11/29 ANDY HOFFMAN (CryptoGoldCentral.com): Central Bank Inflation – The Greatest Wealth Confiscation Tool Of All

Since the first fiat currency was issued in the 13th century – by China’s Yuan Dynasty monarchs – Central banking has been the single biggest contributor to economic instability and social inequality.

Of the thousands of fiat currencies created since, not one has lasted the test of time – with most, not making it through their first decade. Some were created with honest intentions – like Abraham Lincoln’s “greenback,” in response to Jefferson Davis’ war funding Confederate dollar. Some, out of garden variety financial ignorance; and some, the unabashed political goal of enriching those issuing it, at the expense of all others. However, the end result has always been the same - no matter how the ensuing inflation, debt, and social inequality are ultimately spun.

Fiat currency sounds great “on paper” - but in reality, is the most sinister form of wealth confiscation, given the guarantee one’s purchasing power will be reduced by holding it…which is particularly obvious in societies, like India, where the government mandates the money one uses. To truly be “money” – an asset must be scarce, fungible, universally accepted, and liquid. Sadly, no government-issued currency possesses these characteristics, even the almighty dollar.

Inflation Creation

Monetary inflation is created in several ways. The first, an ingenious form of “derivative accounting” known as fractional reserve lending – in which, the Central bank enables branch banks to hold only a tiny percentage of their deposits as reserves. Consequently, they can dramatically increase the money supply by lending out far more currency than they hold in their vaults.

However, when loan demand is weak, more damaging methods are utilized – like the suppression of interest rates, by printing currency and using it to buy short-term (less than one year until maturity) money market instruments, like T-bills and commercial paper. This increases overall loan demand, but far less so in weak economies saddled with already high debt levels.

Unfortunately, stimulating loan demand causes – surprise, surprise – more debt; which in turn, slows the economy further, weakening longer-term loan demand - in a vicious Catch-22 loop that in true Ponzi scheme fashion, must continue to expand to avoid spontaneous collapse. This, whilst maintaining confidence in system viability – hence, the tightrope Central bankers walk each day; particularly those running the 150+ Treasuries NOT issuing the “reserve currency” dollar.

Finally, the most draconian methods of all…which until the current fiat Ponzi - the first to involve all nations simultaneously - ceremoniously crashed in 2008, had never before been attempted. I.e., the negative interest rates the ECB (2014) and Bank of Japan (2016) introduced to fight “deflation”; and the “quantitative easing” the BOJ invented in 2001 - which become a commonplace Central banking policy tool in the wake of the 2008 financial crisis. In other words, the lack of economic response to previous, mainstream banking measures forced Central banks to utilize the equivalent of monetary defibrillation to revive dying economies.

To institute a negative interest rate, or “NIRP” monetary policy, central banks purchase money market instruments at prices so high, their yields fall below zero percent. The reason being, the now proven to be misguided belief it will prevent banks from wanting to hold negative-yielding deposits – causing them to instead, loan out their reserves or invest the proceeds in the economy. As for “QE,” it simply means monetizing bonds of longer durations (maturities), causing borrowing rates to decline throughout the entire yield curve. Unfortunately, economic activity has not responded as central bankers expected – which is why negative rates still remain in Europe and Japan…with extremely draconian measures attempted as well, like the Bank of Japan directly monetizing stocks, in utterly staggering amounts.

Great For Wall Street, Disastrous For All Else

For Wall Street, such monetary witchcraft is a godsend – particularly when combined with market manipulation operatives like the President’s Working Group on Financial Markets (i.e, the PPT, or “Plunge Protection Team”) – not just in the U.S., but overseas; the Fed’s daily “open market operations”; and the “Gold Cartel” – better known by its true name, the U.S. “Exchange Stabilization Fund.”

However, for the “99 percent” not privy to such free money, it translates into a variety of wealth-diminishing forms – from the less visible explosion in wealth inequality, to the quite obvious explosion of debt that cripples corporations, municipalities, and sovereign states alike – but is felt most by the billions of individuals who don’t enjoy institutional financial support.

And of course, increased consumer prices – as measured by the CPI or Consumer Price Index; particularly in the sector that accounts for by far, the largest percentage of consumer spending, housing - where prices have surged to record levels, far higher than even 2007-08.

However, there is no better way to depict the damage Central bank monetary policy causes then the dramatic decline of the dollar’s purchasing power since the Federal Reserve was created in 1913 - via a December 23rd vote when nearly all of Congress had gone home for the holidays. Yes, by a 3-0 vote, with 93 Senators absent, the “99 percent” were doomed to a century-plus of monetary destruction.