When The United States Dies.

Remember KISS. Let's start off with basic truths: The Fed cannot cement in place a policy of QE To Infinity. Why? Quite simply for national debt reasons, which if left unchecked would require that the United States default on its debt and start over. You can't do that in economic terms without permanent economic ruination.

The Fed was formed to regulate the money supply and control inflation. In reality, most economic recessions were the result of excessive Fed tightening, thereby increasing interest rates either too quickly or by too much.

But in the QE reality that goes back all the way to the Obama Administration, we are in an entirely different and far more dangerous world where boom and bust cycles are no longer the expected outcome as per traditional capitalist economic cycles.

Treasury being completely complicit with The Fed has turned the stock markets into junkies requiring their daily indirect fix of capital through Fed cash injections into financial services and the banks. That money doesn't go toward stabilizing bank balance sheets, to bank repos or even dealing with bank derivative exposure. Quite the contrary, the money is used by banks to inflate stocks by buying them when no one else can or will.

You also know that The Fed is out to lunch when it starts buying high-yield junk bonds -- that no one else wants -- and their disastrous ETF counterparts. That's lipstick on a pig but it's still a lousy pig.

The Fed recklessly believes that creation of phoney money in infinite and never-ending amounts will stabilize markets and reverse the current depression. Absolute lunacy. You can't keep the printing presses going forever.

When the stock market junkie gets its fix, stocks inevitably go up. But within days, natural market forces kick in again focusing on true economic metrics and down stocks go. Then in comes another Fed fix and stocks rise again, with the cycle continually repeating itself but on a basic downward trend: in other words, lower highs and lower lows. Put another way: serial cyclical bull rallies in a clearly established overall bear market.

Now, let's focus upon the effects of excessive Fed liquidity: this is the period when we transition from increasing inflation to hyperinflation with the initial trigger being money printing, which in and of itself is clearly inflationary. In hyperinflationary environments, stocks take off for the moon but that's entirely deceptive. In local currency terms, stock market valuations increase quickly and at an incredible pace. So, paper returns are in the order of hundreds to thousands of percent increases. But the problem is that excessive money printing leads to rapid currency devaluation coupled with unchecked price increases and escalating corporate input costs. In American terms, the dollar will plummet and lose much of its purchasing power while consumer prices rise at an alarming pace. So, people have less purchasing capacity while at the same time goods prices are making them less accessible.

Meanwhile, corporations experience less demand for goods and services, revenues decline and overall profits are drastically affected by the true underlying economic conditions. That's when companies start trying to avoid bankruptcy or end up going bust. In addition, in a hyperinflationary environment, corporate dividends go the way of the Dodo bird and share buybacks, which normally artificially inflate stock prices, become a thing of the past.

That's when the stock market hyperinflationary cycle turns and stock indexes crater, often down 80-90%. That's what Treasury and The Fed are trying to prevent but in reality, they are only making it inevitable with their excessive and dangerous phoney money printing policy. And if unemployment goes to all-time highs, or unmanageable levels, then hyperinflation becomes stagflation with incalculable economic consequences on working men and women across the United States.

When The Fed launched QE, that was the beginning of the end of normal capitalist economic cycles. It also signed the economy's death warrant, which unfortunately, is playing out today before our very eyes.