Top central banker warns money printing is spiraling out of control

(NaturalNews) Way back in my university days, I was lucky to have a very good professor who taught a course in macroeconomics. On the first day of class, he introduced himself as an "economist" but quickly followed that statement with a disclaimer, saying that anyone can call themselves an economist.

I'd like to say right now that I am anything but an economist. However, I did learn a few things from that professor that have stuck with me after all these years. The course was one hell of a lot more interesting than I ever imagined it would be (I only took it because it was required for my degree plan), and the single most important thing I learned about economic theories is that they are simply that -- mere theories.

And these theories often function a lot better on paper than they do in the real world. A case in point is the practice of Quantitative Easing (QE), which is actually more like an extremely dangerous experiment based on a theory. And it's an experiment that is going horribly awry, like some B-grade sci-fi movie, only it's not a movie and it's not fiction -- and we are soon going to be faced with the harsh economic facts.

Once again, I don't pretend to be anything resembling an economic expert, but I do listen to what the real experts have to say. And most (if not all) of the people who have been successful in forecasting recent economic trends have roughly the same thing to say about the dangers of QE, especially now that central banks across the globe are also engaging in the practice -- not just the U.S. Federal Reserve Bank.

What they are saying, almost unanimously, is that we are headed for an economic disaster worse than the one we experienced in 2008.

Although the basic mechanics of QE are rather simple, the repercussions are complex and no one really knows where it will all lead, but most economists and honest central bankers are warning that, no matter what happens at this point, the results will not be pretty.

The definition of Quantitative Easing, in the most basic terms, is the practice of a government creating money out of thin air that can be used to increase lending, thereby stimulating spending, which -- in theory -- is supposed to be good for the economy (for a more detailed explanation of how QE works -- or doesn't -- click on the links provided below).

William White, chairman of the Organisation for Economic Co-operation and Development's (OECD) Review Committee, former chief economist of the Bank for International Settlements, and adviser to Angela Merkel, has warned that the continued use of QE will inevitably lead to a deep financial crisis on a global scale.

In White's words:

We are in a world that is dangerously unanchored. We're seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.

He also warns that those who believe that the European economy will benefit from the massive planned expansion of QE in the EU (expected to be as much as €500 billion) are deluded. "QE is not going to help at all," he said.

Part of the problem is that countries across the globe are all trying to do the same thing, which leads to the "unanchored" global economic scenario White is warning us about.

Global QE practices amount to what Ambrose Evans-Pritchard of The Telegraph calls "beggar-thy-neighbour devaluations" which will lead to further instability in the world's financial markets.

As emerging markets, along with countries such as Japan, also turn to QE to boost their own economies, the problem only grows worse.

As White notes:

The emerging markets got on the bandwagon by resisting upward pressure on their currencies and building up enormous foreign exchange reserves. The wrinkle this time is that corporations in these countries - especially in Asia and Latin America - have borrowed $6 trillion in US dollars, often through offshore centres. That is going to create a huge currency mismatch problem as US rates rise and the dollar goes back up.

White and others warn that it's too late to avoid serious repercussions. It seems that all the average American can do at this point is to continue stockpiling "beans, bullets and band-aids" for when the big crash finally arrives -- and it may be sooner than you think...

Source:

http://www.telegraph.co.uk

More info on QE:

http://www.economist.com

http://www.peakprosperity.com