John Baeyens posted a photo:
Why do ballons burst? It is pretty simple. Balloons are when a government hands out money like candy, but there is a proviso attached: you have to pay it back over time.
This would be OK but the fatal trick of low interest rates below the rate of inflation is, people are tempted to take on more and more debt thinking they can keep doing this due to rising inflation. This rising inflation means everyone's assets and stocks rise so they get 'richer and richer'. But this inflation means the government will collapse so they have to cut back on the money production and their tool is to raise interest rates. The US Fed has been doing this continuously since 2005. Day after day, they raise rates. Until they started the inevitable contraction. Even though inflation is raging across the globe thanks to our oil wars, they stopped raising rates and are thinking of dropping them again.
Only they cannot! Not unless the PRICE OF OIL DROPS!
Here is the mess: the only way the US can get the price of oil to drop is to stop wars in the Gulf. And are they doing this? No?
The US is like a monkey with a banana in a jar. They can't get our hand out unless they let go of the banana. And they can't let go of this toxic banana for various historical and religious reasons. This week, the rulers in America are stomping all over the earth demanding everyone cease trading or banking with Iran! So, the price of oil climbs, Iran sneers at the US and flexes its claws. The US begged Saudi Arabia to pump more oil last month and they announced 'We will magically conjure more oil out of the Ghawar fields'. And what happened? Production jumped from 9 million barrels a day to 9.1 million barrels which is much less than the 10-11 million barrels they produced effortlessly just 10 years ago!
Now you wonder why it's so important for Brazil to be oil-independent (0 import of oil) and even export gas?
The liquidity trap of the US is the inability to pump oil out of Iraq. The Chinese are very aware of the forces at work here. They have to pay for high oil costs and this annoys them no end. They know that the US wars are causing world oil prices to shoot up. And this is destroying the world's stability with trade and finance. And the solution of the US: more wars, is pure insanity.
And here the world is: in panic because the US cannot do the right thing. They invaded Iraq to make oil cheap again. And why was that? Well, this was in 2003 and in 2003 our interest rates were at 1%. And oil was shooting up in price! And there was no way in hell the US had 1% inflation during that time! The Federal Reserve and the US government dealt with this nasty fact by eliminating oil from the inflation statistics! Then, as food shot up in price, they eliminated that! And so on! To deal with this, the US government enabled all it's industries to relocate their facilities in China. This made inflation disappear, magically. But it removed most of the industries to a trade and political rival, the empire of China! This leads the US to their present fix and why they can't let go of any of the bananas in any of these jars: they are in a classic currency crisis due to overspending, overload of debts coupled with a reckless government spending beyond its means. And making the Chinese change their currency values is pure stupidity. the US caused this, not them.
China is the main protector of the US. They protected the US from inflation, they protected the US from rising oil costs, they gave the US loans so that they could double the amount the US spends in military adventures.
Countries like China and Brazil have been massively collecting US dollars. And now, the US is demanding them to produce inflation. Why? Because there is no way the concubine with Japan's free money business can provide the flood of liquidity the US needs. The US needs China.
And now the US is the monkey with a banana (war in Iraq) stuck in its paws, while the Chinese dragon is pinching hard in the monkey's tail. And trust me, the few countries like Brazil and Venezuela who have build up massive dollar reserves will love to hear the monkey chitter and scream.
