Sunday, December 2, 2012

The Federal Reserve's Bottomless Pit of Money

Our friends at, - who were formerly known as, have come out with a new infographic covering the Federal Reserve's Quantitative Easing, or money creation, called "The Federal Reserve's Money Printing Failure ".  You should go read.  As always, it's full of stunning visualizations of the amount of money involved, depicted as stacks of $100 bills.  One picture from it, depicting the money to be printed in 2013 alone. 
For scale, see that tiny stuff in the lower left front?  The tiny cube is $100 million dollars in $100 bills.  The dot just to right of it is simply one million dollars.  The sort of reddish dot (again, lower left) is a graphic of a woman sitting on a "sofa" made of stacks of $100 bills - it "only" amounts to just under $47 million dollars.  Each pallet in the grid is one of those $100 million dollar stacks.  The Fed's machinations will account for nearly one half of the US budget deficit in 2013 - compare to the Fed buying 61% of US debt this year. 

By the end of FY 2013, the Fed's money creation will look like this:
Quoting from them:
Each economic boost through money printing (QE1, QE2, QE3) has diminishing effects, that appear to follow the Fibonacci equation. This implies that the Federal Reserve is now caught in a perpetual cycle where it has to print near exponentially more money just to maintain same stock market performance level, not mentioning inflation.

The money printed by the Federal Reserve does not end up the hands of the people, but goes directly to the banks, though whom it ends up in the stock market in order to inflate asset values. This pushes the Dow Jones Industrial Average and S&P higher, but does NOT increase hiring and above all consumer spending, which is one of the main drivers of the US economy.
This ends, of course - this implies a need to create infinite amounts of money.  It ends, but it doesn't end well.  I sincerely wish I knew how far out it will be, but I think the Congressional Budget Office saying 2027 is wildly optimistic.  I think 2020 plus or minus 10 years is as closely as it can be predicted.  

Rig for collision.  


  1. Consequently, I am trying to position things for my wife and I where our money is in commodities that will allow us to continue to eat, be sheltered - survive - even if/when money no longer has any value. Solar, food storage, greenhouse and gardening, plentiful game, perhaps even a milk cow (small breed) or goats, and chickens. I'm even considering investing in a wood gasifier to power either a vehicle and/or a generator, since wood is plentiful where I am at, but gasoline won't be, if TSHTF.

    1. FWIW, I think all of that is about as perfect a plan as one can get.

    2. It is a bit scary translating the funds we had planned to use to cushion our retirement into physical commodities, but I just don't see that money having much - if any - value in a year or two.

      I didn't do this for Y2K - although I did store a bit of extra food/ammo - but I believe this time the threat is real. Inflation has already stolen a significant portion of our savings, and I think it is going to get a lot worse. When Social Security fails, we will no longer have the funds we would have lived off of, but we will have what we need to pay the mortgage and taxes, and should be able to feed ourselves.

      Thankfully, the mortgage will be our only debt, besides taxes. If .gov doesn't confiscate our two small retirements when SS fails, we should be able to squeak by.