by tonytran2015 (Melbourne, Australia)
#treasury bonds #QE #quantitative #easing #scam #stealth
Figure: Fiat money relies on the payments to government employees with it and the power to collect it back as taxes on the population.
It has been a US policy of borrowing from bankers through Treasury bonds (the method is given in section 1). USA have thus been designed to be in a perpetual state of indebtedness to bond holder bankers. Quantitative Easing is an even more outrageous extension of that monopoly. This posting shows why.
1. Borrowing from the population.
(as previously posted in ref. , sect. 7)
We note that the US government regularly issues and has been using its own Fiat money. When the government wants to borrow X units of its fiat money from its citizens, it may have to conduct an “auction”.
It may offer to all of its people to give the government any each of their spare $90 now to receive $100 in 1 year time.
Too many of its citizens may accept the offer and the total amount of their money may far exceed the requirement of the government. If that is the case, it may next say No, not $90 anymore, but $91. The amount may goes up again until the acceptance has only about X units, the amount it requires.
Anti-corruption requires that the bidding process be public and transparent.
This is the idea of Treasury Bonds, or Government Debentures.
If the final auction price is $97 of current money for $100 of money in 1 year time then the Treasury Bond rate is (100-97)/97 or 3.1%.
It is a sad fact that currently Treasury bonds are only sold to a handful of bankers, the ordinary people have no access to the “auctions” of Treasury bonds. The treasury rate may thus be manipulated by some coalition of bankers to suit their agendas.
It has been US government practice to always keep the US in debt with Treasury bonds. It would be alright if the debts are to ordinary US citizen. However the debts are to only a handful of bankers. There has been no plan to ever free the US from debts to bankers.
2. US government could have and SHOULD borrow from ordinary citizens.
The establishments always defend their actions by saying that the auctions of treasury bonds involve billions of dollars and the parcels (chunks) cannot be practically made small for ordinary citizens. The argument may be valid prior to WW2 but became invalid after that time.
With the development of techniques for share sales on the Share Markets, the selling of IPO’s (Initial Public Offerings) worth of billions of dollars are common: People can buy shares in initial float of new companies worth of billions of dollars. Why cannot the Treasury organize IPO’s of Treasury Bonds ? The operating mechanism can be made exactly the same as for IPO’s of new companies. The share markets can easily handle Treasury Bond IPO’s.
The US Treasury can also offer its Bonds on the Stock Exchange just like Investment Banks offer its “Call Warrants” and (future) Options. The methods for offering can be very similar.
Ordinary Americans should stand up and demand IPO’s for Treasury bonds, to take away the monopoly by bankers on Treasury bonds.
It has been US government practice to always keep the US in debt with Treasury bonds. It would be alright if the debts are to ordinary US citizen. However the debts are to only a handful of bankers. The indebtedness to a handful of bankers may threaten the democracy of the US and the bankers have now extended that monopoly into another scheme for skimming national wealth called Quantitative Easing.
3. Quantitative Easing.
Quantitative easing is an even more outrageous extension of the monopoly of bankers on Treasury bonds.
When the government wants to have more money circulated in the economy of the population, it can buy gold from the population so that the population keeps the money and the government keeps the gold for future resale. Beside gold the government can also buy infrastructures or services from the population.
But instead of doing that the US government carried out QE (Quantitative Easing) (see reference , ). This is what the government does in a QE (continuing with the example at the end of section 1):
The government now buy back the Treasury Bond at a price of nearly $100 from bankers a bond it has previously sold for $97.
So the government has sold to the bankers some treasury bond for $97 and bought back at nearly $100. The government lost money for nothing. That why US debt has ballooned up after Quantitative Easing. See reference  for the new level of debt.
The injection of money should have been done by government buying gold, infrastructures (including hiring people to build anew or maintain infrastructures) or services from the population.
1. Reference  stated that “A central bank enacts quantitative easing by purchasing—without reference to the interest rate—a set quantity of bonds or other financial assets on financial markets from private financial institutions. .. QE does directly increase the broad money supply even without further bank lending.”
2. Since inflation has been targeted by the government to be 2% (see reference ), buying a 1 year bond at $100 is just buying $98 worth of good to be delivered after 1 year time. So paying $100 to buy back a 1 year bond of $100 is just giving away $2, and bankers will be happy to take that $2.
4. A second numerical example.
Let the bank bought in Jan 2006 a bond of $100 maturing on Jan 1st 2011 at a price of $90.57. This means the bond holder has an interest of 2% per annum compound interest.
On Jan 1st, 2008, the bond is worth
$90.57×1.02×1.02 = $94.23.
On the excuse of solving the Global Financial Crisis, the government bought back that bond at nearly $100. The bond holder got his $100 straightaway rather than having to wait until Jan 2011. This is called Quantiative Easing.
In any normal financial practice, the bond holder can only either get $94.43 (the current value of the bond at Jan 2008) or has to follow the contract and wait until Jan 2011 to get $100.
So it is clearly seen that the Government gave away tax money (which is $100 – $94.43 = $5.57) to the bond holding bank. In this example only dollars were used while in real life billions of dollars were used.
So Quantitative Easing gives away money to Bond Holders for nothing.
Having PRIVATE Federal Reserve Banks, limiting sales of Treasury bonds to ONLY bankers, practicing obfuscated Quantitative Easing all look like plans to defraud Americans of their wealth and permanently enslave them with ever increasing debts to bankers.
. Quantitative Easing, Investopedia, http://www.investopedia.com/terms/q/quantitative-easing.asp, accessed 1st Mar 2017.
. Quantitative easing, Wikipedia, https://en.wikipedia.org/wiki/Quantitative_easing, updated on 02 March 2017, accessed 03 Mar 2017.
. Why does the Federal Reserve aim for 2 percent inflation over time?, Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/faqs/economy_14400.htm, updated January 26, 2015, accessed 03 Mar 2017.
. kchild2013, US national debt soars by $100 billion. . . in just 8 hours, sentinelblog, https://sentinelblog.com/2017/01/05/us-national-debt-soars-by-100-billion-in-just-8-hours/, January 5, 2017
. sdbast, Ripped-off Britons: Osborne finally admits BofE’s QE payouts gifted min £600bn to the wealthy, worth half the national debt: https://t.co/WNp9Kw7XVb, sdbast.wordpress.com, https://sdbast.wordpress.com/2016/12/18/ripped-off-britons-osborne-finally-admits-bofes-qe-payouts-gifted-min-600bn-to-the-wealthy-worth-half-the-national-debt-httpst-cownp9kw7xvb/, Dec 18, 2016.
. peoples trust toronto, Bank Of Japan Said To Start Preparing For Losses On Its “Huge” Debt Holdings Once QE Ends, https://peoplestrusttoronto.wordpress.com/2016/05/20/bank-of-japan-said-to-start-preparing-for-losses-on-its-huge-debt-holdings-once-qe-ends/, 2016 May 20.
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