QE doesn't create new money; it merely converts existing money (bonds) into its more liquid form (USD).

Think of it in similar terms to how gold used to be convertible back and forth between USD. If someone cashed in their gold for fiat, it didn't change the amount of money in the system, just the proportion of liquid cash to its slightly less liquid form in bullion.

We're not on the gold standard anymore, though, we're on the human capital standard. We print, issue, and borrow money all on the basis of how much human capital the system has in it, which is what gives the currency its value. In other words, slavery has become the new reserve that backs our currency. The banks lend money to the government because they're confident in the government's ability to force us at gunpoint to provide the labor input to create the currency to pay the interest on the bonds. It's that simple.

So not much has changed. The underlying premise is the same as back when we were on the gold standard, which is this: When the government borrows money, it's putting WE THE PEOPLE on the hook to pay it back. For the privilege of earning a wage and feeding yourself, you are obligated by law to give the government a certain percentage of your labor to go towards paying their debts. And if you don't, men with guns will come get you.

So you can see, the banks have relative security that the government is going to raise the money to pay the interest. Being that people tend to like to eat, and tend not to like men with guns coming to get them.

So what is a bond? It's just future labor. We can only input so much labor at once, meaning the government can only tax us so much, and if they want more money than that right now, they have to borrow it by promising the banks that they will pay it back with interest. So the government needs money now, and the banks have money that they're not currently using, and the government wants to borrow it for a while, and they promise to pay it back with a little bit of interest.

So, fundamentally, the USD in its liquid form, and bonds denominated in USD, are both represented by a promise to provide labor at some point in the future. The USD represents the immediate future, T bills are the not too distant future, and bonds are the more distant future. But they are all backed by the same thing, and therefore all carry pretty much the same risk. Those risks include the collapse of the US government, or the collapse of society, such that GDP is severely affected. Which are also risks associated with any money, up to and including gold. So whether you hold USD or bonds is kind of irrelevant in the grand scheme of things.

Now, depending on where you sit in the financial system, holding one or the other could represent a minor inconvenience. For example, if you're a consumer, it would be inconvenient if your employer paid you in government bonds. You would have to sell them on the secondary market and pay some brokerage fees and whatnot if you wanted to spend them. Well, for certain people at certain times in the financial system, holding cash can be inconvenient, as well, and they might prefer to hold bonds instead.

So all QE does is convert one form of USD into a more liquid form. Yes, USD are "created" out of thin air by the federal reserve. But, at the same time, bonds "vanish" into thin air, because they go onto the Fed's balance sheet. And they can't reenter back into the financial system until someone converts them back by giving the Fed USD, which then, in turn, vanish back into the aether from whence they came.

So one of two things has to happen, once the bonds are on the Fed's balance sheet. Either the bond matures during that time, in which case the USD goes onto the Fed's balance sheet as a liability. OR, someone buys the bond back from the Fed, and that money they pay for it goes onto the Fed's balance sheet. In other words, all the money that the Fed is "printing" will at some point have to vanish back into the aether. So not only is no new money being created, but the conversion of bonds into USD has an expiration date.

It's nothing but an accounting trick to keep interest rates low. It only sounds vaguely like money printing to someone who doesn't understand, a) that bonds are nothing more than a very slightly less liquid form of USD, and b), that the Fed can't "print" USD unless the recipient of those dollars first gives them bonds to hold, and that c), those USD come with an expiration date when the bond matures. In other words, those USD are collected as taxes by the government, and instead of being paid to the bond holder who "sold" it to the Fed, they are paid to the Fed, where they go on the Fed's balance sheet as a liability.

In other words, via one of those two ways (i.e. maturation or reverse repo/normalization), the fed's balance sheet is going to go to zero. Again, this is only an accounting trick to manipulate interest rates. At no time are new assets created!

So why the lies from the media? Why do TPTB want to keep you convinced that the Fed has a printing press?

Think about it this way. What happens when you borrow money? Does that money come from nothing?

NO!!! It comes from your future labor. You're borrowing from your future self!

Is that inflationary or deflationary? Well, in the very near term, it's inflationary. You have a lot of money all the sudden and your output goes way up. All the sudden you have a really nice house, new cars, etc.

But at some point, current you meets up with future you, and whether future you is going to be happy is going to depend on how current you used the money. Did you use it wisely to invest in a business and you show up on future you's doorstep with his money you borrowed plus a bunch more?

Or did you blow future you's money on stupid stuff, and now you're showing up empty handed?

Which of those two scenarios describe the way the US government is spending future us's money? Do you think future us are going to be happy about it? Yea, probably not.

So in example two, was future you richer or poorer? That is, was he experiencing inflation or deflation as a result of your actions?

DEFLATION. Obviously.

The more it borrows, the more the government has to tax us, pulling money from future us to fund its dead end projects today. Which means poorer people, which means less velocity, which means less real GDP.

Borrowing's inflationary effect is only an illusion! 2001, 2008, and 2020 were all examples of what happens when the inflationary effect wears off.

And none of this is even talking about the consumer debt, which is directly linked. When the government takes 50% of your labor output, it means you have to go to the same banks they borrow from and take out loans of your own.

So in the end, the government is borrowing money with you as the cosigner of the loan, and then making you pay the interest. And then the banks take the interest and re-loan it to you in the form of mortgages, small business loans, etc. In other words, this is nothing but a slow transfer of ever increasing amounts of your labor output to the banks.

Now does that sound inflationary or deflationary to the economy (the economy being our collective labor market and output)?

This shit is really so simple a child could understand it, behind all the smoke and mirrors. Like, do you have more or less money if someone takes half of your money?

Another aspect of the inflation fairytale is that in inflationland the borrower wins in the end. Well, let's see about that, shall we.

If everything goes according to plan, and the borrower pays off the loan successfully, did they win? Not really, they just broke even, at best. If inflation went up faster than the interest on their loan, all they managed to do was reclaim a small percentage of the money that was taken from them by the government. Still a pretty big net loss under the best of circumstances.

But what if the unthinkable happens and they're unable to pay the loan back? Yea, well, anyone around in 2008 knows how that turns out.

Keeping the inflation fairytale alive also requires perpetually rolling over the debt. It requires both government and consumers to constantly roll over their debt, and take on more debt, albeit at lower interest rates.

But no matter how low rates go, there's a point where neither government nor consumer can afford any more debt, and then it's time to pay the piper.

What we're doing is like making the minimum payment on a credit card and thinking that that's somehow going to be a winning strategy in the end, if only you can constantly take on more debt. The card company is more than happy to let you live in that fantasy as long as you have title to assets worth taking, and they'll let you get in over your head to the last penny hiding under the couch cushion. For one because by the time you realize your mistake they'll have already made back their initial investment and now get your stuff as a big fat bonus. Oh but it's even better, because in the case of the banks, they lent us our own money to begin with!

Lastly you have the guys on wall street getting their cut. That's the final element to this fantasy, that if you pour enough money into the markets you'll beat the fed at its own game. But here's the thing. The banks inflate the markets, and they get the pick the timing when to deflate them, too. You only win if you can somehow beat the banks at their own game and get out at the top. Yea, like .0001% of investors might, if they're really lucky. But of course you not only have to do it on the day of reckoning, but also in every little pump and dump in between.

Welp, there it is. That's what they don't want you to know, and why they don't want you to know it.

Don't get me wrong, hyperinflation will be a very real concern someday, and I tend to think someday soon. But not before they get theirs first! They're not going to simply let you hyperinflate your debt away. That option is for the government, not the the retail borrower. The system is designed from the top down to ensure deflation first, and it will be a miracle if borrowers are somehow saved by hyperinflation. Anyone expecting perpetual inflation, much less hyperinflation, is akin to someone expecting an endless line of credit from a credit card company. About the only way it could happen is if congress takes back its power to issue money and prints trillions and hands it out to everyone in an intentional act to destroy the currency. Which of course is about as likely as flying pigs airdropping golden geese.

And remember, inflation might create currency, but deflation destroys it. The way this ends is the same way the credit card debt ends. It ends with the borrower declaring bankruptcy and the credit card company taking all his stuff.

My banker is taunting me with an extended-credit card, but hell no.
I also keep that video in mind

Ghostwriter wrote:My banker is taunting me with an extended-credit card, but hell no.

No taunting, Financial literacy is an important part of life that should be taught in school, instead of being ‘woke’.

Credit cards build credit. Which in turn can increase credit scores. Since credit scores are linked to a lot of things in western life, it’s important to have.

The key is responsible use.

QE is a tool, like all tools. Bonds aren’t just some nebulous thing that financial fat cats use. Loads of everyday retirement funds (like the California teacher/ retirement funds) buy bonds for a stable source of interest payments. It’s a sensible part of the market mix.

Plus certain bonds have tax exempt interest payments.

Financials are complicated.

Just my opinion.

Ooops, i should have said "Tempting me" instead of "Tauting me". Sometimes i get my English mixed up.

Yeah, responsible use, sure. It's complicated for the complicated uses, but i use my money simply.
Nah, except for buying a house, won't use credit. I surely miss opportunities, but i'm not comfortable with debts, minuses. I use what i have, or less.
I don't speculate, i don't bitcoin too.