Finance & Economics Archives - Page 6 of 8

Should You Buy Gold Now?

by Jeff Clark – Hard Assets Alliance:

There’s a subset of investors who see the big picture for gold, believe in the fundamental case, and have the means to buy, but are holding off because they think gold is headed lower. By waiting, they believe they’ll get a better price.

With all due respect to those of you in that camp, I think that’s a mistake.

If one is convinced gold will be cheaper a week or month or quarter from now, it might seem prudent to wait to buy. But obviously no one knows if gold is headed lower or if it’s already bottomed. So don’t kid yourself: you may or may not get a better price.

And premiums don’t stay the same. The US Mint raised the price it charges authorized silver purchasers by a substantial 50¢ after last month’s big retreat. The price retail silver buyers paid was not as attractive as they thought it would be.

But these issues miss the bigger point. Here’s what I think is perhaps a better way to view the subject, along with how to handle the dilemma…

Gold Is Not an Investment—It’s Insurance

“A dollar is worth only 70¢ now,” my dad once told me as we worked in the back yard. “And they say it’ll only be worth 50¢ in a few years.”

It was the mid-1970s. I was helping my dad build a dirt road to our barn, and he wasn’t happy. Not about the hard work or humidity, but from what was happening to the dollar. Inflation was starting to kick into high gear, grabbing headlines that even a girl-chasing teenager could understand.

I remember being appalled by the thought of going to the store and having the clerk demand $1.30 for an item marked $1. Knowing what I know now, my thinking wasn’t that far off.

Our local paper ran a story of a blue-collar worker who had stuffed wads of dollars into the back of his gun cabinet early in his working life. The money was discovered by the family after his death. While saving money is good, the duck-hunter equivalent of “Family Mattress Bank & Trust” won’t keep your money from depreciating; the stash of $10s and $20s had lost over half its purchasing power since he’d hidden it some 30 years earlier.

About the same time the gun locker was being lined with legal tender, both of my grandfathers—unbeknownst to me at the time—bought some gold and silver coins for me and likewise stored them away. I inherited them a few years ago—and the purchasing power of the coins is still the same as it was 30 years ago, despite the price fluctuations along the way.

If gold were an investment, it might be prudent to see if you can get a better price. But it’s not. It’s lifestyle insurance. It’s an alternate currency that will withstand the inevitable fallout of government excess, the start of which grows closer by the day. It is purchasing-power protection—protection that you and I may use sooner than we’d like.

You might argue that you always try to get the best price when you buy auto insurance and life insurance. That’s true—but the difference is that you shop among different brokers for the best price; you don’t put off the decision because you read somewhere the insurance industry might lower its rates at some point in the future.

So, what to do?

Don’t “Buy” Gold—Accumulate It

Neither you nor I nor anyone else knows exactly when the very best price for gold will occur. But since it’s an increasingly critical form of insurance in today’s world, the thing to do is to take a portion of your dollars earmarked for gold and buy some now, but keep some powder dry for the next potential dip. That way you’ve got a good price in case the bottom is in, but still have some cash available if the price falls lower. Then buy another tranche next week or next month or next quarter—whatever suits your cash flow and financial plan—but make it a regular occurrence until you have the full allotment you want.

This is exactly how central banks buy.

Central banks aren’t trying to snag the bottom. They’re focused on how many ounces they own.

Further, almost no institutional investor or money manager buys in one lump sum. They accumulate.
Our focus should be the same. Our amounts are a lot less, of course, but the point is to buy in regular tranches, working toward our allocation goal.

I cringe when I hear people say they’re waiting for a better price. What if the market takes off higher or simply stops falling—then what?

Start your accumulation plan today. Heck, you can even use the MetalStream service to buy automatically each month, and the amounts can be adjusted each time if you want. Just log into your Hard Assets Alliance account and once logged in, click the MetalStream signup button to get started.

In a short period, you’ll have a nice stash of hard assets purchased via dollar cost averaging (i.e., at the best cost basis you could hope to achieve).

Whatever you do, start now. Then keep going.

Article originally posted in the December issue of Smart Metals Investor at HardAssetsAlliance.com.

Calls for Repatriation Signify Changing Perceptions of Gold

by Justin Spittler, Hard Assets Alliance Analyst :

Last month, we urged readers to not lose sight of what makes gold special. Major market participants sure haven’t. In fact, Switzerland just held a public vote over whether to increase its gold holdings to 20% of total foreign reserves.

The referendum was voted down on November 30 and it wasn’t even close, which is hardly surprising considering the widespread smear campaign spearheaded by the federal government and central bank. Still, the fact that conversation reached a nationwide vote is encouraging. It’s just one of many examples of how prevailing attitudes toward gold are evolving.

Bird in Hand

Investors that look beyond the sensational headlines realize that not everyone has given up on gold. Poland, Venezuela, Ecuador, and Mexico are among the growing list of countries that have repatriated their gold reserves or have taken steps to do so. The movement has recently gained traction in crisis-stricken Europe.

Last year, Germany shocked the financial world when it requested that 300 metric tons of gold be transferred from Lower Manhattan to Frankfurt. The New York Federal Reserve offered excuse after excuse before ultimately saying the Bundesbank could have its gold back. It would just take seven years.

The Fed said it would need until 2020 to complete the delivery because they first needed to melt down gold bars. In other words, Germany’s gold was probably no longer in the Fed’s vaults. The leading theory among investment circles is Germany’s gold stash has been hypothecated, or leased out, to Wall Street banks for derivatives trading.

In any case, the Bundesbank agreed to a protracted delivery schedule. Eighteen months later, however, the Germans gave up on their repatriation efforts after receiving only 5 tons. Oddly enough, German officials maintain that country’s gold in good hands and sees “absolutely no reason” to not trust the Americans. Not every country shares this unflinching faith.

Last month, the Netherlands reported that it had transferred 122.5 metrics tons of gold from New York to Amsterdam, though it didn’t deliver the news until after the bullion had already made its way home. Dutch officials said the bullion was repatriated in order to inspire public confidence, which is interesting considering how Holland referred to its gold in Manhattan as “absolutely safe” two years ago.

France, Belgium, and most recently Austria have also conveyed interest in bringing foreign-held gold reserves home. With the global currency war heating back up and instability edging higher, precious metals investors will want to watch this trend closely.

Putting Trust to the Test

Germany’s failed attempt to repatriate 300 metric tons of gold from New York raises serious concerns over gold held outside a country’s border. In the coming years, trust between sovereign nations—even longtime allies—could be put to the test should more and more nations wish to hold their bullion within arm’s reach.

Few people monitor the actions of central banks as closely as precious metals investors. Usually, the focus is on monetary policy and gold accumulation trends, but repatriation efforts can’t be overlooked. Transporting metric tons of gold across the globe is a highly complex process. When a country makes that decision, you better believe they’ve thought about the matter long and hard.

The chorus of rational actors demanding that their gold be brought home is growing louder. Should a custodian in New York, London, or other global financial hub prove unable to return bullion to its rightful owner in a timely fashion, investors will have even more reason to mistrust the global fiat money scheme.

Article originally posted in the December issue of Smart Metals Investor at HardAssetsAlliance.com.

Asset Allocation

submitted by jwithrow.

Asset allocation is a necessary tool for saving money and building capital within a fiat monetary system. Within a fiat system, the purchasing power of your currency is gradually inflated away and the value of various asset classes can fluctuate rapidly based on central bank monetary policy. Thus, it is important to have a principled yet flexible asset allocation model in place.

The concept of asset allocation is to allot a percentage of your capital to various asset classes and to maintain each allocation ratio until you deem it necessary to adjust your model. For example, a basic asset allocation model could consist of 25% cash, 25% precious metals, 25% real estate, and 25% stocks. You would then allocate your income to each asset class accordingly.

The beauty of this strategy is that you cannot be wiped out by any wild swings in the market and you will always have cash on hand with which to purchase assets when they go on sale (when the market tanks). Of course you can always add additional asset classes into your model such as bonds or bitcoin or cattle depending upon your outlook and you may need to adjust your percentages based on new analysis from time to time as well.

The Infinite Banking insurance strategy that we talk so much about here at Zenconomics and in our book works perfectly to house much of your cash allocation. An IBC policy serves to compound returns on your cash while it sits idle waiting to be put to use without sacrificing any liquidity whatsoever.

As for your precious metals allocation, you can purchase gold and silver bullion from any local coin shop or from reputable dealers online or you can purchase through companies like Hard Assets Alliance which will facilitate fully allocated domestic or international storage for you.

Of course to follow an asset allocation model you will need to save a large percentage of your income. I think 50% is a good benchmark. 75% savings is preferred. Very few people have the discipline to pull this off but those who do never have to worry about financial problems again.

If maintaining such an asset allocation model for your household sounds extremely tedious and time-consuming that’s because it is. This is the price we must pay for living under a fiat monetary regime. In a sound monetary system we would be able to build capital simply by saving money in a bank account because our money would maintain its purchasing power over time. Instead, saving money in a bank account is a losing strategy so we are all forced to become financial analysts or have our wealth systematically transferred away from us.

IBC – What’s it all about?

by R. Nelson Nash
Author of Becoming Your Own Banker
Article originally published in the October issue of BankNotes

It should be evident to most people that the last 100 years have been very violent in the financial world. Why? What happened to cause all this turbulence?

During this period we have witnessed the bloodiest century of all time. Two World Wars. Endless smaller wars all over the earth. An influenza epidemic after WWI. Nations formed and then self-destructed. New diseases coming into existence. Endless turmoil in the Mid-East. Empires coming apart. Financial euphoria followed by inevitable busts. Unbelievably powerful weapons and weapon systems. Propaganda perpetrated on an unsuspecting public such as man-made global warming. The list could take several pages to itemize them.

So, what’s going on? All of these actions are preceded by thoughts of the people involved at any time and place. Or, maybe it could be best described as lack of thought! It appears to me that people have forgotten how to live. It could be that they never learned how to live in the first place. Maybe it could be because of the way people feel. We seem to have a generation of “touchy-feely” folks that are in places of leadership and they influence the actions of every-day people.

Wars make absolutely no sense, but it is evident that this behavior is a common denominator throughout this time frame. Nothing good came from them. Yet, wars are glorified in the minds of many people. Things like Tom Brokaw’s book, The Greatest Generation. In reality it was a disaster — because of what it did to the minds of the people. They heard lies and came to believe them. Our country had already adopted Socialist ideas a number of years earlier, but this head-long plunge gained tremendous momentum during this period. I was there to witness it as a teenager and have seen it unfold to become the monster that we have today.

The historian, Dr. Clarence B. Carson wrote a masterful book entitled, The World In The Grip Of An Idea back in the 1970’s. He did a great job of explaining how we got into this abominable situation. The book needs to be re-published and Dr. Paul Cleveland and Dr. L. Dwayne Barney are in the process of re-writing it at this time. The world needs this book very much and so I encourage you to get a copy when it becomes available.

From my own perspective, money is the real common denominator in human action. The great Austrian Economist, Ludwig von Mises points out that the business cycle is caused by central banks. They inflate the money supply dramatically and people can’t tell the difference between “real money” and the “counterfeit money” (fiat money has no real basis). They feel that it is real wealth and so they do things that are totally irrational. This creates booms in the economy. In due course of time, reality rears its ugly head, and the bust follows.

This pattern has a long history, but it seems that every generation during the boom years feels that “Yes, those things happened in the past – but, this time it’s different!” This is nothing but hubris in its purest form. It is the “Arrival Syndrome” that I describe in my book, BECOMING YOUR OWN BANKER. It is the worst thing that can happen to the human mind!

Government debt all over the world is huge. But, consumer debt in these nations is approximately equal in volume. Bankers have created a mind-set in people that “you don’t have to save money– just spend, spend, spend! We are going to take care of your financial needs.” A local Credit Union advertises “Get a Legacy Lifestyle Loan from us.” Translated: “If you don’t like your present lifestyle, then get a loan from us so you can live the way you want to today! Don’t worry about having to repay the loan.”
We are bombarded with such stuff every day. If you listen to financial advertising very long then it becomes “hourly!”

Your local, commercial banks are the primary source of inflation. They lend money that doesn’t exist. If anyone else did that they would be put in jail! But, this chicanery has been going on so long that most everyone considers it normal.

In the video, Banking With Life, Dr. Paul Cleveland points out that people confuse money with wealth. Wealth is your productivity, and things that you own. Money is just the medium of exchange that we use to acquire wealth. Creating a pool of money from which to buy wealth is a necessary function in an economy. This pool of money is known as banking! We could not live the way we do today without the concept of banking! It is sovereign! Some party in your life is going to be the banker whether you recognize it or not!

That party should be you! John Donne (1572-1631) gave us the thought, “No man is an island.” Therefore, this Infinite Banking Concept must involve other people in the form of a contractual relationship. The perfect financial instrument to accomplish this has been in existence for over 200 years. It is known as Dividend-paying Whole Life Insurance (Preferably with a Mutual Company – one that is owned by the policy owners). Your medium of exchange must be warehoused somewhere! There are no exceptions!

This is a place that cannot inflate the money supply. This Infinite Banking Concept has been taught through my book, Becoming Your Own Banker and the follow-up book, Building Your Warehouse of Wealth. Further explanation is provided by How Privatized Banking Really Works by Carlos Lara and Robert P. Murphy, PhD.

Through these books and seminars that are taught all over the USA and Canada, there are now thousands of people who will never have to make loans from an institution that inflates the money supply and creates “booms and busts.” You, too, can become your own banker!

Please see the October issue of BankNotes for the original article and others like it.

Saving

submitted by jwithrow.

We have been hearing all about how most Americans are living paycheck to paycheck and not saving any money as justification for the brilliant (*cough*) myRA government savings plans so we felt that it would be prudent to take a deeper look at what ‘saving’ is.

You see, we don’t think that saving is about money. Money is involved, but it is not the focus. Saving is really about storing our productive efforts.

It goes back to the days of barter…

Back then the fisherman would catch extra fish in the morning and take them to the market in the afternoon to trade his extra fish with the farmer for vegetables. His wife liked to have vegetables with her fish for supper so he had to trade for vegetables instead of the painted rock that he really liked.

The fisherman had learned that fish would start to smell bad the day after being caught so he had no choice but to trade all of his extra fish every afternoon and go fishing for more again every morning.

Until the fisherman discovered gold. Then the fisherman could trade his extra fish for gold and take the next day off. The fisherman didn’t really care about amassing gold; he just figured out that gold would let him store his production so he didn’t have to go fishing every single day to feed his family. And it turned out that three day old gold smelled much better than three day old fish – this was a bonus.

So saving was born!

Somewhere along the line we forgot this and started to think that saving was about amassing money. And on top of that we started to think that money was paper and not gold. We are so forgetful!

So when saving became about money and not about production we opened the door to debt. We started to think that instead of saving we could just borrow whatever money we needed. After all, the credit money still bought stuff just like the saved money except we didn’t have to wait to use it!

But then when we had to start using our entire paycheck to pay back all of the credit money we found out that we had to be even more productive now than before we went into debt. Our plan backfired.

We didn’t learn from our smart fisherman ancestor and now we had to go fishing both in the morning and in the afternoon to have enough fish for our supper and also enough to trade for vegetables so our wife won’t get mad and also enough to give to the banker to pay him back for the credit money that bought us the really neat painted rock.

Darn painted rocks.

Debt Impedes Economic Recovery

submitted by jwithrow.

Debt is nothing more than an obligation to pay for present spending with future earnings.

A little bit of debt used to increase future earnings is a good thing. A little bit of debt used to increase present spending at the expense of future earnings is not a very good thing. A lot of debt used to increase present spending at the expense of future earnings is a good way to make it very difficult for there to be any earnings in the future at all.

At the macroeconomic level, the U.S. has chosen option three. Japan and Europe have done the same.

The great thing about economics is that there is a ‘response’ system built in that maintains a sort of chaotic order in the general market.

When there is significant capital formation within the system, interest rates go down. Decreasing interest rates send a signal that it is a good time to borrow so homes are purchased and businesses expand.

Interest rates then rise as more debt is taken on and thus capital available diminishes. This sends a signal that it is not a good time to borrow so mortgages are paid down and business debt is reduced. This leads to gradual capital formation within the system that will trigger a decrease in interest rates and the cycle perpetuates.

But guess what happens when you have an Ivy League graduate that thinks it is his job to force interest rates lower and keep them suppressed?

That’s right! The market does not receive the proper signal and it looks like it is still a good time to borrow. So even more homes are purchased and businesses keep on expanding.

Then we get the idea that home prices should always go up, stock prices should always go up, businesses should always expand, and GDP should always grow.

And we end up with more debt.

U.S. debt has grown by more than 60% since the financial crisis began in 2008. Global debt has grown by more than 40% in the same time period.

It turns out that a problem of too much debt cannot be solved by taking on more debt.

The events of 2008 sent a signal that it was time to stop borrowing and to liquidate debt but we didn’t listen. The economy will undoubtedly blow up again and the next crisis will be even bigger because the debt is now even bigger.

The only way for the economy to truly recover is for a mass-liquidation of debt to occur. Until then we can expect the Fed to keep fudging the numbers and blaming economic stagnancy on the snow.

We happen to like snow and find it to be much more desirable than the Fed, both economically and ascetically.

The Middle-Class is Fading

submitted by jwithrow.

The middle-class is fading. Fast.

The jobs that have been lost since the financial system teetered on implosion in 2008 have not come back. Those jobs are not coming back. More education won’t bring them back. More laws won’t bring them back.

The government’s job report says that more and more jobs are being created, but guess what? They are mostly low paid part-time or temporary jobs; they are not the middle management jobs in the high rise buildings.

As for why the middle-class is being wiped out, it’s no mystery. This very same scenario has occurred all throughout history. One can look back as far as the time of the Roman Empire and see that there is nothing new under the sun. History rhymes and those ignorant of history are doomed to repeat its mistakes.

You see, every time the currency of the land has been inflated and debased, the middle-class has been destroyed. Inflation transfers value from those who must work to earn currency to those who control the currency supply.

They don’t tell you this in school. They don’t tell you this in college. They don’t even tell you this if you major in finance or economics. They probably don’t know themselves. So most people never understand what is happening. Their paycheck gets bigger and bigger so they can’t figure out why they can never get ahead. They don’t realize that their bigger paycheck is buying less and less. They don’t understand the difference between nominal income and real income.

In Roman times it was the government that controlled the currency supply. The Romans would collect taxes and tributes from citizens and conquered peoples and they would then melt the precious metal coins and add in cheaper metals such as copper to re-mint more coins of lower value. They would then pay the Roman army with these cheaper coins and pretend that they had the same value as before. The general market caught on to this process and began to charge higher prices for food and goods in response. The middle-class was destroyed over time and eventually the economy collapsed. Then the Empire fell.

In modern times it is the Federal Reserve and the other central banks of the world that control the currency supply. They do this by simply creating currency units from nothing and using the new currency as they see fit. They inject some of this new currency into the banking system, they use some of the new currency to buy government debt, and they inject some of the new currency into the IMF and foreign central banks. This directly leads to more and more debt and an increase in consumer prices across the board.

They are printing currency at will so why is the middle-class working so hard for 2% annual raises?

The rules of the game have changed and those unable to recognize this and adjust accordingly will be wiped out with the middle-class – just as has happened throughout history.

Making the Income Tax Fair

submitted by jwithrow.

Well tax season is here once again and we have been hearing a lot about the need to make the income tax system more fair and equitable.

We couldn’t help but overhear a woman’s conversation the other day on the subject matter:

“Did you know that Mr. So-and-so’s tax refund was ten thousand dollars!? He doesn’t claim much of his business income but he claims all of his children, can you believe that!? It’s just not fair – that’s exactly what’s wrong with America!”

And that got us to thinking – maybe she is right.

Maybe we do need a more fair income tax.

After all, some people only pay 15% but some people pay 25% and even others pay 35%! And some corporations don’t even pay 10%!

You know what, we agree with our angry woman. We do need to have a more fair income tax!

We think the tax system should be structured based on our American heritage. Our income tax should foster liberty and justice for all. This is the land of the free, is it not?

Our income tax should make sure that every single American shoulders an equal burden, especially the rich! And our income tax should make sure that corporations pay the same amount as people!

Yes, dear friend, having thought it over more we are one hundred percent on board with a fair income tax.

Now we are not sure what our inspirational angry woman had in mind to make taxes more equitable, but we have thought of a pretty good solution.

Get rid of the income tax completely. Make it 0%.

Now it’s fair!

And now it’s modeled after our American founding principles. How can a man be free if he is not allowed to keep the fruits of his labor?

What’s that you say? How will we pay for all of our government operations?

Easy – we won’t. And we shouldn’t.

Oh, and it’s not ‘our’ government. If it were ours then we would be the boss. Instead, the government tags and monitors all of us at all times.

Mr. So-and-so has the right idea.

What We Forgot About Free Market Capitalism Part Two

submitted by jwithrow.

Failure is just as much a facet of free market capitalism as success is.

In a free market economy, well managed businesses with desired products and services will succeed and poorly managed business with undesired products and services will fail.

Consumers, when well informed, will make decisions based on their individual preferences; they will either buy the highest quality product at the lowest price for which that product is available or they will buy a lower quality product for a price lower than the higher quality product. Consumers are typically not very interested in paying high quality prices for low quality products.

So, in the free market, businesses must constantly strive to either offer the best product at the lowest price or a suitable product at a very low price. This requires businesses to focus on improving efficiency and decreasing costs without sacrificing product quality. If a business cannot offer competitive products at competitive prices then it will not be in business for very long.

This model aligns the interests of both businesses and consumers and creates a self-regulating incentive structure.

In the free market system, businesses have an incentive to offer quality products to customers at the best price and they have a disincentive to offer poor products at poor prices. While this is a simple representation, the incentive structure is one of the core principals underlying the free market system.

But what happens if businesses are not allowed to fail due to government intervention?

We have seen numerous cases of this scenario in recent years. The “too big to fail” banks were propped up by the federal government when they came to the point of failure. Fannie Mae and Freddie Mac were taken under receivership by the federal government when they came to the point of failure. General Motors was temporarily taken over and propped up by the federal government when it came to the point of failure.

This is moral hazard.

Oh, and we should probably mention that the federal government cannot actually bail anything out with its own capital. To fund the bail-outs, the government has to appropriate capital from the private sector in the form of tax dollars and it has to borrow money from the Federal Reserve that was created out of thin air.

So the business losses were socialized but the profits remained privatized – this is fascism in action.

By creating moral hazard in this way, the disincentive piece has been removed from the system and the incentive model has shifted away from a consumer focus and to a focus on generating high profits with no regard for risk. Such a model is a win-win for the favored businesses and the government cronies that they support. The losers are everyone else as the economy turns to mush.

Coming full circle, failure is a welcome facet of free market capitalism. Maybe not for the companies’ doing the failing, but failure is a force for creative destruction that serves to weed out the businesses that cannot offer quality products at reasonable prices.

This is why it is ridiculous to claim that any company is “too big to fail” as justification for bail-outs. Sure there would be temporary hardship were the major banks to fail, but this would eventually free up capital and clear the way for sustainable banking practices to be implemented.

Feel free to read more on the matter here and here.

What We Forgot About Free Market Capitalism Part 1

submitted by jwithrow.

One of the most important elements of free market capitalism is the price system. The capitalist price system provides information on supply and demand in the marketplace and individuals make business and investment decisions based on this information.

The economic system that America now employs is not free market capitalism and there are legions of regulations in place that distort the market pricing system every step of the way.

The most insidious price distortion is the suppression of interest rates.

Interest rates are simply the price of money. Like everything else in the market economy, interest rates are self-regulated by the forces of supply and demand. If there is a high quantity of capital in the system available for lending then interest rates will naturally be low. Low interest rates will entice borrowers to engage in long term financing – purchasing homes, expanding businesses, etc. Interest rates will then naturally rise as the capital available for lending diminishes. High interest rates are not attractive to borrowers so individuals and businesses will focus more on short term projects. This will lead to increased capital formation within the system which will gradually trigger falling interest rates.

But what happens when a central bank suppresses interest rates and keeps them near zero for an extended period of time? Well, this destroys the entire pricing system and distorts the entire market system.

Artificially suppressed interest rates send a false signal – which is exactly why they were suppressed in the first place. Artificially suppressed rates still entice borrowers to take engage in long term financing but this is a Keynesian trap. The problem is that there is not sufficient capital formation in the economy to warrant the low interest rates and thus there is not a true demand for all of the long term projects undertaken.

This is called mal-investment.

“If you build it, they will come” is a great catch phrase in the movies but it’s just not how the real world works.

Despite what the economics textbook says, there is no such thing as a ‘mixed economic system’. There is simply no room for the suppression of interest rates or the distortion of prices in a capitalist system.

There are only two choices:

Free markets
Central planning

Free market capitalism presumes an honest and functional price system that is not manipulated by a central bank.

Oh, we should probably mention how interest rates are suppressed.

The Federal Reserve creates currency units out of thin air and uses them to buy long term Treasury bonds at low rates. What could possibly go wrong?

By the way, you can read more on this topic here, here, and here.