October 28, 2013 at 11:41 AM EDT
The Madness Continues
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economyAndy Sutton: Now that another annoying gut check moment is safely in the rear-view mirror, we can all get back to the business of filling the punch bowl yet another time. Yep, once again, we’ve proven ourselves to be among the dimmest of bulbs and are going right back to the bag of tricks that isn’t working anymore, but nobody seems to be noticing that – at least not on a meaningful level.  Yes, I’m referring to the umpteenth opening of the monetary spigots announced gleefully in the mainstream press this week. The whole world is awash in money, every one is rich, and the party is bound to go on for at least another hundred years if you listen to the misinformation misfit mafia.

Marc Faber recently shocked some folks with his prediction that we could soon see a trillion dollar per month monetization program here in the US. He’s probably right too. After all, it makes perfect sense when you consider the path we’ve taken over the past several years. If X won’t do it, then 2X must be the answer. Or maybe X2. This is the very nature of fiat-based monetary systems. The supply of money and credit expand, slowly at first, then exponentially into what Von Mises et al have dubbed the crack up boom. This very logical conclusion is based on simple economics, the laws of supply and demand, and the law of diminishing returns.

There are several analogies that we can use to illustrate. Most have been grossly over utilized, so we’ll go with the prototypical heroin addict. The addict starts out with a little and we all know what happens. Eventually he’s committing all sorts of mayhem to get his hands on just enough dope to keep him feeling ‘normal’. There is no more ‘high’ for him. That is precisely where we’re at on the monetary curve right now. Go back ten years and a small intervention like sending out tax rebate checks in 2001, and then again in 2008, gave a little boost. Now we’re piling on debt at a rate that is ever increasing. The slope of that debt curve keeps steepening. And where’s the economic high? As you’ll see below, there is at least one big-time banking analyst who is willing to go on the record by saying that a year’s worth of QE has done absolutely nothing. They’re taking all these heroic measures merely to maintain status quo. So if they want to create another false cycle of growth (infinite sarcasm), they’re going to have to take some monster steps, like what Marc Faber suggested.

Rest assured though, even if that measure is taken, there will in fact come a day when a trillion bucks a month in monetization will feel normal and the high will be no more. I guess the whole point of the first section of this piece is not to have high expectations for any new interventions. There is nothing new under the sun here. It is just more of the same. Maybe some different words will be used. We certainly will never default. We might execute a dynamic financial action, but we’ll never default. Not the United States. Words mean things. Don’t ever forget that.

New Central Bank Interference

Countries that have decided to continue to engage in the foolish game of competitive devaluation at this point are Canada, Sweden, Norway, and the Philippines.  Interest rate increases are on hold. Obviously the bigger central banks, namely the not-so-USFed, the ECB, and the BOJ are already engaged in to the Moon and back style devaluation. Of course this is a good thing we’re told.

“We are at the cusp of another round of global monetary easing,” said Joachim Fels, co-chief global economist at Morgan Stanley in London.

Here’s the chicken dinner winner of the week though and a prime example of the mentality that is run amok in the world of banking:

“If you look at where we are economically, versus where we were a year ago, we’re virtually in the exact same place,” Gary D. Cohn, president of Goldman Sachs Group Inc., said yesterday in a Bloomberg Television interview with Stephanie Ruhle. “So if quantitative easing made sense a year ago, it probably still makes sense today.”

However, not all the voices, even amongst diehard Keynesians, are in agreement on the moves:

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