Diary

Forget AIG, think IMF, G20 and George Soros

Yes I know AIG has just been used as a clearing house for all of these bad paper, you know the       $93 bill given to other banks as per the CONTRACTS that they signed, but

The International Monetary Fund is poised to embark on what analysts have described as “global quantitative easing” by printing billions of dollars worth of a global “super-currency” in an unprecedented new effort to address the economic crisis

I’m no money man but even I can see that we are hearding towards the wheel borrow full of money for a loaf of bread. Think Germany in the twenties and Mugarba’s bread basket of Africa now. BO may yet get his way and be ablke to put his face on the dollar bill, the ten thousand dollar bill.

However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.

Simon Johnson, former chief economist at the IMF, said: “The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them.

“The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary.”

http://www.telegraph.co.uk/finance/financetopics/recession/4986287/IMF-poised-to-print-billions-of-dollars-in-global-quantitative-easing.html

And then you have the Fed buying Treasuaries

The experience of the 1970s in both the United States and Britain demonstrates that the Fed’s theory that inflation won’t co-exist with economic slack is wrong. Thus an over-inflationary monetary or fiscal policy could quickly produce accelerating inflation even while recession persists.

The Fed’s proposed purchase of $300bn of long-term Treasury bonds, when combined with the Obama administration’s record budget deficits, is particularly risky. Running large budget deficits and monetising them through central bank purchases of debt is a highly inflationary policy that has got plenty of emerging markets into trouble.

Broad money growth, whether by the M2 metric or by the St. Louis Fed’s MZM figure, has been running at over 15pc annually since last September. The $1trillion further expansion of the Fed’s balance sheet is very likely to accelerate this. The effect may not be obvious in the short term. But at some point, it is almost inevitable inflation will return, probably with force.

The Fed will then need to reverse policy with the speed and verve of a racing driver. Unfortunately, the odds are against it doing so before inflation has taken hold.

 http://www.telegraph.co.uk/finance/breakingviewscom/5014284/Federal-Reserve-is-now-playing-a-high-risk-game-with-inflation.html

So the pieces of the pie are just going to get smaller and it’s just going to take more pieces to buy that loaf of bread. Or am I wrong? Is this the end of the Dollar?