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Closer and Closer to the Global Collapse

Soon, the USA will decide whether to loosen the monetary easing measures or not. Regardless of what happens, the effects of the Fed's decision will propagate to the entire World.

According to many economists, the low interest rates and money printing have created new financial bubbles - which are potentially insolvable and will eventually pop with devastating consequences.

To Stop or to Accelerate Monetary Easing?

Even though quantitative easing is bad for the economy on the long term, as it weakens the currency, at this time there's little else pushing the over indebted US economy, therefore the Fed must print enough dollars in order to pay the accumulated debt.

Like a drug addict, the United States are depending on quantitative easing.

Bond and treasury buying pumps money into the economy, but this is creating a bubble, because the buyers will eventually have to collect their yields, once these titles expire.

If the US stops printing, it will be unable to obtain the money for paying the debt and will therefore spiral deeper and deeper into debt and then a default will be closer.

Just like in the case of a drug addict, the US economy is relying on artificial stimulus - money creation, which has already tremendously increased the volume of US dollars. And, as there are more and more US dollars in the World in less and less hands (multiple countries have been ditching the currency for safer assets and alternative currencies), the value of the currency drops.

The QE3 (which is also referred to as "QE infinity") pumps 85 billion $ per month into the US economy, which dilutes the US dollar's volume by 1,020 billion $ per year (more than a trillion dollars!).

Roughly a year has passed since September 13th, 2012 - when QE3 had been decided upon.

It's very likely that this round of QE will eventually reach the 1,020 billion $ (1.02 trillion $) amount created during the past year. All artificially-generated fiat dollars!

How much money is this?

It's more money than the combined GDP figures of Greece, Portugal, Hungary and Colombia. This is how much these nations have produced in the year 2011 according to the United Nations.
Of course, the Fed has created this amount out of "thin air". Absolutely no labor has been involved, no value added.

If the monetary easing slows down to fast , the bubbles could pop easily. Therefore, the Fed will have to think well before deciding whether to trim the QE round or not. Various figures are circulating for the next possible monthly easing round: 45 billion $ or 65 billion $. The decision will come in September, the same month when (later, after the Fed's QE-related decision) the German elections will take place.

Should the Fed not slow down the pace of monthly QE, the bubble will inflate more and more, the risk of currency devaluation will increase further.

Economist, author and investor, Peter Schiff went as far as to expecting even more QE. According to him, it's the stimulus that's keeping the US economy "alive". If the Fed decides to reduce QE, it could have devastating effects on the economy. They will have to print more, which will devalue the dollar more and will increase gold and silver prices even more.

QE trimming or increasing is a double-edged sword.

Risky Countries Have More Attractive Bonds

Rwanda, Bolivia, Zambia and Nigeria have much higher-paying yields on bonds than the USA.
While the United States offer 1.63 % on 10 year bonds, Kenya promises 10.79 % and Nigeria a staggering 15.13 %!

Nevertheless, the USA, the United Kingdom are among the least attractive bond-sellers, while in the top we find: Venezuela, Turkey, Vietnam, Russia, Hungary, Colombia, Brazil etc. (for further details, check this list) Therefore, financing the great Western economies is becoming more and more expensive.

According to Swiss economist and investor, Marc Faber, the problem is that the money on the market isn't distributed evenly and instead of stimulating the economic activity, it creates bubbles.

Prime Values has previously published articles on the consequences of a global collapse and also about the causes of the current crisis, which could eventually lead to the predicted great crash.

It's vital for your personal finance to get prepared adequately and survive the coming financial cataclysm.

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