To hoodwink the creditors, the FED adopted two strategies (and we must give credit to those fraudsters in the FED and treasury for their audacity in the execution of this fraud). Firstly, they ensured that the printing machine (digitally or otherwise) would be functioning at full speed without any glitches. They cannot afford a “Lucky” Jim scenario. With modern technology of the computer and the mouse, all that was needed was a simple click of the mouse, and there would be a Book Entry in the
FED’s computerised ledger in the columns - “Credit / Debit” and “Assets and Liabilities” – the requisite amount/value of the newly created digital monies. In technical jargon, the FED was monetising the debt by creating money out of thin air. But, for other countries and Joe Six-Packs, they have to work their guts out to earn an income, save the surplus to pay off any debts that they have incurred (borrowing US$) to purchase crude oil and other necessities (as all oil trades are denominated in US$ as well as other goods). We cannot create money out of thin air by the click of a computer mouse! But, then any massive money printing would devalue the currency, so some of the monies were diverted into the stock market to create “asset inflation” i.e. to artificially jack up the price of the assets – the shares quoted in the stock exchange, thereby creating an artificial demand for more US$ toilet paper money and hence its value would be maintained and at worse would not depreciate that much. The new monies were also used to pay off existing debts and to finance new debts incurred by the US Treasury.
However, that would not really solve the problem of the risk of a junk rating of the US Treasury bonds. Technically, they are junk and would result in high yields so there was an urgent need to dress-up the bonds to justify an AAA rating.
Please grant me the indulgence of a digression. This is why it is so important for the Joe Six-Packs to understand why the FED
was given the power to control interest rates in addition to the power to print money (digitally). If the FED is only authorised to create money out of thin air, it would not be really useful because the mere printing of money would not confer any long lasting benefit to the financial elites and the entire fractional reserve banking system grounded on fiat money. The Fed must control the
rate of interest for interest is the life-blood of the banking system and whosoever controls interest controls the life-blood and in simple financial terms, control the revenues and profits to be made by the entire banking system thereby conferring on the privileged 1 per cent an unbridled means to limitless wealth. The only caveat is that at all times the members of the system must not be too greedy to demand more monies created out of thin air (with no risks) than were required to keep the system running and the party going as well. There must be a stream of interest payments (income) at a rate that would not kill the borrowers. Without borrowers there would be no customers for the fractional reserve banking ponzi scam!
Let’s get back to the issue at hand.
So, there was a need to convince the world at large that the US Treasury is not Jack the pauper but a credible borrower and ought to be treated as such. So what was the trick, the scam that would convince unthinking and greedy creditors, be they sovereign creditors like China and Japan and institutional and retail investors (foreign banks and pension funds etc.)? To turn the trick, it required the combined efforts of selected economists (plus one or two Nobel Laureates), financial analysts, rating agencies who know there is a whole lot of money to be made by participating in the scam to spew the propaganda that US Treasury Bonds are the best assets (safe-haven) in times of crisis and not Gold (derogated as a Barbaric relic). And, since the financial elites also control the mass media – print, TV, and radio etc., it would be easy to spread the propaganda. With the FED in total control of interest rates, all it needed to do is to announce the policy of zero interest rate (ZIRP) and automatically interest rates on any borrowings would plummet. Of course Joe Six-Packs did benefit somewhat, but that was purely collateral. The main beneficiary of ZIRP is the US Treasury, the biggest debtor in the world. And as they say, the rest is history. Having over the years brainwashed students in economics at leading universities, financial harlots in global banks and financial services institutions etc. that low interest rates is the benchmark for financial credibility per se (i.e. to ignore the fundamentals when it comes to US Treasury bonds, but not any other borrowers), foreign sovereign creditors like China were conned into lending
monies to the US and in the case of Japan were compelled to do so as the vanquished foe of the US after World War II and now a client state under the nuclear protection of the US military.
No one dared cry out, “the Emperor has no clothes”, it is bankrupt! The zero interest rate policy (ZIRP) is a scam to cover-up the reality that the bonds are in fact junk bonds. Bearing in mind the principles of bonds as explained above, low interest rates was the illusion that clouded the minds of creditors to believe that such bonds could not be junk bonds. These creditors totally ignored the financial fundamentals of the US as a debtor that cannot mathematically pay off its debts. These creditors also overlooked the fact that even if there were repayments, it was by way of more of the same – US$ toilet paper money, more fiat money created out of thin air. For those who think that what is stated here is conspiracy theory, good luck to you if you have invested in US Treasury Junk Bonds. The truth of the matter will be decided in the near future whether the US Treasury Bond market is also another huge bubble sustained thus far by the above scam perpetrated by the FED and other central banks.
