Hype-pandemic Decreases the Velocity of Money So Unavoidable Hyper-QE Doesn’t Blow Up the World Alexander Kuzmin Follow Apr 19 · 4 min read

In the recent couple of decades, financial processes have been dominant. Today, everything else — wars, energy supply, digital technologies, mass media, even politics — all are tertiary, all follow the logic of the global financial center restructuring, foot-to-foot.

The key event of recent months is the official launch of the FED’s multi-trillion-dollar giveaways (hyper-QE).

From this moment on, it is impossible to go back to the previous state of the system. Now, only forward! We are heading into the unknown and not yet experienced by anyone. We are facing something for which there is no description, rules of tested behavior.

The exaggeration of the pandemic (hype-pandemic) serves the need for a sharp slowdown in the real economy.

A sharp acceleration of financial pumping must not be done without slowing down the real sector. As they are multiplying the increased money supply by the decreased speed of money, at least to some extent they stay commensurate with the second part of the classical equation. This way, the hyper-QE does not [necessarily] lead to immediate hyperinflation.

But why did they end up needing this hyper-QE in the first place?

We should first ask why weren’t they afraid to QE in 2009 and later and why aren’t they afraid to hyper-QE now? The very ability of the Fed to print and throw trillions of dollars into the furnace of the system without inflationary consequences for the dollar does look like a miracle.

The trick is that capitalism (that could be “afraid” of such actions) has not existed for many years already. It’s been dead since a two-circuit financial system has been formed, in which “dollars for capital operations” are separated from “dollars for the consumer market”. The former circulates in the virtual world of large speculations and investments. It does not trickle down to consumers, it never becomes the latter. The money that does sneak into consumers’ pockets is immediately sucked back into the virtual world via the [artificially] “growing stock market”. This is why they’d kill for constant “growth”. To a large extent, it has been a Ponzi for centuries but since about a decade ago, it is a complete and very quickly rotating Ponzi.

Notably, the two-circuit system is one of the core characteristics of the so-called developed socialism. Just as under Brezhnev, under Obama, capital operations ceased to depend in any way on the real economy. The percolation of the “capital” dollars into the real sector, as well as non-cash rubles into cash at the time, is, in fact, a planned (commanded) procedure, since it is determined by budget expenditures agreed in congressional committees.

However, in the bourgeois United States, it is impossible to maintain this separation of the two financial circuits for a long time, even with the full support of deceptive mass media.

Even in the best virtual computer game, there are external limitations and physiological needs of the players. Someone should go into this increasingly dusty and degraded game room and put cheeseburgers in a convenient place so that gamers can pick’em up and eat without removing virtual reality helmets. Someone also needs to change diapers.

In an exciting game of virtual financial “capitalism”, China and other countries of the periphery were needed for this “support” role. The dependence of the real sector of the world economy on the virtual game was created by involving the comprador elites, albeit indirectly, through offshore banks that siphoned dollars leaked to the producing sector back into the global virtual game. There’s plenty of other mechanisms: creating local budget deficits, IMF loans, buying American “treasuries” instead of investments in their own economies.

Until recently, this convergent virtual superstructure over the real economy not only co-existed with classic capitalism but also helped it complete the global expansion. Even the politically closed North Korea is now partly embedded in the world market through smuggling.

Having embarked on the path of QE in 2008, the financial elite of the West could no longer step off it. Rather, attempts to maneuver always ended with the opposite maneuver, leading to the main trajectory — to the collapse of the pyramid.

Every day, the two-circuit system requires bigger and bigger infusions — from several billion a year they came to several trillion in a month. All this time, the real economy has not expanded.

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The hype-pandemic is a gesture of despair. That’s why it feels so caricatured. For 75 years, there has been no place for real despair in our world. The hype-pandemic allows the otherwise split elite to temporarily unite and slowly pump the already punctured bubble of the real economy.

They now have the formal justification to continue the Brezhnev’s practices and distribute loans without collateral and give away subsidies.

Ok, for now, they avoided a sharp collapse with the destruction of even relatively healthy and necessary sectors and enterprises. This can be called a success. Gradual deflation is better than immediate death. So far, much of the extra money continues to be sucked out of reality to the “virtual” stock market.

But did the quarantine give time to work out an agreed decision? Did they decide what is going to be the fate of the dollar? Probably so. In such a stressed situation of the “co-located” mutual and universal interest, in a situation when they have time to solve it, there SHOULD be some [temporary] solution. Then, of course, after some time the world will have to look for the next move.