Greenspan & Bernanke share Nobel for eCONomics

Thus Spake Ben Bernanke

U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost. … …the Fed could find other ways of injecting money into the system–for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities … If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation. Remarks by Governor Ben S. Bernanke, Before the National Economists Club, Washington, D.C. November 21, 2002 (ellipsis mine)

Let The Games Begin

US Debt to GDP Ratio | Morgan Stanley Estimates. Click for a larger image.

In the last 5 years, more than US$10 trillion were printed and the world is awash with dollars. That is a low estimate. US Govt. has stopped revealing M3 money numbers.

Where did this money go? How was this used? “Lendings by US commercial banks in the period 2000 to 2004 soared by altogether USD 1,500bn to USD 6,750bn. In the European Monetary Union lending to the private sector by monetary financial institutions (MFI) climbed from roughly EUR 6,200bn end-1999 to not quite EUR 8,700bn at the end of last year.” – Allianz Report, Dresdner Bank. The recipients of this largesse, mainly Western banks have made (it is whispered) bad loans worth 300-400 billions dollars. I am confident that the actual figure is much higher.

The loans story does not end there.

These loans were in turn sold and re-sold, then packaged and mortgaged, derived and contrived – finally ballooning into the ‘sub-prime’ crisis. Welfare payouts by another name? Who will pay for this “lending”? US Consumers are not repaying their housing loans.

Some one has to!

Billions Are Not Big Anymore

The ICBC IPO received subscriptions of half a trillion dollars! IMF estimates of funds with Sovereign Wealth Funds (SWFs) is US$2-3 trillion – and “foreign assets under management of SWFs could reach US$6–10 trillion by 2013“. The same IMF study also estimates that global financial assets are currently valued at US$190 trillion. Commodity prices are going through the roof.

Very soon, major movements will be measured in trillions – thanks to the humongous printing presses, that the US has used in the last few years. Daily trading volumes total US$1.5 trillion in the Forex Markets. To that add trading volumes of debt markets, stock markets and commodity markets. Combined global trading volumes now cross US$3.0 trillion – and growing.

This degree of hysterical trading had made the US$ into a giant wrecking ball – which goes out of control very few years.

Asians Are Funding The US

Total US debt has crossed 300% of GDP (Federal+State+Corporate+Household sectors).

What this means is that if every income earning member of the US were to assign 30% of their income, every year, for the next 25 years (at current interest rates and borrowing rates) ), US debt will come to possible close to zero level. Government debt in comparison to GDP is fluctuating between 50% to now nearly 100%. Some claim that the debt burden is actually declining.

Who is stuck with this hoard of dollars – getting devalued daily. China (with more than 1 trillion dollars), Japan (another trillion dollars), Russia (400 billion dollars), India (300 billion dollars) are the top 4 countries.

I hereby nominate the US Federal Reserve for the Nobel Prize for Conmanship. They truly deserve it.

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