So, what does it mean?

The EU announced a nearly 1 trillion dollar program of loan guarantees and bond purchases to "shore up" the Euro and effectively preserve the Eurozone from imminent destruction.  Also, the Fed has announced it is re-opening dollar swaps with key central banks around the world in an effort to support the Euro.  

What does this all mean?  Well, to coin a phrase from Jim Sinclair, this is Quantitative Easing to infinity, all entities will be bailed out everywhere, all the time.  The course is set for the destruction of all paper currency.  

When a central bank says it is providing loan guarantees and buying bonds, in an effort to support prices in the bond market, it is saying it will be providing liquidity (money) to inject into these markets.  This is a false signal designed to counter the true signal that the debt markets are sending, namely, that debt has gotten out of hand and is not sustainable.  The central bank does not sit on a pile of money that it has saved for a rainy day for such purposes.  No, it makes the money required on the spot from thin air then adds a ledger entry on the central bank "balance" sheet, simultaneously entering the transaction as an asset and a liability.  Try that at home!  

It goes like this: say the central bank wants to buy bonds, they create the money from nowhere and purchase the bonds on the open market.  The ledger entry shows that they now hold the bonds as an asset, but at the same time they show the money they made out of nothing as a liability, that presumably must be paid back at some point.  In this way they claim that they are net neutral, balanced.  Now what is the effect in the markets and economy?  The effect is that new money has entered the scene that was not there before.  It was created from nothing remember.  The temporary effect is to increase the availability of money and underpin markets that are suffering lower prices, in the Eurozone's case bonds.  The market now depends on this extra money to support prices and maintain confidence.  This is important to the issuers of bonds because the debt they sell must be paid back with interest.  Interest rate is associated with demand, and bond prices reflect demand.  

The money goes into buying the bonds that the governments are selling.  The government deposits the money and proceeds to pay for expenditures.  The receivers of the expenditure payments then deposit the money into various banks.  The banks then do what banks do with new money that comes in the door, they send it back out in the form of loans and such.  What is interesting here is that through the magic of fraction reserve banking, what goes out the door of the bank is more than came in.  Specifically 90% more.  You see, the original money that came into the "appears" to reside in an account.  Then the bank loans out 90% of the balance, retaining 10% as a cushion in case the original depositor wishes to withdraw his money.  I used "appears" because in reality 90% of the account balance went out of the bank in the form of a new loan, drawing interest of course for the bank.  Yet, if the original depositor comes and and wants to withdraw the entire balance, mysteriously the missing 90% reappears.  The missing money comes from other depositors accounts.  The net effect is that for every 1 dollar that enters this process, 1.9 leave it.   

In this manner, the overall money supply grows.  As it grows, the value of each monetary units decreases because suppy expands while available good and services remain static.  This is why prices will rise during monetary inflation.  It isn't that the value of the goods and services are changing, it is that the monetary units used to purchase them are getting weaker and it requires more units to transact a purchase.  In a nutshell, your purchasing power is being eroded.  Where is your purchasing power going?

To answer that question, you have to go back to the original monetary unit that was created out of nowhere and ask what was its purpose?  In this case it was to purchase a bond.  What is the purpose of a bond?  It is a loan that after a period of time is paid back with an associated interest payment.  Who receives the interest payment of the bond?  Well, that's easy, the bond holder.  There you have it, your purchasing power is being eroded to pay the bond holder an interest stream. 

 "It seems you have been living in a dream world Neo..."  - Morpheous 

Your productivity, which is nothing more than your output divided by your cost, is being mined in order generate an income stream to the bond market.  Do you feel like you are free?  Or do you feel like you are plugged into the Matrix where your very life energy is being sucked from you to support your owners? 

The Bond market is the most powerful force on the earth because it owns every man, woman, and child, and everyone to come as long as this system of debt is perpetuated.  

Our central bank, The Fed, has announced they will be joining the program also.  They will be initiating currency "swaps" in an effort to help solidify the dissolving Euro.  What is a currency swap?  It is a fancy name for a a good old garden variety loan.  That's right, our Fed is going to be loaning to various central banks around the world in an effort to strengthen the Euro.  How is this done.  See above.  The Fed will make the dollars it will loan out of nothing.  It will then swap them for "collateral" the central banks will put up.  What kind of stuff makes up this collateral?  Who knows, nobody is allowed to audit the Fed and they ain't telling.  The new dollars will enter the global marketplace and inevitably the purchasing power of each unit will be diminished.  As I write this, the broad dollar index is down 138 basis points on this news.  That's right Neo, your purchasing power is being mined to underpin the Euro, to underpin the the European bonds, and of course to provide the sustenance to the bond market.  Pissed yet?

It gets even better boys and girls.  All this Hocus Pocus is based on generating new debt to facilitate payment of existing debt.  The bond market signals the need for new debt when the interest it demands starts to rise.  It is saying there isn't enough money out there to service the existing debt levels.  It is saying since there is insufficient money to pay the interest stream and return the original capital, risk of default and interruption of interest is rising.  The bond market will continue to raise the interest rate it demands until the central banks get the message and inject new money into the system.  When this happens, the bond market is again happy and makes new debt available at more favorable interest rates.  

So, I hope you realize now that you are caught in a trap.  A trap that is seemingly a perpetual debt machine designed to do one thing, provide bond holders a steady stream of interest.  The machine is built upon this simple inequality:

P <  P + i ; where P is principle and i is interest.

All of our money P was created by a debt transaction.  To pay back the debt associated with this creation of our money supply, principle plus interest must be accumulated, or P + i.

P <  P + i   states that our money supply P is always less than P + i, therefore always insufficient to facilitate repayment of debt.  Therefore, there always must be inflation of the money supply P to enable payment of interest and repayment of principle.  Since money supply P is generated by creating new debt, the total indebtedness increases, which increases the flow if i or interest.  As the money supply expands, your purchasing power diminishes.  Over the last 100 years, this process has eroded 97% of the dollar's purchasing power.

Please stop here and watch Renaissance 2.0 .  It explains the debt machine in great detail.  Prepare for Shock and Awe!

I have stated something as fact that may not resonate or that you may skeptical about. Namely, all money is created through a debt transaction.  This is fundamental and is apparent by definition upon examination of the Federal Reserve system and fractional reserve banking.  Do not take my word for it, read The Creature from Jekyll Island and learn this fact for yourself.  Awareness of the truth of this fact is the "red pill" that will free your mind from the Matrix. 


There you have it Wal Mart shoppers.  We have entered the spin cycle now where the vortex of ever escalating debt will require ever escalating money creation.  After all, the last remaining 3 cents worth of purchasing power has yet been mined.  When all wealth has been siphoned from the world through this debt machine the game will be over and you will be as they say Shit Outta Luck.  


You should be good and pissed at this point.  My hope is that it is the case and you are pissed enough to wake up and and start doing something about it.  Like educating yourself.  Like networking with others that have taken the "red pill."  Like spreading the "pill" around to awaken others.  Quit voting for those who want to steal all you have and enslave you and your family for perpetuity.  Quit consuming the propaganda and prepare yourself for the inevitable crash of this debt based system.  This world will need leaders when the current ones are exposed as the criminals they are.  Be a leader instead of a slave.  


This blog is a starting point.  Use the feeds and links to begin your journey outside the Matrix.