Posted By: Michael Onken, MadSci Admin
Tuesday, November 30, 2010
The day I posted my item on the very real possibility of the historical existence of an elixir of life and that it should be in our sights with our present knowledge; here we have the first demonstrated incidence of actual age reversal.
The initial protocol is obvious. A regimen of sufficient telomerase enzyme will apparently do the trick. Of course, there are details to work out and the usual fears to overcome and work around. I do not think that the obvious problems are insurmountable.
First of, we now have the MIT nanogold protocol for eliminating cancer in the body. There is no point in trying to reverse age when the body is losing a battle with cancer. See my post on the subject.
Secondly, senescent cells will simply be replaced over time by younger cells in a rejuvenated body.
Thirdly a restored body will also have a restored metabolism and immune system and will be well able to deal with mechanical restoration issues and suppress normal cancer issues.
There will still be plenty of issues and the second item makes that rather clear. Yet we are now very much pursuing what looks to be an attainable goal. The effect has just proven itself real. Surviving to age 100 in excellent health, even if it means dropping dead the day after is superior to presently available outcomes.
Harvard scientists reverse the ageing process in mice – now for humans
Harvard scientists were surprised that they saw a dramatic reversal, not just a slowing down, of the ageing in mice. Now they believe they might be able to regenerate human organs
In mice, reactivating the enzyme telomerase led to the repair of damaged tissues and reversed the signs of ageing. Photograph: Robert F. Bukaty/AP
Scientists claim to be a step closer to reversing the ageing process after rejuvenating worn out organs in elderly mice. The experimental treatment developed by researchers at
turned weak and feeble old mice into healthy animals by regenerating their aged bodies. Harvard Medical School
The surprise recovery of the animals has raised hopes among scientists that it may be possible to achieve a similar feat in humans – or at least to slow down the ageing process.
An anti-ageing therapy could have a dramatic impact on public health by reducing the burden of age-related health problems, such as dementia, stroke and heart disease, and prolonging the quality of life for an increasingly aged population.
"What we saw in these animals was not a slowing down or stabilisation of the ageing process. We saw a dramatic reversal – and that was unexpected," said Ronald DePinho, who led the study, which was published in the journal Nature.
"This could lead to strategies that enhance the regenerative potential of organs as individuals age and so increase their quality of life. Whether it serves to increase longevity is a question we are not yet in a position to answer."
The ageing process is poorly understood, but scientists know it is caused by many factors. Highly reactive particles called free radicals are made naturally in the body and cause damage to cells, while smoking, ultraviolet light and other environmental factors contribute to ageing.
The Harvard group focused on a process called telomere shortening. Most cells in the body contain 23 pairs of chromosomes, which carry our DNA. At the ends of each chromosome is a protective cap called a telomere. Each time a cell divides, the telomeres are snipped shorter, until eventually they stop working and the cell dies or goes into a suspended state called "senescence". The process is behind much of the wear and tear associated with ageing.
At Harvard, they bred genetically manipulated mice that lacked an enzyme called telomerase that stops telomeres getting shorter. Without the enzyme, the mice aged prematurely and suffered ailments, including a poor sense of smell, smaller brain size, infertility and damaged intestines and spleens. But when DePinho gave the mice injections to reactivate the enzyme, it repaired the damaged tissues and reversed the signs of ageing.
"These were severely aged animals, but after a month of treatment they showed a substantial restoration, including the growth of new neurons in their brains," said DePinho.
Repeating the trick in humans will be more difficult. Mice make telomerase throughout their lives, but the enzyme is switched off in adult humans, an evolutionary compromise that stops cells growing out of control and turning into cancer. Raising levels of telomerase in people might slow the ageing process, but it makes the risk of cancer soar.
DePinho said the treatment might be safe in humans if it were given periodically and only to younger people who do not have tiny clumps of cancer cells already living, unnoticed, in their bodies.
David Kipling, who studies ageing at Cardiff University, said: "The goal for human tissue 'rejuvenation' would be to remove senescent cells, or else compensate for the deleterious effects they have on tissues and organs. Although this is a fascinating study, it must be remembered that mice are not little men, particularly with regard to their telomeres, and it remains unclear whether a similar telomerase reactivation in adult humans would lead to the removal of senescent cells."
Lynne Cox, a biochemist at Oxford University, said the study was "extremely important" and "provides proof of principle that short-term treatment to restore telomerase in adults already showing age-related tissue degeneration can rejuvenate aged tissues and restore physiological function."
DePinho said none of Harvard's mice developed cancer after the treatment. The team is now investigating whether it extends the lifespan of mice or enables them to live healthier lives into old age.
Tom Kirkwood, director of the Institute for Ageing and Health at Newcastle University, said: "The key question is what might this mean for human therapies against age-related diseases? While there is some evidence that telomere erosion contributes to age-associated human pathology, it is surely not the only, or even dominant, cause, as it appears to be in mice engineered to lack telomerase. Furthermore, there is the ever-present anxiety that telomerase reactivation is a hallmark of most human cancers."
Date: Mon Apr 3 16:25:18 2000
Posted By: Michael Onken, MadSci Admin
Area of science: Cell Biology
First off, the subject of free radicals has been covered extensively in past posts which can be accessed from our search engine at: http:// www.madsci.org/MS_search.html. Now, on to telomeres, telomerase, and aging:
Telomeres are stretches of repetitive DNA at the ends of chromosomes that allow faithful DNA replication by acting as primers for lagging-strand synthesis. As mentioned in the preceding link, each replication shortens the telomeres, until eventually they disappear and subsequent replications begin to chew away at the ends of the chromosomes. To counteract this loss, replicating cells contain an enzyme calledtelomerase which re-lengthens the telomeres between replications. The importance of telomerase came after years of frustration by researchers who found that several cell lines stopped growing in culture after a certain number of passages (divisions). They found that cells with activated telomerase could grow in culture indefinitely. This finding was hyped by the non-scientific media as a potential Fountain of Youth, and stories of telomerase allowing people to live forever and never age quickly sank into popular lore.
Meanwhile, researchers continued to examine this phenomenon, and found that the activity of telomerase and the length of the telomeres were intricately tied to programmed cell death (apoptosis), in so far as cells monitor their telomere lengths and commit suicide if they sense that they've replicated too many times. As it happens, this is very important in tissues like the skin and the lining of the gut, where new cells are constantly made as older cells slough off and die. If the older cells don't die but keep dividing instead, the result is more cells in the area than you want in a structure commonly called a tumor. If these cells find a way out of their tumor, they can become cancerous. In fact, "immortalization" was one of the first hallmarks described for cancerous cells, and is vital for tumor formation. The body normally prevents this by shutting off the telomerase gene in cells that are destined to be sloughed.
So, giving someone activated telomerase, or altering their endogenous telomerase genes to make them constitutively active would be a really bad idea. In fact, all of the cells in your body that are supposed to be proliferative express sufficient telomerase to last you throughout your lifetime. It is worth noting then that aging is not caused by your cells wearing out (since they don't), but is caused by the connective matrices (mostly collagen and elastin) around the cells wearing out.
The question now is to what degree is this true. Generally we can now map active areas of the brain as a task is taking place.
The interesting experiment is to have two subject been brain scanned while one leads and the other observes without acting, and then after some time does act in imitation.
Just how closely does brain activity mirror the other when this is done?
Simple questions, but if it works even a little bit, we have a powerful tool that right away can be used to support reprogramming and to winkle out abnormalities. It may even be used to guide the healing of such abnormalities.
They are not be too far of the mark when they say that this is important
A recent paradigm-shattering discovery in neuroscience shows how our minds share actions, emotions, and experience -what we commonly call "the monkey see, monkey do" experience. When we see someone laugh, cry, show disgust, or experience pain, in some sense, we share that emotion. When we see someone in distress, we share that distress. When we see a great actor, musician or sportsperson perform at the peak of their abilities, it can feel like we are experiencing just something of what they are experiencing.
Only recently, however, with the discover of mirror neurons, has it become clear just how this powerful sharing of experience is realized within the human brain. In the early 1990's Giacomo Rizzolatti and his colleagues at the University of Parma discovered that some neurons had an amazing property: they responded not only when a subject performed a given action, but also when the subject observed someone else performing that same action.
These results had a deep impact on cognitive neuroscience, leading the the world's leading experts to predict that 'mirror neurons would do for psychology what DNA did for biology'.
Vilayanur Ramachandran is a neurologist at the
The astonishing fact is that any given mirror neuron will also fire when the monkey in question observes another monkey (or even the experimenter) performing the same action. "With knowledge of these neurons, you have the basis for understanding a host of very enigmatic aspects of the human mind: imitation learning, intentionality, "mind reading," empathy -- even the evolution of language." Ramachandran writes.
"Anytime you watch someone else doing something (or even starting to do something), the corresponding mirror neuron might fire in your brain, thereby allowing you to "read" and understand another's intentions, and thus to develop a sophisticated "theory of other minds."
Mirror neurons may also help explain the emergence of language, a problem that has puzzled scholars since the time of Charles Darwin, he adds.
Mirror neurons may also help explain the emergence of language, a problem that has puzzled scholars since the time of Charles Darwin, he adds.
"Is language ability based on a specially purposed language organ that emerged suddenly 'out of the blue,' as suggested by Noam Chomsky and his disciples? Or did language evolve from an earlier, gesture-based protolanguage? No one knows for sure, but a key piece of the puzzle is Rizzolatti's observation that the ventral premotor area may be a homologue of "Broca's area" -- a brain center associated with the expressive and syntactic aspects of language. Rizzolatti and Michael Arbib of the University of Southern California suggest that mirror neurons may also be involved in miming lip and tongue movements, an ability that may present the crucial missing link between vision and language."
To test his idea, Ramachandran tested four Broca's aphasia patients -- individuals with lesions in their Broca's areas. He presented them with the sound of the syllable "da," spliced to a videotape of a person whose lips were actually producing the sound "ba." Normally, people hear the "da" as "ba" -- the so-called "McGurk effect" -- because vision dominates over hearing. To his surprise, he writes, "we found that the Broca's patients did not experience this illusion; they heard the syllable correctly as 'da.' Even though their lesions were located in the left frontal region of their brains, they had a visual problem -- they ignored the lip movements. Our patients also had great difficulty with simple lip reading. This experiment provides a link between Rizzolatti's mirror neurons and the evolution of human language, and thus it calls into question the strictly modular view of language, which is currently popular."
Based on his research, Ramachandran predicted that mirror neurons will do for psychology what DNA did for biology: "they will provide a unifying framework and possibly even explain a host of mental abilities that have hitherto remained mysterious and inaccessible to experiments."
Image credit: David Sambells
This trick obviously has applications, not least as seam builder for improving the structural capabilities of the material. Continuous ribbon production is not too far away and we will have the capacity to produce the most incredible structure we are able to imagine.
As an example, we could reinforce our skulls with an embedded layer that is allows for larger and thinner. We already have found evidence of just that in the starchild skull.
However, sooner or later this stuff will be simply cheaper than steel. Then our whole reinforced concrete construction technology can be replaced with a vastly superior product able to do the same job with a fraction of the weight.
The dream of huge airy constructions will become a human reality.
NOVEMBER 18, 2010
Among graphene’s remarkable properties is its roughly 100-GPa tensile strength, which is 40 times greater than the value for steel. That, however, is for defect-free graphene sheets; when formed by chemical vapor deposition, a proven industrial technique, graphene sheets contain crystallites separated by grain boundaries.
A computational study by Rassin Grantab and Vivek Shenoy at Brown University and Rodney Ruoff at the University of Texas at Austin reveals that graphene sheets with highly misaligned boundaries are actually stronger than slightly misaligned ones. As the image shows, misaligned grain boundaries consist of repeating pairs of 5- and 7-member rings separated by hexagonal rings. In simulations of the stress-strain curves as a function of the misalignment, the researchers found that, surprisingly, tensile strength increases with increasing misalignment angle
Science - Anomalous Strength Characteristics of Tilt Grain Boundaries in Graphene
Graphene in its pristine form is one of the strongest materials tested, but defects influence its strength. Using atomistic calculations, we find that, counter to standard reasoning, graphene sheets with large-angle tilt boundaries that have a high density of defects are as strong as the pristine material and, unexpectedly, are much stronger than those with low-angle boundaries having fewer defects. We show that this trend is not explained by continuum fracture models but can be understood by considering the critical bonds in the strained seven-membered carbon rings that lead to failure; the large-angle boundaries are stronger because they are able to better accommodate these strained rings. Our results provide guidelines for designing growth methods to obtain sheets with strengths close to that of pristine graphene.
In one simulation, a graphene sheet with a boundary angle of 28.7° and strained by 15% resisted stress up to 95 GPa; conceivably, it might be more efficient for researchers to engineer controlled defects into a graphene sheet rather than trying to make a perfect one.
I assume that if we have got far enough to talk about it, that it can stand up to wear and tear the way concrete can. It is still the kind of product that only a city can like and use with careful attention to costs.
Consuming plastic waste is a problem that is best solved in the city before it ends up in landfills and the ocean. This is at least what appears to be a good stab at the problem and let us hope it stands up.
I think that the consumer would also pay a premium price for this because it will keep underlying soils under patios healthy. Many yards are concrete zones suppressing border plantings.
Of course, it may encourage roots to demolish such establishments.
'Plastisoil' could mean cleaner rivers and less plastic waste
By Ben Coxworth
16:32 November 21, 2010
A new cement-like material that could be used to form sidewalks, bike and jogging paths, driveways and parking lots, may be able to lessen two environmental problems, namely plastic waste and polluted rainwater runoff. The substance is called Plastisoil, and it was developed by Naji Khoury, an assistant professor of civil and environmental engineering at
Temple University in . In order to make Plastisoil, discarded polyethylene terephthalate (PET) plastic bottles are pulverized and mixed with soil, and then that mixture is blended with a coarse aggregate and heated. The result is a hard yet non-watertight substance, similar to pervious concrete or porous asphalt. Philadelphia
With traditional concrete and asphalt paving, rainwater stays on the surface and runs into the storm sewers, accumulating oil and other road filth along the way. With pervious surfaces such as Plastisoil, that water is able to go down through them, and into the soil below. This certainly reduces the amount of pollutants entering the rivers, although Khoury and his team at Temple are currently trying to determine if Plastisoil could even serve as a filter, that removed pollutants as the water filtered through.
Khoury said that it uses less energy to produce one ton of Plastisoil than one ton of cement or asphalt, and that it’s less expensive to manufacture than similar products. It takes 30,000 PET bottles to make one ton of the material, although he is hoping to be able to use other types of plastic in the future.
Monday, November 29, 2010
Today I am going to post on something that I would have dismissed recently as myth and wishful thinking. I should know better by now. I have been well served by allowing that ancient writers were just as skeptical yet as clever as our best and struggled only in finding a common language to describe the unusual.
I want to address the idea of the Elixir of Immortality or perhaps the existence of a protocol able to extend human life for centuries at a time. I now suspect it might well exist and was at one time known to a few scholars.
First though I must return to my unusual findings regarding the section in Genesis describing the story of Noah and his immediate successors. What was passed down to us was a translation of a Bronze Age translation of a human resettlement story that took place immediately after agriculture became possible after the collapse of the Ice Age through the Pleistocene Nonconformity.
A large settlement group led by Noah was landed on Ararat at the headwaters of the rivers feeding the Mesopotamian plain. As posted, the
was a magnetic field exclusion vessel able to land perhaps 2000 settlers at a time. I have good reason to think this was done at several locales around the world were it was most suitable. What we have though is Noah’s chronicle. Ark
None of this is mystical or particularly strange once we understand humanity had long since established space habitats and got out of town. It meant that I could rely on the authenticity of this particular document. Yet the additional information that emerges is around the unusual life spans of what is effectively the governing family. More critically, these lifespans are not remarked as unusual in this most ancient of documents.
Thus we learn that the founding human population was able to extend their lifespans for centuries and did.
First Conjecture: We contain the genetics for life extension.
Second Conjecture: A protocol could exist to trigger the life extending process. Most likely such a protocol is applied during the seventh decade of life and cellular health and youth is dully restored. It is repeated every fifty years.
The information is long lost but then who really knows? This is the type of information that can be buried under confusion and translation. What we can do is to keep our eyes open for hints that flow from research that may point in the correct direction.
I once read an odd tale of a chap from the nineteenth century who suddenly began to replace his teeth and to begin growing young hair. He died in a accident before it had gone further, but is this evidence of something out there?
My point is that I see no reason to dismiss the possibility and that research needs to be open to possibilities and avenues of attack however unlikely it may be seem.
What they are trying to accomplish here is the outright synthesis of graphene as a working layer directly onto an active substrate. We sure could not print it on, but this is indicative that there will emerge a method to do the equivalent.
With that in place, mass production of graphene based chips can begin immediately.
I continue to be impressed by the speed with which graphene is emerging as a working technology. I still am looking for continuous ribbon production with a seamed edge to use as cabling. We can first test that out on cable stayed bridges operating at the limits of concrete compressive strength. Then we can figure out how to rig a space elevator.
EMPA Identifies Reaction Pathway To Fabricate Graphene-Like Materials
by Staff Writers
Graphene is a promising material for tomorrow's nanoelectronics devices. Precise and upscaleable methods to fabricate graphene and derived materials with desired electronic properties are however still searched after.
To overcome the current limitations, Empa researchers have fabricated graphene-like materials using a surface chemical route and clarified in detail the corresponding reaction pathway. The work has just been published in the scientific journal "Nature Chemistry". The scientists combined empirical observations using scanning tunnelling microscopy with computer simulations.
Electronic components are getting smaller and smaller, with microelectronic components gradually being replaced by nanoelectronic ones. On nanoscale dimensions, silicon, which is at the present stage the most commonly used material in semiconductor technology, reaches however a limit, preventing further miniaturization and technological progress.
New electronic materials are therefore in great demand. Due to its outstanding electronic properties, graphene, a two-dimensional carbon network, is considered as a possible replacement.
However, several obstacles must be overcome before graphene can be used in semiconductor technology. For instance, currently there is no easily applicable method for large-scale processing of graphene-like materials.
Empa researchers of the nanotech@surfaces Laboratory reported on a surface chemical route to fabricate small fragments of graphene, so-called nanographenes. Using a prototypical polyphenylene precursor, the researchers clarified, together with scientists at the Max Planck Institute for Polymer Research in Mainz (Germany) and the University of Zurich, how the reaction pathway runs in detail on a copper surface und how the building blocks can be transformed into planar nanographenes directly on the surface.
The work has been published in the scientific journal "Nature Chemistry" as an advanced online publication.
Successful partners: experiment and simulation
For their investigations the researchers combined empirical observations, in particular from scanning tunnelling microscopy with computer simulations. The simulations are used to determine whether a theoretically possible reaction step is energetically possible or not.
The result: the reaction pathway consists of six steps with five intermediate products. Two of them are stabilised by the surface so that they can be stably imaged with the scanning tunnelling microscope. The reaction barriers connecting the different intermediates are lowered through a catalytic effect of the substrate.
To be capable of being integrated in electronic circuits, the graphene-like material must however be manufactured on semiconductor surfaces instead of metal ones. The researchers have simulated whether their approach could also work on these surfaces and the results are very promising, showing that surface-supported synthesis is a possible way to fabricate tailored nanographenes on a range of different substrates.
The three pillars of today's science: theory, experiment, and simulation
Progress in today's scientific research relies at the same time on theory, experiments, and to an increasing extent on computer simulations.
These simulations are complementary to often complex lab experiments and make it possible to get further information that cannot be obtained with experimental methods alone.
The combination of experiments and simulations as well as the deduced theories therefore allow for a more and more accurate explanation and precise prediction of natural phenomena.
It is becoming clear that microbes are able to operate far deeper in the crust than had ever been accepted. The issue had been temperature, but we are now up to 250C. This is also pretty well at the limits of our ability to operate geothermal. Massive fluid pressures also help keep things stable. This also means that sample recovery becomes difficult because pressure release likely dissolves any organics.
However, we need to go do this. This is a pretty good indicator that microbial life forms can exist at what are clearly massive depths. However, these temperatures suggest we need to get down as much as ten miles.
Knowing that a whole suite of microbes can survive there without solar inputs is important because it informs us that the available habitat on all planets is hugely larger than the often sterilized surface.
The probability that Mars has a living interior is now approaching near certainty. In fact the only object that possibly does not as yet have a suite of microbial life is possibly Venus because it appears to be recently formed as the crust is still several hundred degrees Celsius.
Busy Microbial World Discovered In Deepest Ocean Crust Ever Explored
One Rock from deep beneath this undersea mountain in the
Atlantic Ocean was recently studied to reveal some of the microbial life interactions going on in the deepest ocean crust ever explored. Credit: Image courtesy of PLoS
by Staff Writers
The first study to ever explore biological activity in the deepest layer of ocean crust has found bacteria with a remarkable range of capabilities, including eating hydrocarbons and natural gas, and "fixing" or storing carbon.
The research, just published in the journal PLoS One, showed that a significant number and amount of bacterial forms were present, even in temperatures near the boiling point of water.
"This is a new ecosystem that almost no one has ever explored," said Martin Fisk, a professor in the
College of Oceanic and Atmospheric Sciences at . "We expected some bacterial forms, but the long list of biological functions that are taking place so deep beneath the Earth is surprising." Oregon State University
Oceanic crust covers about 70 percent of the surface of the Earth and its geology has been explored to some extent, but practically nothing is known about its biology - partly because it's difficult and expensive, and partly because most researchers had assumed not all that much was going on.
The temperature of the sediments and rock increases with depth, and scientists now believe that the upper temperature at which life can exist is around 250 degrees.
The ocean floor is generally composed of three levels, including a shallow layer of sediment; basalt formed from solidified magma; and an even deeper level of basalt that cooled more slowly and is called the "gabbro" layer, which forms the majority of ocean crust.
The gabbro layer doesn't even begin until the crust is about two miles thick. But at a site in the
Atlantic Ocean near an undersea mountain, the Atlantis Massif, core samples were obtained from gabbro rock formations that were closer to the surface than usual because they had been uplifted and exposed by faulting. This allowed the researchers to investigate for the first time the microbiology of these rocks.
A research expedition drilled more than 4,600 feet into this formation, into rock that was very deep and very old, and found a wide range of biological activity. Microbes were degrading hydrocarbons, some appeared to be capable of oxidizing methane, and there were genes active in the process of fixing, or converting from a gas, both nitrogen and carbon.
The findings are of interest, in part, because little is known about the role the deep ocean crust may play in carbon storage and fixation. Increasing levels of carbon dioxide, a greenhouse gas when in the atmosphere, in turn raise the levels of carbon dioxide in the oceans.
But it now appears that microbes in the deep ocean crust have at least a genetic potential for carbon storage, the report said. And it may lend credence to one concept for reducing carbon emissions in the atmosphere, by pumping carbon dioxide into deep subsurface layers where it might be sequestered permanently.
The researchers also noted that methane found on Mars could be derived from geological sources, and concluded that subsurface environments on Mars where methane is produced could support bacteria like those found in this study.
"These findings don't offer any easy or simple solutions to some of the environmental issues that are of interest to us on Earth, such as greenhouse warming or oil spill pollution," Fisk said. "However, they do indicate there's a whole world of biological activity deep beneath the ocean that we don't know much about, and we need to study."
Microbial processes in this expansive subseafloor environment "have the potential to significantly influence the biogeochemistry of the ocean and the atmosphere," the researchers wrote in their report.
It took two years, but the air is now coming out of the asset balloon created during the run up prior to the 2008 crash. The figure quoted here is an amazing 15 trillion. When this all started, no one dared use the word ‘trillion’.
As I posted on day one of the 2008 crash, it is all about deflation of the massive asset bubble created by cheap interest rates in the past several years. What is happening now is that the
government is resetting interest on its own debt to the lowest level possible by QE2. US
This will allow interest rates to be slightly increased every year over the next decade while the economy sorts out all the damage. In the meantime aggressive borrowers at the corporate level need to be leery of M&A schemes. A modest rate rise means an easily doubling of interest costs.
Of course none of this refinances the taxpayers anytime soon and that means a continuation of present distress. That can happen only with a land sale on government guarantees to unwind the housing stock and restore the mortgage industry.
The take home lesson is just how long it takes to unwind a financial bubble. We have a bottom and it will linger until the overhang disappears.
We should expect a tentative economic uptick even now but surely no later than next fall fo0r something a lot less tentative.
Ellen Brown: What's Really Behind Quantitative Easing QE2? The Looming Threat of a Crippling Debt Service
By Ellen Brown
URL of this article: www.globalresearch.ca/index.php?context=va&aid=22014
The deficit hawks are circling, hovering over QE2, calling it just another inflationary bank bailout. But unlike QE1, QE2 is not about saving the banks. It’s about funding the federal deficit without increasing the interest tab, something that may be necessary in this gridlocked political climate just to keep the government functioning.
On November 15, the Wall Street Journal published an open letter to Fed Chairman Ben Bernanke from 23 noted economists, professors and fund managers, urging him to abandon his new “quantitative easing” policy called QE2. The letter said:
We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. . . . The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
The Pragmatic Capitalist (Cullen Roche) remarked:
Many of the people on this list have been warning about bond vigilantes while also comparing the
USA to for several years now. Of course, they’ve been terribly wrong and it is entirely due to the fact that they do not understand how the Greece monetary system works. . . . What’s unfortunate is that these are many of our best minds. These are the people driving the economic bus. US
The deficit hawks say QE is massively inflationary; that it is responsible for soaring commodity prices here and abroad; that QE2 won’t work any better than an earlier scheme called QE1, which was less about stimulating the economy than about saving the banks; and that QE has caused the devaluation of the dollar, which is hurting foreign currencies and driving up prices abroad.
None of these contentions is true, as will be shown. They arise from a failure either to understand modern monetary mechanics (see links at The Pragmatic Capitalist and here) or to understand QE2, which is a different animal from QE1. QE2 is not about saving the banks, or devaluing the dollar, or saving the housing market. It is about saving the government from having to raise taxes or cut programs, and saving Americans from the austerity measures crippling the Irish and the Greeks; and for that, it may well be the most effective tool currently available. QE2 promotes employment by keeping the government in business. The government can then work on adding jobs.
The Looming Threat of a Crippling Debt Service
The federal debt has increased by more than 50% since 2006, due to a collapsed economy and the highly controversial decision to bail out the banks. By the end of 2009, the debt was up to $12.3 trillion; but the interest paid on it ($383 billion) was actually less than in 2006 ($406 billion), because interest rates had been pushed to extremely low levels. Interest now eats up nearly half the government’s income tax receipts, which are estimated at $899 billion for FY 2010. Of this, $414 billion will go to interest on the federal debt. If interest rates were to rise just a couple of percentage points, servicing the federal debt would consume over 100% of current income tax receipts, and taxes might have to be doubled.
As for the surging commodity and currency prices abroad, they are not the result of QE. They are largely the result of the U.S. dollar carry trade, which is the result of pressure to keep interest rates artificially low. Banks that can borrow at the very low fed funds rate (now 0.2%) can turn around and speculate abroad, reaping much higher returns.
Interest rates cannot be raised again to reasonable levels until the cost of servicing the federal debt is reduced; and today that can be done most expeditiously through QE2 -- “monetizing” the debt through the Federal Reserve, essentially interest-free. Alone among the government’s creditors, the Fed rebates the interest to the government after deducting its costs. In 2008, the Fed reported that it rebated 85% of its profits to the government. The interest rate on the 10-year government bonds the Fed is planning to buy is now 2.66%. Fifteen percent of 2.66% is the equivalent of a 0.4% interest rate, the best deal in town on long-term bonds.
A Reluctant Fed Steps Up to the Plate
The Fed was strong-armed into rebating its profits to the government in the 1960s, when Wright Patman, Chairman of the House Banking and Currency Committee, pushed to have the Fed nationalized. According to Congressman Jerry Voorhis in The Strange Case of Richard Milhous Nixon (1973):
As a direct result of logical and relentless agitation by members of Congress, led by Congressman Wright Patman as well as by other competent monetary experts, the Federal Reserve began to pay to the
Treasury a considerable part of its earnings from interest on government securities. This was done without public notice and few people, even today, know that it is being done. It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation’s money, but on the other hand charging the nation interest on its own credit – which no true national bank of issue could conceivably, or with any show of justice, dare to do. U.S.
Voorhis went on, “But this is only part of the story. And the less discouraging part, at that. For where the commercial banks are concerned, there is no such repayment of the people’s money.” Commercial banks do not rebate the interest, said Voorhis, although they also “‘buy’ the bonds with newly created demand deposit entries on their books – nothing more.”
After the 1960s, the policy was to fund government bonds through commercial banks (which could collect interest) rather than through the central bank (which could not). This was true not just in the U.S. but in other countries, after a quadrupling of oil prices combined with abandonment of the gold standard produced “stagflation” that was erroneously blamed on governments “printing money.”
Consistent with that longstanding policy, Chairman Bernanke initially resisted funding the federal deficit. In January 2010, he admonished Congress:
"We're not going to monetize the debt. It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the
government is going to bring itself back to a sustainable position." United States
His concern, according to The Washington Times, was that “the impasse in Congress over tough spending cuts and tax increases needed to bring down deficits will eventually force the Fed to accommodate deficits by printing money and buying Treasury bonds.”
That impasse crystallized on November 3, 2010, when Republicans swept the House. There would be no raising of taxes on the rich, and the gridlock in Congress meant there would be no budget cuts either. Compounding the problem was that over the last six months, China has stopped buying
debt, reducing inflows by about $50 billion per month. U.S.
QE2 Is Not QE1
In QE1, the Fed bought $1.2 trillion in toxic mortgage-backed securities off the books of the banks. QE1 mirrored TARP, the government’s Troubled Asset Relief Program, except that TARP was funded by the government with $700 billion in taxpayer money. QE1 was funded by the Federal Reserve with computer keystrokes, simply by crediting the banks’ reserve accounts at the Fed.
Pundits were predicting that QE2 would be more of the same, but it turned out to be something quite different. Immediately after the election, Bernanke announced that the Fed would be using its power to purchase assets to buy federal securities on the secondary market -- from banks, bond investors and hedge funds. (In the EU, the European Central Bank began a similar policy when it bought Greek bonds on the secondary market.) The bond dealers would then be likely to use the money to buy more Treasuries, increasing overall Treasury sales.
The bankers who applauded QE1 were generally critical of QE2, probably because they would get nothing out of it. They would have to give up their interest-bearing bonds for additional cash reserves, something they already have more of than they can use. Unlike QE1, QE2 was designed, not to help the banks, but to relieve the pressure on the federal budget.
Bernanke said the Fed would buy $600 billion in long-term government bonds at the rate of $75 billion per month, filling the hole left by
. An estimated $275 billion would also be rolled over into Treasuries from the mortgage-backed securities the Fed bought during QE1, which are now reaching maturity. More QE was possible, he said, if unemployment stayed high and inflation stayed low (measured by the core Consumer Price Index). China
Addison Wiggin noted in his November 4 Five Minute Forecast that this essentially meant the Fed planned to monetize the whole deficit for the next eight months. He quoted Agora Financial’s Bill Bonner:
“If this were
Greece or , the government would be forced to cut back. With quantitative easing ready, there is no need to face the music.” Ireland
That was meant as a criticism, but you could also see it as a very good deal. Why pay interest to foreign central banks when you can get the money nearly interest-free from your own central bank? In eight months, the Fed will own more Treasuries than China and Japan combined, making it the largest holder of government securities outside the government itself.
The Overrated Hazard of Inflation
The objection of the deficit hawks, of course, is that this will be massively inflationary, diluting the value of the dollar; but a close look at the data indicates that these fears are unfounded.
Adding money to the money supply is obviously not hazardous when the money supply is shrinking, and it is shrinking now. Financial commentator Charles Hugh Smith estimates that the economy faces $15 trillion in writedowns in collateral and credit, based on projections from the latest Fed Flow of Funds. The Fed's $2 trillion in new credit/liquidity is therefore insufficient to trigger either inflation or another speculative bubble.
In any case, Chairman Bernanke maintains that QE involves no printing of new money. It is just an asset swap on the balance sheets of the bondholders. The bondholders are no richer than before and have no more money to spend than before.
Professor Warren Mosler explains that the bondholders hold the bonds in accounts at the Fed. He says, “
Treasury securities are accounted much like savings accounts at a normal commercial bank.” They pay interest and are considered part of the federal debt. When the debt is “paid” by repurchasing the bonds, all that happens is that the sums are moved from the bondholder’s savings account into its checking account at the Fed, where the entries are no longer considered part of the national debt. The chief difference is that one account bears interest and the other doesn’t. U.S.
About the Inflation in Commodities?
Despite surging commodity prices, the overall inflation rate remains very low, because housing has to be factored in. The housing market is recovering in some areas, but housing prices overall have dropped 28% from their peak.
Main Street hasn’t been flooded with money; the money has just shifted around. Businesses are still having trouble getting reasonable loans, and so are prospective homeowners.
As for the obvious price inflation in commodities -- notably gold, silver, oil and food -- what is driving these prices up cannot be an inflated U.S. money supply, since the money supply is actually shrinking. Rather, it is a combination of factors including (a) heavy competition for these scarce goods from developing countries, whose economies are growing much faster than ours; (b) the flight of “hot money” from the real estate market, which has nowhere else to go; (c) in the case of soaring food prices, disastrous weather patterns; and (d) speculation, which is fanning the flames.
Feeding it all are the extremely low interest rates maintained by the Fed, allowing banks and their investor clients to borrow very cheaply and invest where they can get a much better return than on risky domestic loans. This carry trade will continue until something is done about the interest tab on the federal debt.
The ideal alternative would be for a transparent and accountable government to issue the money it needs outright, a function the Constitution reserves to Congress; but an interest-free loan from the Federal Reserve rolled over indefinitely is the next best thing.
A Bold Precedent
QE2 is not a “helicopter drop” of money on the banks or on
Main Street. It is the Fed funding the government virtually interest-free, allowing the government to do what it needs to do without driving up the interest bill on the federal debt – an interest bill that need not have existed in the first place. As Thomas Edison said, “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also.”
The Fed failed to revive the economy with QE1, but it could redeem itself with QE2, a bold precedent that might inspire other countries to break the chains of debt peonage in the same way. QE2 is the functional equivalent of what many countries did very successfully before the 1970s, when they funded their governments with interest-free loans from their own central banks.
Countries everywhere are now suffering from debt deflation. They could all use a good dose of their own interest-free national credit, beginning with
Ireland and . Greece
Ellen Brown is an attorney and the author of eleven books. In Web of Debt: The Shocking Truth About Our Money System, she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites arewebofdebt.com, ellenbrown.com, and public-banking.com.