The U.S. is a Leveraged Basket Case with Peter Schiff

Schiff like many are incorrect on the FED printing money as they have no mandate to simply create money out of thin air like digital dollars and are limited. The FED can replace worn out paper and coins every month which then Treasury creates and can tell treasury to print a limited amount of paper when banks thru lending increases the actual money supply so there are no real shortages in circulation. Both domestic and foreign banks create money by lending and 75% of all money created is outside the US and not counted in the official money supply numbers. The FED simply creates what is called “elastic money” or “reserve assets” which are IOUs which sit on the FED balance’s sheet as liabilities with assets on the other which are the treasuries and other gov debt they swap from banks. Banks must use their own liquidity to buy treasuries to meet the QE goals and receive in return “reserves” credited to their accounts at the FED or branches. This increases the reserves of banks but does not increase the money supply but the monetary base. QT is the reverse as the FED gives back similar debt to banks and dissolves the reserve assets which is why it is called “ELASTIC MONEY”. These are not legal tender and never enter the real economy but banks can use them as collateral to borrow from the FED, other banks or buy more treasuries. If you notice QE takes liquidity from the real economy. Previously when banks were not lending and as existing debt was paid down this also removed even more liquidity from the real economy. Banks which gave up treasuries to the FED also no longer receive the income streams from treasuries, MBS, etc. and this is one way the FED makes money and not banks then reducing liquidity available to lend.
Now as Congress passed the massive stimulus this year and last foreign central banks, governments and entities all moved dollars to the US and bought this debt which then increased the money supply which everyone thinks is from the FED simply printing which is false as they have no mandate to do so. The new BBB bill actually allows the FED to create legal tender out of thin air using a programmable currency controlling what you can purchase bypassing banks which at least create an asset and liability when created. Without central bank intervention in the west as they all over borrowed and now unsustainable they could not service or sell more debt hence the new bill. This would have the FED simply create what is needed and fund bankrupt gov pensions using UBI. Dr Lacy Hunt has said about this: From former FED alum Dr Lacy Hunt
“Thus, Fisher is correct.
Friedman’s famous phrase that “inflation is always and everywhere a monetary phenomenon” would only hold if the central bank’s liabilities were legal tender. But, for that to happen the Federal Reserve Act would need to be rewritten and that is very unlikely, even more so in front of the Congressional elections in 2022.” This is why the left wants and needs the new bill to fund everything including illegals with incomes and medical, pay pensions, fund the US gov as part of the Great Reset is defaulting on all western sovereign debt. This bill also allows the FED to convert or monetize the trillions in liabilities they have created to obtain treasuries, MBS, etc. to legal tender or programmable currency or dollars giving the FED in this bill trillions in dollars and wiping out their debt which is the reserve asset IOUs or elastic money.
Now looking at the FED’s velocity of money it has been falling since 1999 and below Great Depression levels. A sustained increase in the velocity creates demand inflation which by the FED’s own data we do not have but cost-push inflation caused by structural problems in the economy like lockdowns, mandates, green agenda BS, etc. Monetary policy tackles demand inflation which we do not have but cost push inflation which raising rates makes things worse as this does not fix the structural; problems and will collapse the economy and world economy which the bond market is better on. Demand is not an issue as Steven Van Metre explains in his recent vid. “China, Germany, and the U.S. Economies are Rapidly Slowing” https://www.youtube.com/watch?v=jAkmV08TyFw “From China to Germany, to the U.S., the global economy is rapidly slowing. In today’s show, you’ll learn why a global recession is imminent. As global growth slows, demand wanes, and central bankers are forced to chase inflation, the probabilities are increasing that a global recession is imminent.”
This is not an issue of slowing demand to fight inflation as it is already been slowing with higher prices again from structural problems and until fixed prices will go higher. Germany laid off 879,000 last month and previously in Nov 712,000 as demand is simply not there as again prices rise from cost push inflation.

1 COMMENT

jjh January 18, 2022 At 6:15 pm

Schiff like many are incorrect on the FED printing money as they have no mandate to simply create money out of thin air like digital dollars and are limited. The FED can replace worn out paper and coins every month which then Treasury creates and can tell treasury to print a limited amount of paper when banks thru lending increases the actual money supply so there are no real shortages in circulation. Both domestic and foreign banks create money by lending and 75% of all money created is outside the US and not counted in the official money supply numbers. The FED simply creates what is called “elastic money” or “reserve assets” which are IOUs which sit on the FED balance’s sheet as liabilities with assets on the other which are the treasuries and other gov debt they swap from banks. Banks must use their own liquidity to buy treasuries to meet the QE goals and receive in return “reserves” credited to their accounts at the FED or branches. This increases the reserves of banks but does not increase the money supply but the monetary base. QT is the reverse as the FED gives back similar debt to banks and dissolves the reserve assets which is why it is called “ELASTIC MONEY”. These are not legal tender and never enter the real economy but banks can use them as collateral to borrow from the FED, other banks or buy more treasuries. If you notice QE takes liquidity from the real economy. Previously when banks were not lending and as existing debt was paid down this also removed even more liquidity from the real economy. Banks which gave up treasuries to the FED also no longer receive the income streams from treasuries, MBS, etc. and this is one way the FED makes money and not banks then reducing liquidity available to lend.
Now as Congress passed the massive stimulus this year and last foreign central banks, governments and entities all moved dollars to the US and bought this debt which then increased the money supply which everyone thinks is from the FED simply printing which is false as they have no mandate to do so. The new BBB bill actually allows the FED to create legal tender out of thin air using a programmable currency controlling what you can purchase bypassing banks which at least create an asset and liability when created. Without central bank intervention in the west as they all over borrowed and now unsustainable they could not service or sell more debt hence the new bill. This would have the FED simply create what is needed and fund bankrupt gov pensions using UBI. Dr Lacy Hunt has said about this: From former FED alum Dr Lacy Hunt
“Thus, Fisher is correct.
Friedman’s famous phrase that “inflation is always and everywhere a monetary phenomenon” would only hold if the central bank’s liabilities were legal tender. But, for that to happen the Federal Reserve Act would need to be rewritten and that is very unlikely, even more so in front of the Congressional elections in 2022.” This is why the left wants and needs the new bill to fund everything including illegals with incomes and medical, pay pensions, fund the US gov as part of the Great Reset is defaulting on all western sovereign debt. This bill also allows the FED to convert or monetize the trillions in liabilities they have created to obtain treasuries, MBS, etc. to legal tender or programmable currency or dollars giving the FED in this bill trillions in dollars and wiping out their debt which is the reserve asset IOUs or elastic money.
Now looking at the FED’s velocity of money it has been falling since 1999 and below Great Depression levels. A sustained increase in the velocity creates demand inflation which by the FED’s own data we do not have but cost-push inflation caused by structural problems in the economy like lockdowns, mandates, green agenda BS, etc. Monetary policy tackles demand inflation which we do not have but cost push inflation which raising rates makes things worse as this does not fix the structural; problems and will collapse the economy and world economy which the bond market is better on. Demand is not an issue as Steven Van Metre explains in his recent vid. “China, Germany, and the U.S. Economies are Rapidly Slowing” https://www.youtube.com/watch?v=jAkmV08TyFw “From China to Germany, to the U.S., the global economy is rapidly slowing. In today’s show, you’ll learn why a global recession is imminent. As global growth slows, demand wanes, and central bankers are forced to chase inflation, the probabilities are increasing that a global recession is imminent.”
This is not an issue of slowing demand to fight inflation as it is already been slowing with higher prices again from structural problems and until fixed prices will go higher. Germany laid off 879,000 last month and previously in Nov 712,000 as demand is simply not there as again prices rise from cost push inflation.

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