves. However, via inclusion in the SDR basket, the currency will effectively enjoy a “back door” where convertibility is concerned. The upshot, according to Citibank, means increased yuan demand from central banks and further integration of the currency into global capital market flows.

 

Importantly, China has espoused an “internationalisation” of reserve currencies away from U.S. dollar hegemony and dependencies on local economic fluctuations on exchange rates and stability. The yuan inclusion in the basket would be a step towards a more multi-lateral currency world. While full convertibility may still be far away, China’s ability to have a global reserve currency may soon be upon us."

Yes, that’s right, China’s inclusion in the SDR will HELP the process of marginalization of the dollar and aid in the ascendance of the SDR as a world reserve mechanism. And as China becomes a currency powerhouse in its role as the No. 1 economy in the world, the only way central banks around the planet can benefit or “invest” in the Yuan will be by stockpiling SDRs! Demand for SDRs will be cleverly boosted by natural demand for the Yuan. This is how a global currency structure begins.

The only true beneficiaries of this cycle will be the IMF and those elites who desperately want a totally centralized global economic system.

In the meantime, as the dollar loses its world reserve status, it loses the ONLY pillar of support keeping its value somewhat stable. As the dollar falls, U.S. citizens will be reduced to Second World or Third World economic expectations. Employment and wages will continue to dissolve, while the margins between the “haves” and “have nots” will continue to grow. In the worst-case scenario, total chaos would result followed by an international intervention to “save us” from ourselves. Our currency would likely be permanently pegged to the SDR basket, just as Argentina’s was pegged to our dollar after its collapse. And the IMF would own the U.S. rather than the U.S. owning the IMF, as is the common delusion.

As stated earlier, Federal Reserve stimulus actions “seem” to have failed miserably. Now our nation is facing a firestorm. But I would submit that the Federal Reserve has not failed in its mission. The Fed’s purpose is not to defend the stability of the U.S. economy and the dollar; the Fed’s purpose is to destroy the stability of the U.S. economy and the dollar. Thus, the Fed has succeeded in its mission. And I believe a full audit of Fed policies and actions would prove this fact beyond a doubt.

I will continue to outline the endgame for globalization that is under way in the next installment of this series, including how central banks in foreign nations collude with each other and are managed by supranational entities like the IMF and the BIS. The implosion of America serves a very particular purpose. It is not a product of blind coincidence, fate, political stupidity or corporate greed. It is an engineered event meant to clear the way for an even more sinister economic environment designed to establish a final economic empire with the purpose of permanently enslaving us all.

http://www.zerohedge.com/news/2015-04-10/one-last-look-real-economy-it-implodes-part-4