JIM WILLIE: US FINANCIAL System is NOW THIRD WORLD!

The Fed is not going to raise interest rates and eliminate profits for the big banks. The Western financial market systems are a joke.

You have debt from 2 or 5 years ago is maturing and has to be rolled over. You either find new investors or you “monetize” it. Monetize means “print money, then buy the bond.” Which is what Third World Nations do! 

The entire industrialized nations have become Third World.  The US, Japan, Europe and Britain are the 4 nations that actually had debt which was all covered by printed money.

I don’t care that they call it stimulus; printing money is not a good thing. What it means is that you have a generation of outsourcing, to exploit cheaper labor in emerging markets, which is finally causing problems with inadequate industry in the US and western Europe. You can’t send your industry to Asia and India and expect to have no problems back home.

Another big signal is the money velocity. If QE and all the bond purchases were truly stimulus, how come the money velocity is roughly at half of where it was in 2007? It’s because QE is killing the economy by killing capital. It destroys capital by eradicating the profit margins. 

This happens by this simple reaction – you do hyperinflation by the central banks and the reaction globally is to hunker down in hard assets. QE is a guarantee of systemic failure and we are starting to see it. 

The liquidity loss in the bond market is very serious. The Fed must soak up whatever new shock comes into the system. It means that if a bunch of new bond supply hits the market, the Fed must take it immediately. They’re lying by saying they’ve ended QE. They’ve not ended anything. I think we are going to see a breakdown in the bond market from derivative accidents. 
 

After Lehman Brothers, the big banks were ridiculously insolvent. They realized they couldn’t make money in commercial lending, so they decided to ramp up the “bond carry trade.”  Here’s your biggest indicators that the zero interest rate policy will never leave. First, they need the free money to make fabricated 10 and 30 year bond demand. It’s all artificial. The second, if you’ve got this spread between the The fed is not going to raise interest rates and eliminate profits for the big banks.

One more big bank crisis and the dominoes are going to begin to fall. One more big loss like Greece, one new debt restructure, and these British banks are going to fall into “debt hell” – into junk status. Going to junk has an immediate cascade effect.   It means all kinds of mutual funds and investors can no longer invest in a junk bond, and must get rid of them.”