Money Printing Is Not Inflationary
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The FED says it has injected over 4 trillion US dollars into the economy with its “QE” program, over the course of 6 years, give or take. The stated intention was to create 2% inflation, because apparently this is the sweet spot percentage which benefits the most people in the economy, from homeowners, to manufacturers, suppliers, and so on. Have they done it? In a word, no. But, for some strange reason, even without achieving this objective, the FED discontinued its QE program in October of 2014.

Did they give up? Did they change tactics? What were the reasons for the FED discontinuing the program? Well, they didn’t exactly say, they just said they were ending it, and would soon announce interest rate increases due to the economy having recovered. You could surmise that they changed the narrative from setting a 2% target for inflation, to “a recovered economy.” That would be convenient, since nobody really knows what a recovered economy looks like exactly, but we do know how to count to 2.

So, why didn’t 4 trillion newly printed dollars get us to 2% inflation? The answer lies in a better question. The better question is; “Where did that 4 trillion go?” Recently, the media has been running a story on how the richest people in the world now own 50% of the world’s wealth, a shocking number by any comparison. Is it possible we have our answer, or at least part of it, with this story? You bet we do.

The financially and economically sophisticated class understands very well how to take full advantage of a policy like QE. Not only this, but they have the means to leverage their returns many times over, with practically no risk, due to this policy having a stated start date, precise guidance on how much will be printed, and a forecasted end date, which is continually repeated long before the end actually comes. To these people, this is no different than telling them to place their buckets beneath the water hose on this certain day, for exactly this amount of time, and using these particular instruments to achieve the maximum results. And that’s exactly what they did, and millionaires turned into billionaires, and billionaires turned into multi-billionaires.

What about the general public, who are the stated beneficiaries of this program? What did they get? Unless they had a bundle of cash in the stock market, they got nothing, except food inflation. They’re worse off than before. I hope you’re starting to see why this policy did not create 2% inflation, and in fact, never had a chance of creating 2% inflation. The money is sitting in the bank accounts of the wealthiest people in the world, or invested in financial assets, making them even richer. Was this an unintentional result? Not on your life.

For had the FED actually wanted to create 2% inflation, and give the economy a much needed boost, there are so many better ways it could have released the money into the economy. For starters, howabout a tax break? Or maybe a government sponsored small business initiative where small businesses are encouraged and funded. These are just top of my head ideas, I can only imagine what could be accomplished if some experienced business people spent time crafting some initiatives.

But instead, the FED simply bought government debt, in the form of bonds, as well as stocks. Yes, the Federal Reserve bought stocks on the stock market. Does that strike you as odd? It should, the FED is responsible for monetary policy, and has no business in the stock market, much less artificially inflating it in an effort to supposedly create inflation. If you were to be tasked with the job of creating inflation, would buying stocks be your chosen method? Mine neither. I’d simply get as much money into as many people’s hands as possible, but with the goal of seeing that money circulate through the economy, like in starting small businesses. Buying stocks benefits a small handful of people, people who are already rich and don’t need a 4 trillion dollar gift, but that’s exactly what they received.

This program never intended to get inflation to 2%, it intended to do exactly what it did, make the rich richer at the expense of the middle and lower classes. And to add a little cream on top, we now have asset bubbles everywhere, from bonds to real estate to stocks, and when they burst, guess who will get hurt the most? Naturally, those least aware of what’s occurring and how it will affect them, those same middle and lower class people. Meanwhile, the rich see this coming and are converting their financial assets into hard assets as quickly as possible, everything from Manhattan penthouses, to acreage, to art and vintage wine. These are the type of actions you expect to see rich people taking in advance of a crash.

They know there won’t be 2% inflation, and they’re now preparing to profit even more than before.

The average investor has the entire deck stacked against him today, as there has been a seismic shift in the structure and function of the world economy, going from a production based capital creator, to a financial based money creator. Capital and money are very different animals, though to most they appear the same. At Wealth Management Vancouver, we act as a shield to our clients, whose business isn’t investing, and therefore they aren’t aware of just how hostile today’s markets are. Vancouver Wealth Management has the people and expertise to unravel the strategies employed by central banks and institutions, and therefore capitalize on them for our clients.


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