Has QE & The Rest Been A Success?

What Has Really Been Going On With The US Economy & Statistics Reporting?

I have been hesitant for awhile in terms of writing this article, but I think the truth is important and
also necessary if one is to be prepared for what is coming next. One can only make sound personal
decisions if you have the truth and understand what is really going on (as opposed to listening to
government & political propaganda). And as I write this I am reminded of some dialogue from the
movie “Dune” (based on a science fiction novel by Frank Herbert) which is “the first step in
avoiding a trap is knowing of it’s existence in the first place”. In other words, my initial trepidation
in writing this comes from the fact that America’s middle class now have one thing they have been
lacking for a very long time, which is optimism (due to Trump’s election). However, hope is not
enough as there are many things going on & that have gone on over the past few decades that have
lead up to the point where we are today, both economically & politically. So, I’m not trying to kill
hope or optimism, but rather alert you to the “trap”.

I am going to focus on the economics (don’t yawn, it won’t be boring or at least I hope it won’t be)
and I am going to include what seems to be “disjointed” information although it is all connected and
relevant. However, I just want to make a quick political comment as well. I do support current US
President Donald Trump and I too have cautious optimism he can & will clean out the corruption
and malfeasance that has plagued American politics for decades. However, with that said, while
that in and of itself is a tremendous task there are still the lingering economic issues which quite
frankly he did not create, and which he may not be able to control. In addition, the overwhelming
majority of commentaries & analysis I have seen on social media has centered around the political
(“Q” post analysis and the like) without much focus on the extremely dangerous economic situation
the US finds itself in. In my opinion, this is perhaps even more important than the political theater
because while televised “perp walks” may sooth the national emotional anger that is out there, the
economics will affect each and every one of you directly, very personally. And there are some
things coming, or scenarios which are more likely than not (based upon the statistics & even
history) regardless of which bad political actors are put in handcuffs. So, without further ado: What
really is the truthful situation with the economy? How did we get here & where is it going?

Our commentary is going to begin with 2008 because that was the more recent beginning of where
we are now. What actually happened back around 2008? What caused it? The short answer is the
US financial system had the economic equivalent of a stroke or massive cardiac arrest. Banks &
financial institutions were extremely over leveraged, the amount of consumer & business debt
exploded, lending practices were extremely lax resulting in very poor quality mortgages (plus other
consumer loans), financial derivatives were created and traded “over the counter” without
government / financial regulatory oversight AND banks stopped lending to each other out of fear. In
short, too much debt was created and not very good “credit worthy” debt at that, particularly in the
housing market. In other words, housing prices went up faster than income because a typical credit
fueled asset bubble was created in real estate (and the economic policies since 2008 has been geared
towards re-inflating that bubble so the banks are not sitting with “upside” down mortgages,
meaning the mortgage loan is greater than the house value).

This issue of banks not lending to each other is VERY important because that was the catalyst or
“black swan” that tipped the “house of cards” over in 2008 AND it is happening again, right now in
2018. If you visit the US Federal Reserve’s own website you will find a graph showing just that.
And what you will also see is that the last data produced was January 3, 2018 as they claim to now
discontinue this statistic. But why? Why would you all of a sudden stop reporting on some
financial data to the public? Maybe it’s so bad they don’t want the public to know?
(https://fred.stlouisfed.org/series/IBLSCBW027NBOG)

What was the response by the US Federal Government and US Federal Reserve Bank back in 2008
with regards to the “Financial Crisis”? Most of you already know the terms but may not know what
it meant in terms of actionable activity. TARP, TALF, “QE” or quantitative easing (and the various
other programs, acronyms and “activities”) all were done to bolster the financial system but NOT
the overall general economy. The primary concern of the central bank is the banking system, not
you (and such financial salvation of the bankers is done at your expense, indirectly). And the
definition of “Quantitative Easing” in simple terms is “the introduction of new money into the
money supply by a central bank.” I want you to remember this general definition because they have
been toying with inflation in order to starve off deflation, and to re-inflate the housing bubble as
well. Under our present debt based fiat currency system the central banks are scared to death of
deflation as such is a death knell for them. It’s very good for you IF you have cash and no debt
because the currency buys more as prices depreciate under deflation. However, if you have
extensive debts and assets acting as collateral for those debts, the assets drop in value under
deflation, causing the loan amount to be greater than the asset or collateral value (this is why the
bankers WANT inflation over deflation any day of the week).

So, how much have they been trying to “inflate”? In 2008 they expanded the money supply (M1)
by 14% (when the GDP contracted negative .03%), in 2009 they expanded 7.67% (when GDP was
a negative 2.8%), in 2010 they expanded by 10.52% (when GDP grew by a positive 2.5%) and in
2011 they expanded by 18% (when GDP grew by 1.6%). Between 2016 & 2017 the US economy
(GDP) reportedly grew by 2.3% and yet again they expanded the money supply by roughly 10%.
And in mid 2017 alone they created an additional US$1.7 Trillion Dollars worth of “new” currency.

But here is another thing to consider. Perhaps the GDP growth numbers are bogus as well? If they
tell you the economy grew by US$1 Trillion Dollars and they pumped, printed, created US$1
Trillion worth of “economic stimulus” into the economy then the true or real growth rate is ZERO.
Real or true “organic” economic growth happens when Fred’s Diner needs to hire 3 more waitresses
because Fred is so busy he needs more help. When the local refrigerator manufacturing plant (if it
still exists) needs to hire 15 more people for the assembly line because they can’t keep up with
demand, that is real organic economic growth. But simply printing money and dumping it
somewhere in the economy is not organic growth. It is a mirage, a fake or false positive in terms of
what shows up in the GDP numbers. https://www.statista.com/statistics/188165/annual-gdp-
growth-of-the-united-states-since-1990/
In theory, with a fiat currency system (money or currency not backed by gold, silver or other hard
commodity asset) the “value” of the currency is derived from the GDP. If any central bank
continues to “print” more money (actually it’s mostly digital these days and not actual paper money
that is created) than the economy is growing, they are INTENTIONALLY devaluing or debasing
the currency. In other words, they are creating INFLATION which eventually shows up in assets
bubbles (higher & higher house prices, higher & higher stock markets) and or consumer prices.
And since wages never keep up with inflation that means that the average middle class person is
losing ground financially speaking, each and every year. This is why all the people I have recently
spoken to in “Middle America” keep telling me they don’t understand why the stock markets kept
hitting new all time highs but yet where they live they have not seen any economic growth. It leads
one to believe you are crazy or doing something wrong yourself as you continuously hear the
economy is getting better & better but you don’t see it where you live.

One secret I can unfortunately tell you is that some government statistics issued for public
consumption are intentional political lies which started about 40 years ago when the methods were
“changed” to create the lie. Remember that the average person is constantly being fed just a few so-
called key statistics about the economy. What are they? The stock market indexes (Dow Jones
Industrial Average or AKA “The Dow”), the unemployment numbers and the inflation rate. The
numbers or statistics for unemployment & inflation especially are outright manipulated fabrications.
Which is to explain that the data collected is real and correct (and you can find and see all of it for
yourself should you wish to as it is publicly available) but rather “how” they tabulate the end
numbers fed to to public is completely bogus. Why would they do such a thing?

Well, let us take the unemployment statistics as one example, which were “changed” in terms of the
tabulations back in 1994. Why was the tabulation method changed at that particular time? Because
the North American Free Trade Agreement was due to go into effect January 1, 1994 and they knew
it would have caused a politically unsavory spike in US unemployment as manufacturing jobs were
moved to Mexico to take advantage of cheaper labor costs. So, the way you hide these unpopular
numbers is to simply change the tabulation methods. One such change is to stop counting people
that have been unemployed for more than 12 months under the argument that they must not be
really interested in finding a job and are “voluntarily” unemployed. The other thing they do is
count part time workers and those now working for minimum wage at a fast food restaurant that
was previously earning US$25 per hour in some other job. Re-define the categories, shove some
statistics from column A over to column B and presto chango the unemployment rate that is
reported goes down.

Inflation is the other key statistic they have “manipulated” as well, and they did this back in the
1970’s to try and hide the massive inflation created when former US President Nixon took the US
Dollar off the gold standard. Many of the older folks reading this will remember Gerald Ford’s
WIN campaign (Whip Inflation Now), as if some kind of collective positive thinking will push
down the price of chicken in the grocery store. Inflation really took off under the Jimmy Carter
administration and if it wasn’t for Paul Volker at the Fed, the US would have ended up like
Venezuela today. But getting back to the manipulation tactics, how did they monkey with the
numbers? Very simple my dear Watson. They stopped counting food, fuel & education costs in the
numbers (they said food & fuel numbers are too “volatile” to be counted). So, as Americans stop
eating, stop driving their cars and stop educating their children, the inflation numbers look
“marvelous darling”.

John Williams of Shadowstats, who does some interesting work & analysis using the older “non
manipulated” way of parsing the government’s own numbers says the true rate of inflation right
now, in 2018, is actually 6% and not the 2% number the government is telling you. He also tells us
the real or true rate of unemployment right now in the US, in February 2018, is 21% (shocking, is it
not?). But getting back to the 6% inflation number, this also means that we do now already have
“negative interest rates” in the US because no matter what you put your money into (savings
accounts, bank certificates of deposits, government or corporate bonds) you are never earning
enough interest to at least keep even with inflation. http://www.shadowstats.com/article/no-438-
public-comment-on-inflation-measurement

Ms. Lynette Zang, chief market analyst at ITM trading, has called all this nonsense going on since
2008 a great economic “experiment”, but is it really? I mean, is it really true throughout human
(and economic) history we have not been here before? As a fan of history myself I can assure you
that there is nothing new under the sun economically, politically or otherwise,. For example, when
Julius Caesar died and made his nephew Octavian his heir, Rome was saddled with high
unemployment and cheap imported foreign labor as immigrants poured into Rome looking for work
(and willing to work for less than a Roman citizen). What did Octavian do? He embarked on a
massive Keneysian like government construction stimulus program, insisting that Roman citizens
be given first preference in all jobs created by this. New buildings, roads, aqueducts and the like
were built on an unprecedented scale, and it worked to solve the unemployment, but it also did
something else. It created inflation and asset bubbles that eventually caused a banking crisis under
the reign of his heir Tiberius. What did Tiberius do? He bailed out the banks, but he did with a 10
year loan from the government treasury. The Roman banks were recapitalized BUT they had to pay
the Emperor back or face the consequences. Following Tiberius (and Claudius) we had Nero,
famed for supposedly playing his fiddle while Rome burned, but also famous for being the first
Roman Emperor to pay off the government debts (and have more money to spend) by debasing or
devaluing the money. Otherwise often referred to as “clipping” coins, he had the gold and silver
content of the money reduced and replaced with cheaper base metals without telling the public of
course (keep in mind no government openly admits they are debasing or devaluing the currency as
the “gig” only works when the populace doesn’t know and still has faith the money is worth what
they say). This currency or money debasement went on for many generations after Nero and it did
take 500 years for the Roman coins to be eventually deemed worthless (almost no gold or silver and
almost all base metals). I tell you all this because debasing or devaluing the currency by
governments is nothing new. The only difference today is we have fiat paper currency not backed
by anything and we have modern technologies that allow both money & information to flow around
the world in a nano second. And modern progress only means we can do it all that much faster
(US$1 from 1913 now worth about 4 cents, or we did what the Romans did in 100 years instead of
500).

With all this said, what is the “real and present economic danger” for the average US citizen? I
would say inflation as official government / central bank policy. The remedy or economic salve for
the 2008 financial crisis was basically an official policy of inflation. And the re-inflation of the
assets has in fact worked. We know for example that housing prices are up 47% since 2011 albeit
wages have only gone up 15% (again, showing low “official” inflation statistics to set the narrative
there is no need for wage increases or COLA, cost of living adjustment, for things like Social
Security). We also know the stock markets were pumped up exponentially when the true “organic”
economic growth would indicate otherwise (and just as an FYI, company insiders have been selling
their own company stocks like mad during the last quarter of 2017 all the while using their own
company funds for corporate stock repurchases on the exchanges). But “targeting” or trying to
control inflation is like letting lose 30 alley cats into the woods and then trying to round them all up
6 months later. My concern for the average US citizen is that they will be hit with double digit
inflation very soon and “mum” will be the word from government wonks.

About The Author: This article was written by John Schroder of Ascot Advisory Services.
John's firm has been helping clients in the Dominican Republic for the last 18 years to date with
residency application services, naturalized citizenship filing, banking assistance, incorporation
services and legal services pertaining to real estate (title transfers, legal representation at closing,
sales contract review). In addition he writes articles like this one and produces a newsletter for his
clients & subscribers. You can contact him by telephone at 809-756-1917 or click the about the
author link above to reach a contact page to send an email directly.

If you liked this article and other articles by this author, please show your support by visiting
https://www.patreon.com/John_Schroder For less than the cost of a cup of double latte mocha
something or other coffee, you can help support independent journalism and the straight talking
alternative media. If you prefer to make a one time contribution of US$10 or more (instead of
monthly support via Patreon), you can also use paypal by visiting:
https://www.paypal.me/JohnSchroderAscotAdv