8/15/2011 PERMALINK
Pushing up against the tipping point where starvation, unrest and instability on a scale never before seen will quickly become the new global norm. The Fed is desperately printing money to buy up the US Gov's debt to prevent interest rates from rising.

Much of this buying is open, but some of it is covert. The Fed is, for example, helping China to invisibly reduce its exposure to US Gov debt. They are doing this by pumping liquidity into American banks and pushing them to make massive loans to various entities controlled by China with China's US Gov debt as the only security for these loans.

The Chinese are then using these dollars to go on a massive worldwide buying spree. For the last two years they have been acquiring mines, farms, fisheries and other commodity producing assets all over the globe at a breakneck pace. These dollars are also funding the construction of the roads, railroad and port facilities necessary to get the output of their newly acquired commodity production assets out of the country of origin and back home to China.

Like a powerful billionaire, who discovers he's been fleeced by a Ponzi Scheme and goes to the operator threatening to expose the scam unless he gets his money back. The Chinese have managed to pressure Fed into secretly helping them convert their US debt holdings into a worldwide commodities empire.

So far, Americans have been spared most of the price inflation that would normally come with so much dollar printing. Other countries, desperate to keep on exporting to America, have ordered their Central Banks to print up lots of their own money and buy up all the Fed's surplus dollars that their exporters are accumulating. This has worked to shift much of the Fed's dollar inflation onto the backs of the citizens of the Developing World.

However, this game has a hard limit. The cost of food in the Developing World can only rise so much. The Fed's policy is now pushing up against a tipping point, past which, starvation, unrest and instability on a scale never before seen will quickly become the new global norm.

And the Fed is still pushing.