World Domination by the Fed through deflation

By Glen Wallace

With regard to the future US fiscal picture I foresee a deflationary spiral as more likely than an inflationary or hyperinflationary scenario.  My hypothesis is that the private central banks are leaving little to chance and while the reckless over-spending  may appear as fiscal bumbling and incompetence by congress and various offices of the president, it is in fact carefully planned by the central banks.  Then one must ask oneself what benefits the Fed more, a deflationary or inflationary scenario.  Currently after all the quantitative easing, the Fed is now holding a tremendous amount of US public debt that for the most part is earning very low interest rates.  Under inflationary conditions, the Fed would be facing a situation where they are holding all of this debt that would now be worth much less but without the benefit of receiving a higher rate of return that new treasuries would have to offer in order to entice buyers.  Additionally, under a hyperinflationary condition, by its very nature there is a lack of control of the financial conditions, thereby rendering central banks impotent.  And looking at the Fed and other central banks, their member banks already are completely free from material want and therefore their primary area for potential growth is that in terms of power.  While the central banks already yield tremendous power, it is not absolute.  And a deflationary picture could yield them the opportunity for what could be the closest thing possible to having absolute power over the entire planet.  They could achieve such power through taking receivership of the entire publicly owned system both materially and organizationally in exchange for forgiveness of debt owned.  In an hyperinflationary scenario, however, the public debt could be just inflated away and the Fed would no longer have anything over the people to control them with.

The beginning of a deflationary crisis may ironically begin with inflation.  Were the economy to grow enough to lead to inflation, the Fed, given their mandate to control inflation, may be forced to significantly raise the federal funds rate.  Any rise in interest would have to be born by the the US deficit as it issues new treasuries.  That, coupled with the Fed no longer having reason to engage in quantitative easing, would mean that now all the bond sales would have to go to private purchasers having no assurance that the Fed would turn around and buy those treasuries.  If there where a failure to find sufficient purchasers of those treasuries then the US government would lose the funds it would need to pay for the programs that the congress agreed to pay for.  Given how dependent the economy has become on government spending, were that spending unexpectedly to come to a halt due to a treasury auction failure then the economy could suddenly dip into a recession.  This could all come at a time when the baby boomers would be beginning to tap into the  entitlements that the government had been committed to providing but even before any auction failure, had been not funded anywhere near sufficiently by revenue.   A chain reaction could ensue whereby the retirees would no longer be receiving the checks that they need to pay businesses that have now become dependent on the senior population having a dependable and reliable source of income from the government to pay their bills.  Those businesses that had depended on the seniors could now become insolvent which in turn could jeopardize their vendors that were not catering directly to the seniors but still provided goods and services to businesses that did.  Negative growth could ensue that would quickly become apparent to any observer that the US government would have great difficulty in generating sufficient tax revenue in the future to pay its future obligations.  All the past warnings about future unfunded liabilities would no longer seem like some far away fiction, but would now be very apparent and real.  US Treasuries would have to be issued with very high interest rates in the hope of enticing potential buyers.  But of course the problem there is that unless the fed did try to print our way out of the problem,  the higher rates would make paying off the debt all the more difficult.  This is the point where the Fed would have the economy at its mercy.

Also, under deflation, the group that traditionally has been some of the biggest critics of private central banks, the gold bugs, would be stunned into silence as the value of their gold would suddenly plummet in value along with all the other commodities that would also deflate in value.  Do you really think the all powerful central bankers would allow a hyperinflationary situation to occur that would give their harshest critics more power, confidence and wealth?  What has been going on instead, I
believe is leading the gold bugs and other central bank critics down the primrose path by doing everything to make them believe that the central banks will do everything to prevent deflation and in their bumbling incompetence will instead allow hyperinflation to take hold.  To keep the ruse alive the Fed has installed Bernanke, someone who has studied the great depression and has committed himself to do everything he can to prevent the deflationary spiral that lead to that economic crisis.  But it will turn out that Bernanke is merely an actor cleverly placed to throw everyone off track in an effort to keep prying eyes off the Feds deflationary plot.

There will come a time I believe during a market crash when it will become apparent that servicing the public debt will no longer be possible by the traditional means.  When it also becomes apparent that Bernanke and company will not simply fire up the printing presses to make it all go away, then we will see a really big crisis that will hit every household in the country as the whole economic infrastructure and the system of commerce that goes along with it that we have all become dependent on for our daily needs will grind to a near complete halt.  At that point the public will be clamoring for a rescuer, anyone, to save them from their plight.  And along comes the Fed to save the people from their plight.  The masses will be completely ignorant of the fact that the private central banks planned for this all along, but the mass media, being party to the crime, will do nothing to dispel that ignorance.  Instead newscasters will do just the opposite and urge everyone to put themselves at the mercy of the Fed, and give everything they ask for, including all of our public infrastructure, public lands and governments.  Wanting to do anything to alleviate the suffering the masses will gladly comply and the plan for world domination by the banksters will be complete.