What follows here is the essence of an article by Matthias Chang who is a frequent contributor at the Global Research web site. The title of Chang's article, which I've summarized and clarified here, is: Global Collapse of the Fiat Money System: Too-Big-To-Fail Global Banks Will Collapse Between Now and First Quarter 2011, When Quantitative Easing Has Run Its Course and Failed
In December 2006, Matthias Chang accurately predicted that global banks would collapse when a Financial Tsunami hit the global economy in 2007. As they say, the rest is history.
For just over a year and a half, Quantitative Easing (QE I), spearheaded by Chairman of Federal Reserve Ben Bernanke, delayed the inevitable demise of our shadow-money banking system. [For Chang's explanation of Quantitative Easing, see item 4) below.]
In November of 2009, Chang wrote that by the end of the first quarter of 2010 at the earliest, or by the second quarter of 2010 at the latest, the global economy would go into a tailspin. The recent alarm that the US economy has slowed down -- in the words of Bernanke "the recent pace of growth is less vigorous than we expected" -- has all but vindicated Chang's analysis. Bernanke warned that the outlook is uncertain and that the economy "remains vulnerable to unexpected developments." Other analysts agree.
It is becoming apparent that Bernanke's words do not reveal the full extent of the fear that has gripped central bankers and the financial elite who recently assembled at Jackson Hole, Wyoming. According to various reports, these men are very afraid.
Why are they afraid? It's because the "unexpected developments" Bernanke referred to refers to the likely collapse of global banks.
Many renowned economists have misdiagnosed both the objective and the consequences of quantitative easing (QE). Central bankers' scribes and the global mass media hoodwinked people by saying that QE will enable big banks to lend monies to cash-starved companies and thereby jump-start the economy. The low interest rate regime was supposed to encourage all and sundry to borrow, consume and invest.
Problem is, this was a fairy tale.
Then too, there were some economists who were worried that as a result of the Fed's "printing press" (its ability to create immense amounts of new money out of thin air) working overtime, hyper-inflation would set in soon after.
But nothing happened. The multiplier effect of fractional reserve banking did not take off, and bank lending stalled.
Step by step, here's how it happened
1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities were in fact JUNK. Yet on the balance sheets of the banks, these securities were stated to be worth TRILLIONS of dollars.
2) The collapse of Lehman Bros and AIG began to tear the veil off of the ugly truth that all global banks had liabilities in the trillions and that they were all, because of this, INSOLVENT. However, central banks the world over . . prudently decided not to reveal to the public the total liabilities of the big banks since that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.
3) Unbeknownst to the public, a devious scheme was devised by the Federal Reserve (led by Bernanke) to assist the big banks in unloading to the Fed these toxic assets . . so as to allow these banks to: a) comply with reserve requirements under the fractional reserve banking system, and b) continue their banking business. This is the heart of the reason for the bailout of the big banks by central bankers.
4) This devious scheme was effected by means of the Fed's purchase of toxic assets from these banks, a.k.a. quantitative easing (QE). In order to make this gigantic purchase, the Fed created money out of thin air and used this "money" to buy the toxic assets at face value (book value) from these banks, notwithstanding that all these toxic assets were "junk' and were, at the most, worth maybe ten cents for every dollar of the price paid for them by the Fed. Result: the Fed is now loaded up with toxic assets once owned by these big banks. However, these banks cannot publicly declare and/or admit to the truth of what took place, for the following two reasons. (Hence, this financial charade must be maintained.)
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