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It's Not Market Rumors, It's a Meltdown

June 14, 2013 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee.

The world financial system has now entered a twilight zone where uncontrolled hyperinflation has been unleashed, characterized by the fact that no amount of monetary expansion can any longer sustain the rate of growth of the British Empire's cancerous financial aggregates bubble. As a result, massive, unexpected turbulence and capital flows have been unleashed, and are rapidly spinning out of control.

The nature of the problem can only be understood from the standpoint of Lyndon LaRouche's famous Typical Collapse Function graphic. We have now entered the region of that collapse function, where the rate of growth of financial aggregates not only has dropped below the curve of the rate of growth of the monetary pumping, but has begun to plunge rapidly downwards. In this new geometry, massive monetary infusions (QE, etc.) not only fail to bail out the financial aggregates, but actually accelerate their meltdown, all the while driving the physical economy deeper into hell.

It's like a heroin addict, who is so hooked on the "fix" of increasing quantitative easing (QE) of the last few years, that it is no longer a matter of what happens when the QE stops. You not only can't stop the QE; you can't talk about stopping; and you can't even think about the topic of eventually "tapering." In fact, global markets today are already undergoing full-fledged junkie withdrawal symptoms and wild contortions, even as the financial heroin continues to flow freely. To wit:

  • Global bond markets are collapsing, and this is "threatening to halt a global refinancing wave," the Financial Times warns. They note that "US sales of investment grade corporate debt... have this week almost come to a complete halt." Recent weekly average of such sales has been about $23.2 billion; this week it is only $3.2 billion—an almost 90% drop. The same thing is happening in the junk bond market.

  • Massive reverse carry trade flows are underway out of the so-called Emerging Markets (EM), such as Brazil. The World Bank has issued a statement warning of the EM implosion, while the IMF has demanded that the U.S. Fed not even think about exiting from QE. In reporting on the EM crisis, the Telegraph's Ambrose Evans-Pritchard notes that "the emerging market rout has become pervasive," with huge outflows occurring from Brazil, Indonesia, Philippines, Thailand, Turkey, Mexico, etc. Brazil alone has spent $5.7 billion in reserves this month to try to stop the capital flight, and has also used derivatives contracts to do the same. Evans-Pritchard quotes a Brazilian asset manager saying: "Brazil seems to be under speculative attack. We are losing reserves very fast. We should not forget that Russia lost $210 billion in reserves in a few weeks during the Lehman crisis in 2008." Brazil has $375 billion in reserves. In the last week they have dropped their 6% tax on foreign bond investors, and lifted their 1% tax on currency derivatives.

  • FT Alphaville frets that current levels of QE-smack are no longer producing the desired high: "The smoke and mirrors are fading. What is worrying, however, is that a move of this size has been prompted by simple talk of tapering [QE purchases]. If that's what tapering does, what will the first hint of a proper QE exit inspire?"

  • Bloomberg wire service demands that their dope distributor continue to deliver the stuff, big time. "Bernanke needs to emphasize on June 19 [after the next FOMC meeting] that 'policy will remain quite accommodative.' "

Under these circumstances, Lyndon LaRouche commented today, the British Empire has something different in mind, and is now consciously taking steps that will mean mass death in the U.S., and elsewhere, very quickly. What will happen when the food supplies are cut, when people can no longer eat? That is the Queen's policy for reducing the population from 7 billion down to one billion.