Quantitative Easing: The Pestilence Poisoning Probity

Saxo Bank has a new infographic on the disgrace underway by those in control of the USA and UK now known as Quantitative Easing.

Click here for the full infographic

Used beer bottle caps, £'s and $'s made worthless by QE.

Yesterday morning on a posting linked here, I queried the value of a working man's home for which he had paid over 35 years, with the following question:

What is the home of the productive worker actually worth?

The maximum value, expressed in dollars, pounds, euros, rand, new shekels or even beer bottle caps, is of course, the amount a willing buyer is voluntarily prepared to  pay to a willing seller, the last such transaction thereby becoming the going market price.

QE puts us on a trajectory where the actual number of dollars, pounds, euros, rand, new shekels or even beer bottle caps you possess, becomes an increasing irrelevance, as more and more useless, faux-used beer bottle caps are produced, reducing their value closer and closer to zero. If I can sell my home for 50,000, 100,000, 500,000 or even millions, when the value of the £ or $ is rendered worthless due to QE, the actual number of such units attained upon the sale becomes an ever greater irrelevance.

As this blog has repeatedly and consistently argued down the years, real value has to be returned for the units exchanged for a working man's labour. Gold served that function in the past, a basket of commodities and food values from the farmland yield at a nation's median latitude, could easily be computed with modern technology, even the market prices of some of the rare earth minerals making these technological advances, could now even be included in any agreed formula.

The outcome has to be, that the money received by a worker selling his home should be at least the equivalent to the thirty-five years worth of labour, (in my example) assessed against something non-inflatable by self-serving and often crooked politicians.

Ironically, removing productive land from farming, (as mentioned in my first posting of today) while allowing unlimited mass immigration, as recent British governments have achieved, while simultaneously debasing the currency, naturally hastens the moment of complete non-sustainabilty, as clearly indicated in all the news headlines of today!

QE explained - a riddle of beer bottle caps!

Assume, for the sake of this argument, that your government allows all productively employed adults one bottle of beer per week. The beer caps from such production and consumption are to be saved and after a period, say five years, can be presented as a deposit allowing the purchase of a home. The balance being paid off against you giving a commitment to surrender all your beer caps to the government, during another longer period of production and consumption, let us say thirty more years. At the end of that time the home becomes yours.

Used beer caps have thus become a valuable commodity in your society.

Now let us assume, those politicians who run everything in your country, are completely without scruples, and in order to obtain fancy entertainment, foreign travel and other favours; secretively and on the side, produce extra quantities of used beer bottle caps, over and above those needed to cap the entire output of the nation's breweries, to hand to their friends in productive industry. In order to retain their power, at every subsequent election, they also promise their voters some small portion of this extra bottle cap production, while nevertheless denying that beer cap supply exceeds the total national beer bottle production.

Worse follows with the digital age as devious financial institutions, discover they can produce virtual beer bottle caps, many of which, are likewise returned to the politicians, so that they may remain in power and purchase whatever they need in order to keep secret the now widely excessive beer bottle cap production from the wider population.

As more and more virtual bottle caps are produced, the demand for them gets ever greater and greater, so that after thirty years, even the productive worker now believes his home is worth two, three, four or even five times the number of bottle caps he has actually invested.

When everybody knows that this has occurred, and deep inside accepts that used beer bottle caps are actually worthless, the politicians abandon pretence and openly commence beer cap production, as if there were no tomorrow. This is called Quantitative Easing!

So here is the riddle: What is the home of the productive worker actually worth?

My answer will be posted here around this time tomorrow morning!

Bernanke fires a blank - but still in a hole!

Thank heavens for that, no more QE for the moment.



H/T Daniel Hannan