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04-12-2009, 07:43 AM
Global Quantitative Easing

By: Trace Mayer, J.D.

Quantitative easing appears to be the new fad among central bankers including the Bank of England, Japan, Switzerland and the Federal Reserve. Quantitative easing is a tool of monetary policy. The effect is an increase in the quantity of currency without regard to maintaining its quality.

Bloomberg has reported that the Bank of Canada Governor ”Carney has pledged to lay out a plan that would flood banks with cash to halt the hoarding of capital and expand lending.” Consequently, the Loonie has been sliding against gold.

Out of the G-20 meeting came the joint cooperation for global quantitative easing. Here are a few key points: ”To treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs (multilateral development banks), to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries.”

This creation of an additional $250B of SDR illusions to form the foundational capital for lending will only hasten the evaporation of the current system because the SDR has only limited liquidity and no intrinsic value. This is classic inflation by increasing the illusion supply. Because the SDR is a composite asset, a basket composed of the FRN$, Euros, Pounds and Yen, the effect is simply more chicanery of no economic substance. The IMF gold sales will be like a single piece of sushi appetizer to a starving dragon. The market’s reaction will be: ”That was nice. Seconds please.” But who will these measures help?

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