By Al Ameen Templeton
Quantitative Easing is a fraud; the US Fed and the ECB are printing money – the dollar and the euro are intrinsically worthless.
Presently, the world’s mature, stagnating economies – The US, EU and Japan – are being allowed to get away with it, but this is coming at enormous cost to the rest of the world.
They are ripping up the fabric of a multilateral world in the pursuit of depraved, short-term interests in a desperate attempt to shore up privileged access to foreign markets and products that are a legacy of the colonial period.
They not only want the privilege to continue, they want to pay for that privilege by simply printing worthless money.
Yes, as Stoddard’s stab at white-man honesty in the above quote notes, “there is an element of discrimination at play here”: white nations must be allowed to print money without question while darker nations must not. With them, it is a matter of sophisticated monetary experimentation; with us it’s just a “Mugabe option”, a grubby money grab that cannot be countenanced.
The latter is the truth.
QE has been described as “bailouts for billionaires” because the money doesn’t reach the retail level, it doesn’t reach ordinary people.
And the motivations for Magashule’s proposal are probably just as venal as those of the bankers in the US and EU who first proposed the policy.
A “Safari QE” would probably be just as elitist as anything washing about in the stagnating economies.
But the lie that it is is something that will not be confessed until the veracity is exposed when everybody starts to do it.
So, the sooner we start doing it the better. This scam needs to come to an end sooner rather than later, because it is not a victimless crime.
The upshot of current QE is consumers in emerging markets like South Africa are being forced to shoulder the obligations the labour aristocracy that is the consumer army in stagnating economies should be carrying.
Principal among these is a higher interest rate burden.
The QE tool works via central banks creating money to buy government and corporate bonds from banks, giving them cash to lend to the real economy. Driving up demand for bonds raised their price, causing the yield, or interest rate, to fall – which had the effect of slashing borrowing costs for the government, businesses and households.
That has caused a search for higher interest rates in other economies. The upshot is that emerging market consumers are being tied into macroeconomic agreements that attract portfolio flows into their economies, propping up their trade imbalances, but forcing them to maintain an interest rate set higher than the conditions in their domestic markets warrant.
So, we in South Africa are struggling under a repo rate as 6.75%. Our last repo rate hike – ostensibly to fight inflation – occurred last year November just after we’d slipped into recession after two successive quarters of negative growth. That hardly meets “overheating” conditions usually requiring a hike to cool down an economy.
The real reason we hiked rates, putting aside all our Reserve Bank’s posturing and spluttering, was in anticipation of an expected US Fed rate increase that duly came in December when the US Fed lifted US interest rates to 2.75%.
In other words, control of the economy or our ability to affect it has been taken from our hands. We in South Africa must endure higher interest rates irrespective of our spending habits. No matter how disciplined we are, our efforts at curbing our spending habits will have no effect – our interest rate will shadow US rates, irrespective of their consumers’ actions as well.
The stagnating economies of the US, EU, and the UK and Japan since the Credit Crunch of 2008 have issued – as a conservative estimate that ignores other stimulus programmes – well over $7trillion in quantitative easing money.
This is money they are showing no intentions of repaying, neither are they showing any ability to do so.
The UK has issued £345billion since 2008. The verdict on 10 years of quantitative easing
The European Central Bank pumped about $3trillion into the continental economy using QE. However, much like George W Bush’s “Mission Accomplished” proclamation in Iraq transpired to be premature, so too did the end to the ECB’s QE programme turn out to be nothing more than wishful thinking. European Central Bank confirms end of quantitative easing programme
By April this year, it was back on stimulus. ECB announces details of new targeted longer-term refinancing operations (TLTRO III)
The US has printed over $4trillion of QE money since 2008. Quantitative Easing Definition
As the Guardian newspaper mentioned faintly in May:
“The measures were designed for an emergency, yet still remain in place today, with the proceeds from any maturing bonds immediately used to fund more QE purchases. However, the fact that it has not been stopped – and that rates remain close to zero – indicate that the policy has not worked emphatically.”
As Andrew Sentence, an MP on the Bank of England’s Monetary Policy Committee who helped put together the quantitative easing superstructure, says: ““The real problem we have with the economy is that it (quantitative easing) hasn’t turned out to be an emergency measure, it’s turned out to be the status quo.”
In other words, the world’s stagnating economies have not reversed the process. They’ve flushed the system with cash as an emergency measure, but they have not reversed the process.
They have not withdrawn the money from the system. They have not repaid the money.
In other words, they’re being allowed to print money for free and to get away with it. Quantitative easing has turned out to be a scam. It is a “unprecedented experiment” – to use another mainstream, banking-economist euphemism – that has not worked.
The time has come to pay back the money.
But that is not going to happen any time soon.
And that is why Magashule’s call for a quantitative easing safari in South Africa needs to be supported.
What’s good for the goose is good for the guinea fowl. If they can do it, we can do it.
And we’d be damn fool not to. It would be like going to a gunfight with a knife.
Voters in the reservoirs of the world’s labour aristocracies are not going to vote for higher interest rates. They’re not going to say the dollar and the euro are worthless.
That’s our job.