Why Monetizing Debt Could End In Revolutions

First published on presstv.ir and zerohedge.com November 2014

Much has been made of the decision by the Japanese government to inject another $700 billion into their ailing economy. While some may see this as an earnest attempt to save Japan from further stagnation and deflation, even some of the mainstream media (e.g. Bloomberg) are questioning the wisdom of this reckless act.

Over the last few decades, since the crash of 1989, Japan has injected billions into its banks and stock-market to help its economy but all of it has been a miserable failure. America has, via the Federal Reserve, increased its national debt to formerly unthinkable numbers with almost no effect on its ailing economy. Most of Europe has huge public debt as a result of bank bailouts, but still suffers from stagnating or shrinking economies.

In fact, any privately owned central bank that has undertaken monetization policies (creating more public debt) has failed to improve their nation’s economy and merely created a transfer of wealth from the general public to corporate hands.

Of course, government owned banks such as in China and Russia are and do take somewhat different actions given that they are owned by the public (state owned) and not private individuals or corporate entities. Therein lies the crux of the matter – private ownership means private interests, therefore the needs of the country and the populace are of no concern at all.

All that the Fed, BoJ (Bank of Japan), the Bank of England etc. have been concerned with is the preservation of private banks and the continued propping up of stock markets. None of these institutions really care about the real-world economy, real-world inflation or the ability of individuals to maintain their lives in a prolonged period of economic contraction.

While monetizing is all great news for the banks and stock-markets it is terrible news for any people that do not receive well over average earnings – this is because monetizing debt (printing money) causes inflation. As with everything else connected with the economy, governments cook the books on inflation to the extent that the CPI is a total fantasy designed to give falsely low inflation rates.

Even the most foolish of people can see that month by month food, fuel, utilities, clothing and just about everything is going up in price. Part of this is due to factors such as environmental/weather disasters and conflict that can affect production and therefore prices. However, the continual currency wars – a race to the bottom to expand and devalue the US dollar, Euro, Pound, Yen etc is the fundamental cause of runaway inflation that is affecting most households.

When you couple high real inflation with stagnation or reduction in wages over the years since the 2008 crash then real-world buying power of most individuals is drastically reduced. This doesn’t just make people depressed, it makes them angry – hardworking people do not expect or deserve to be thrust into poverty.

Governments press blindly on, printing money, propping up the financial sector and saddling their voters with more and more debt that must be paid for in taxes. They know that the public is unhappy, but they are more interested in placating their corporate partners than listening to a public that is increasingly poor, increasingly angry and increasingly close to open revolt.

Stimulus has failed to produce any ‘green shoots’ simply because it has been directed to where it is of no benefit (except to the already rich) and not at where it desperately needs to go. Throwing good money after bad is not going to change anything unless it is redirected to the bottom and middle earners who are the lifeblood of any consumer society.

Quoting Raul Ilargi Meyer’s recent article on zerohedge.com: ‘Any stimulus must be directed at the bottom, or it must of necessity fail… it’s very simply that an economy cannot function without its poorer 90% of citizens spending.’

If this is true, which I believe it is, then more monetizing debt can only lead these ailing economies into further ruination and further beggaring of the masses. If this continues then the bulk of the population will become poor enough and angry enough to demand change on their own terms.

This will begin with mass protest and if it is ignored or suppressed then continued attempts to retain the status quo will lead to insurrections and possibly violent revolutions. One can only hope that governments will act soon in the interest of the people for once instead of lining the pockets of corporations and those that own them.