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QE CasinoCAUSES AND EFFECTS - CONT'D

QE jobs creation - Intended

We have mentioned before that one of the indirect effects sought by QE is the increase of jobs. To a degree this has been accomplished.

QE jobs stagnation - Achieved

However, this has only been the case in US and even this is dubious considering how US measures jobs. It may all be a statistical mirage. On the other hand, there has been no significant job creation in UK, Japan, Europe and Scandinavia, all of them engaging in formal QE.

QE reduction in systemic risk - Intended

One of the big propaganda pieces of Central Bankers is that through the purchases of "toxic waste" from companies "too big to fall", the systemic risk of a "cross cascading default" event has been significantly diminished. Basically, we are now more resilient if (when) the next 2008 event appears.

QE increase in systemic risk - Achieved

The sentence above is quite comical. As we have seen through the support of moral hazard and what is essentially free money, QE has achieved a widespread culture of gambling in financial instruments, assets, derivatives and junk bonds. Financial institutions are now far worse than they were when 2008 hit.

QE GDP growth - Intended

Through the economic "stimulus" nation's GDP begins to grow.

QE Real GDP drop - Achieved

The problem with measuring the effect of QE on a GDP is that the GDP counts printed money as "wealth". As such it is idiotic to equate GDP growth to economic activity. In order to know if there actually is and increase in economic activity we would have to calculate a different parameter altogether (see GDP Keynessians Vodoo Economics). A real GDP (if such a thing could even be calculated) would show that QE had no effect on the economy at best and a negative effect at worse. We must also point out that such calculations can only be performed on a multi-year basis because QE and normal free market clean-up process (if allowed to operate) take time.

LETS RECAP

This is what we have so far.

Intended Effect

Achieved Effect

Economic stimulus (local)

Very poor economic stimulus (local)

Re-capitalization of banks by purchasing "toxic waste"

Banks de-capitalized by purchasing other "toxic waste"

Moral hazard effect minimized in terms of financial institutions

Moral hazard effect maximized in terms of assets

Mild inflation created

Mild inflation instead of deflation was created at the cost of future financial devastation

Generalized inflation

Asymmetric inflation appears in assets creating local bubbles

Market clean-up averted

Market clean-up averted thus mega-sized inefficient, ineffective and dangerous financial organizations continue to operate

Good inflation created

Good and stable inflation won't last. Eventually economies will go into oscillating bouts of inflation followed by recessions.

No hyperinflation

No hyperinflation - yet - but unavoidable

Bond markets managed for the greater good

Bond markets destroyed

Stable economy

QE is setting the world for the biggest boom and bust in the history of humanity

Currency devaluation helping exporters

Currency devaluation hampering importers, creating currency wars, exporting inflation and developing a protectionist environment

Helping debtors

Sinking creditors thus destroying capital

Some trade-offs

Destroying pension funds and savings organizations

Revive local economies through re-capitalization

QE "capital" exported into other countries creating non-local asset bubbles

Helping local workers

Making rich people richer to the detriment of poor people

Local job creation

Local job stagnation

Reduction in systemic risk

Increase in systemic risk

GDP increase

Real GDP decrease

As you can see, QE produces some mild benefits locally at the expense of gigantic local and non-local economic issues, issues that will become catastrophes in the mid to long run.

CONCLUSION

QE is more of the same but at a massive scale. More mumbo-jumbo and voodoo economics from the same usual suspects that brought you the "managed" economy, "managed" markets and that continue to "manage" your life into oblivion. QE is nothing more that the continuation of politicians' jobs through other means. You don't count. Your family does not count. Your opinion is irrelevant. Your economic future has been assimilated and your resistance if futile. Evolve or die… in misery.

Allow us to simplify:

Quantitative Easing is al cons! F&P

But then again there is always the other point of view. Maybe you believe that your government is here to help. That your job was somehow created for you by your government. That your wellbeing was somehow given to you by your government and not through your efforts. That's all right. It's your choice to be in gross error. We won't hold it against you. Just one thing, we recommend you frame that low, low denomination bill you are keeping in your pocket. When the real catastrophe starts, you may want to have a memento pointing out where it all started.

Note: please see the Glossary if you are unfamiliar with certain words.

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