Investors Business Daily Op-Ed: “Economics: Despite the opposition of the European Union’s most powerful nation, Germany, the European Central Bank has launched a massive quantitative easing program. It’s not what the stagnant EU needs.
Yes, markets rallied on the news, largely cheering the fact that someone, anyone, seems to be doing something about the eurozone’s fast-deflating and slumping economy. But the giddiness isn’t likely to last.”
- Inflation – A general increase in prices and fall in the purchasing value of money.
- Deflation – A general decline in prices, often caused by a reduction in the supply of money or credit.
- Hyperinflation – Sudden price increases out of control rendering the concept of inflation meaningless.
Central bankers are convinced that the world’s economies are deflating and it is their job to jump-start inflation. In order to make controlled inflation happen, bankers have been experimenting since 2008 with quantitative easing (QE), or creating money to buy back the nation’s debt (bonds).
When bonds are purchased in massive quantities interest rates go down, and conversely when bonds are sold in massive quantities interest rates go up.
Yesterday, Mario Draghi, the European Central Bank president announced a new QE of bond purchases to the tune of 60 billion euros per month. Draghi, whose name translates to dragon, is a Harvard educated, Goldman Sachs banker who is either lying or ignorant of the commonsense economic principles regarding counterfeit money.
Someday the bill for the created debt will have to be paid. Economies have two natural cures for excessive government: spending and debt.
Recession: period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
Depression: a severe and sustained long-term downturn in economic activity; an extreme recession that lasts two or more years.
The recession of 2008-9 should have resulted in depression. Government tinkering in the housing market forced lenders to sell mortgages to people who had no hope of paying them off, packaged up those mortgages and sold them to banks all over the world.
But, instead of allowing the depression to cleanse the market, government tinkered again and created more money called stimulus, or QE.
Chairman Draghi’s new QE caused euphoria yesterday in the world’s stock markets, much like a 5 year old on too much sugar.
Someday, that 5 year old will get a real bad tummy ache.
Hyperinflation is sudden and prophetic, Revelation 6:5-6.