Last week the mainstream media hailed QE3 as the “quick fix” that the U.S. economy desperately needs, but the truth is that the policies that the Federal Reserve is pursuing are going to be absolutely devastating for our senior citizens. By keeping interest rates at exceptionally low levels, the Federal Reserve is absolutely crushing savers and is systematically destroying Social Security. Meanwhile, the inflation that QE3 will cause is going to be absolutely crippling for the millions upon millions of retired Americans that are on a fixed income. Sadly, most elderly Americans have no idea what the Federal Reserve is doing to their financial futures. Most Americans that are approaching retirement age have not adequately saved for retirement, and the Social Security system that they are depending on is going to completely and totally collapse in the coming years. Right now, approximately 56 million Americans are collecting Social Security benefits. By 2035, that number is projected to grow to a whopping 91 million. By law, the Social Security trust fund must be invested in U.S. government securities. But thanks to the low interest rate policies of the Federal Reserve, the average interest rate on those securities just keeps dropping and dropping. The trustees of the Social Security system had projected that the Social Security trust fund would be completely gone by 2033, but because of the Fed policy of keeping interest rates exceptionally low for the foreseeable future it is now being projected by some analysts that Social Security will be bankrupt by 2023. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. Yes, you read that correctly. The collapse of Social Security is inevitable, and the foolish policies of the Federal Reserve are going to make that collapse happen much more rapidly.
The only way that the Social Security system is going to be able to stay solvent is for the Social Security trust fund to earn a healthy level of interest.
By law, all money deposited in the Social Security trust fund must be invested in U.S. government securities. The following is from the official website of the Social Security Administration….
By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are “special issues” of the United States Treasury. Such securities are available only to the trust funds.
In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.
So in order for the Social Security Ponzi scheme to work, those investments in government securities need to produce healthy returns.
Unfortunately, the ultra-low interest rate policy of the Federal Reserve is making this impossible.
The average rate of interest earned by the Social Security trust fund has declined from 6.1 percent in January 2003 to 3.9 percent today, and it is going to continue to go even lower as long as the Fed continues to keep interest rates super low.
A recent article by Bruce Krasting detailed how this works. Just check out the following example….
$135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA’s income by $5.7B annually. Over the fifteen year term of the investments, that comes to a lumpy $86 billion.
So what happens when the Social Security trust fund runs dry?
As Bruce Krasting also noted, all Social Security payments would immediately be cut by 25 percent…..
Anyone who is 55 or older should be worried about this. Based on current law, all SS benefit payments must be cut by (approximately) 25% when the TF is exhausted. This will affect 72 million people. The economic consequences will be severe.
In other words, it would be a complete and total nightmare.
Sadly, the truth is that the Social Security trust fund might not even make it into the next decade. Most Social Security trust fund projections assume that there will be no recessions and that there will be a very healthy rate of growth for the U.S. economy over the next decade.
So what happens if we have another major recession or worse?
And most Americans know that something is up with Social Security. According to a Gallup survey, 67 percent of all Americans believe that there will be a Social Security crisis within 10 years.
Part of the problem is that there are way too many people retiring and not nearly enough workers to support them.
Back in 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers. But now things are much different. According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.
And remember, the number of Americans drawing on Social Security will increase by another 35 million by the year 2035.
Another factor that is rapidly becoming a major problem is the growth of the Social Security disability program.
Since 2008, 3.6 million more Americans have been added to the rolls of the Social Security disability insurance program.
Today, more than 8.7 million Americans are collecting Social Security disability payments.
So how does this compare to the past?
Back in August 1967, there were approximately 65 workers for each American that was collecting Social Security disability payments.
Today, there are only 16.2 workers for each American that is collecting Social Security disability payments.
The Social Security Ponzi scheme is rapidly approaching a crisis point.
Sadly, the Federal Reserve has made it incredibly difficult to save for your own retirement.
Millions upon millions of Baby Boomers that diligently saved money for retirement are finding that their savings accounts are paying out next to nothing thanks to the ultra-low interest rate policies of the Federal Reserve.
The following is one example of how the low interest rate policies of the Fed have completely devastated the retirement plans of many elderly Americans….
You can understand the impact of the invisible tax on the elderly by watching the decline of interest income from $50,000 invested in a five-year Treasury obligation. As recently as 2000, this would have yielded about 6.15 percent and an interest income of $3,075 a year. Now the same obligation is yielding 0.7 percent and an interest income of $350 a year. This is the lowest yield on this maturity of Treasury debt since the Federal Reserve started keeping an index of the yields in 1953.
But it’s more than a low interest rate. It’s an income decline of nearly 89 percent in just 12 years.
And after you account for inflation, those that put money into savings accounts today are actually losing money.
Of course most Americans have not saved up much money for retirement anyway. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
Overall, a study conducted by Boston College’s Center for Retirement Research discovered that American workers are $6.6 trillion short of what they need to retire comfortably.
So needless to say, we have a major problem.
Baby Boomers are just starting to retire and the Social Security system is still solvent at the moment, and yet the number of elderly Americans that are experiencing financial problems is already soaring.
For example, between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
Also, at this point one out of every six elderly Americans is already living below the federal poverty line.
So how bad are things going to be when Social Security collapses?
That is frightening to think about.
In the short-term, millions upon millions of retired Americans that are living on fixed incomes are going to be absolutely crushed by the inflation that QE3 is going to cause.
Just like we saw with QE1 and QE2, a lot of the money from QE3 is going to end up in agricultural commodities and oil. That means that retirees (and all the rest of us) are going to end up paying more for food at the supermarket and gasoline at the pump.
But those on fixed incomes are not going to see a corresponding increase in their incomes. That means that their standards of living will go down.
Things are tough for retirees right now, but they are going to get a lot tougher.
Right now, there are somewhere around 40 million senior citizens. By 2050 that number is projected to increase to 89 million.
So how will our society cope with more than twice as many senior citizens?
Sadly, we will likely never get to find out.
The truth is that our system is almost certainly going to totally collapse long before then.
We are rapidly approaching a financial crisis unlike anything we have ever seen before in U.S. history, and the foolish policies of the Federal Reserve just keep making things even worse.
The mainstream media is hailing QE3 as a great victory for the U.S. economy. On nearly every news broadcast, the “talking heads” are declaring that Ben Bernanke’s decision to pump 40 billion dollars a month into our financial system is definitely going to help solve our economic problems. The money for QE3 is being created out of thin air and this round of quantitative easing is going to be “open-ended” which means that the Federal Reserve is going to keep doing it for as long as they feel like it. But is this really good for the average American on the street? No way. Despite two previous rounds of quantitative easing, median household income has still fallen for four years in a row, the employment rate has not bounced back since the end of the last recession, and new home sales have remained near record lows. So what have the previous rounds of quantitative easing accomplished? Well, they have driven up the prices of financial assets. Those that own stocks have done very well the past couple of years. So who owns stocks? The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans. Those that have invested in commodities have also done very nicely in recent years. We have seen gold, silver, oil and agricultural commodities all do very well. But that also means that average Americans are paying more for basic necessities such as food and gasoline. So the first two rounds of quantitative easing made the wealthy even wealthier while causing living standards to fall for all the rest of us. Is there any reason to believe that QE3 will be any different?
Of course not.
This time the Federal Reserve is focused on buying mortgage-backed securities. Yes, the same financial garbage that helped cause the last crisis. The Fed plans to gobble up tens of billions of dollars of that trash every month from now on.
But will the Fed pay true market value for those mortgage-backed securities? If you believe that, I have a bridge to sell you.
So this is going to be a huge windfall for some people, and that does not include us.
Not a single penny of this 40 billion dollars a month will go directly into our hands. The theory is that it will “filter down” to us eventually.
But that hasn’t happened with previous rounds of quantitative easing.
So where does the money go?
A recent CNBC article discussed a very interesting report from the Bank of England about the effects of quantitative easing….
It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.
Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”
Wow.
Who benefits from quantitative easing?
According to the Bank of England, it is “mainly the wealthy” who benefit.
As I noted the other day, Donald Trump said essentially the same thing when he told CNBC the following….
“People like me will benefit from this.”
As I already discussed above, a lot of quantitative easing money gets into the financial markets where it pumps up the prices of financial assets.
But not all of it goes there.
We were told that the whole idea behind quantitative easing was that it was supposed to get banks lending again, but this has not happened. Instead, banks are sitting on unprecedented amounts of money. Just look at how the first two rounds of quantitative easing have caused excess reserves being held by banks to explode from close to zero to over 1.5 trillion dollars….
Of course one of the biggest problems is that the Federal Reserve is still paying banks not to lend money.
Yes, you read that correctly.
The Federal Reserve is paying banks to park money with them. So instead of risking their money by lending it out to us, the banks can just park it at the Fed and make risk-free profits for as long as they want.
Must be nice.
If the Federal Reserve really wanted banks to start lending again, all the Fed has to do is to stop paying banks not to lend money.
But of course if more than 1.5 trillion dollars suddenly started flooding into our economy (especially after you consider the multiplier effect) we would be dealing with nightmarish inflation unlike anything we have ever seen before.
So if you want to know why inflation was not even worse after QE1 and QE2 it is because more than a trillion and a half dollars is being parked with the Fed.
So did QE1 and QE2 do any good for average Americans?
Let’s go to the charts.
This first chart shows that the percentage of working age Americans with a job has stayed extremely flat since the end of the last recession.
Does it look like QE1 and QE2 made a difference to you? I don’t see any difference….
Okay, but what about new home sales?
Did QE1 and QE2 help them?
Nope….
But the mainstream media is still buying the baloney the Fed is pushing.
The mainstream media is promising us that home sales will soon rise and that lots of new jobs are on the way.
Sadly, the truth is that things have steadily gotten worse for average Americans over the past 4 years despite all of the money printing the Fed has been doing. If you doubt this, just read this article.
But this is all that Ben Bernanke seems to have left. When printing money doesn’t work, his answer is to print even more money.
QE3 is likely to cause agricultural commodities and the price of oil to rise even further.
So unless you can convince your employer to give you a corresponding raise, this is going to mean that your paychecks are not going to go as far as they did before.
And so that means a lower standard of living.
In a recent article, Bruce Krasting issued an ominous warning….
Higher inflation expectations in the US will filter around the globe. Post the extraordinary steps Ben took yesterday, people will be stocking up on “stuff”. Things like rice, flour, cooking oil, soy, wheat and sugar. If you can eat it, buy it now. It will be more expensive in a month. While your at it, fill up the gas tank, the price is going up next week and every week for the next few months.
In addition, the policy of the Federal Reserve of keeping interest rates as low as possible is absolutely crippling the finances of many retirees. Even the former president of the Federal Reserve Bank of Atlanta, William F. Ford, recognizes this….
One of the overlooked consequences of the Federal Reserve’s recent rounds of monetary stimulus is the adverse impact those policies have had on the interest income of savers. The prolonged and abnormally low interest-rate structure put in place by the Fed has made life particularly difficult for retirees and others who depend on conservative interest-sensitive investments. But the negative effects do not stop there. They spillover into the overall performance of the economy.
Just about everything that the Federal Reserve does these days is bad for ordinary Americans.
But the Fed is not going to stop. The Fed is addicted to money printing now, and as a recent article by Peter Schiff explained, the Fed is just going to “up the dosage” until it gets what it wants….
The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won’t turn off the spigots even if things noticeably improve.
This is complete and total incompetence by Ben Bernanke and his cohorts over at the Fed.
Economist Marc Faber believes that Ben Bernanke should resign, and I agree with him….
“If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash.”
And yes, a crash is coming.
Bernanke can try to put it off for a while, but every action he takes is just making the eventual crash even worse.
And some in the financial community clearly recognize this. For example, credit rating agency Egan-Jones downgraded the credit rating of the United States to AA- on Friday.
The primary reason they gave for the downgrade was QE3.
Ben Bernanke and the Federal Reserve are destroying the U.S. dollar and destroying our financial system for a short-term economic sugar high.
It is utter insanity.
That is why we desperately need to get the American people educated about the Federal Reserve system. It is at the very heart of our economic problems and yet neither major political party is willing to blame the Fed for the problems that it is causing.
A bunch of unelected bankers that are not accountable to the American people are running our economy into the ground and the American people do not even realize what is happening.
Please share this article with as many people as you can. Hopefully we can get the American people to understand that more money printing is definitely not the solution to our problems.
You can’t accuse Federal Reserve Chairman Ben Bernanke of not living up to his nickname. Back in 2002, Bernanke delivered a speech entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” in which he referenced a statement by economist Milton Friedman about fighting deflation by dropping money from a helicopter. Well, it might be time for a new nickname for Bernanke because what he did today was a lot more than drop money from a helicopter. Today the Federal Reserve announced that QE3 will begin on Friday, but it is going to be much different from QE1 and QE2. Both of those rounds of quantitative easing were of limited duration. This time, the quantitative easing is going to be open-ended. The Fed is going to buy 40 billion dollars worth of mortgage-backed securities per month until they have decided that the economy is in good enough shape to stop. For those that get confused by terms like “quantitative easing” and “mortgage-backed securities”, what the Federal Reserve is essentially saying is this: “We’re going to print a bunch of money and buy stuff for as long as we feel it is necessary.” In addition, the Federal Reserve has promised to keep interest rates at ultra-low levels all the way through mid-2015. The course that the Federal Reserve has set us on is utter insanity. Ben Bernanke can rain money down on us all he wants, but it is not going to do much at all to help the real economy. However, it will definitely hasten the destruction of the U.S. dollar.
And the Federal Reserve is apparently very eager to get QE3 going. Purchases of mortgage-backed securities are going to start on Friday.
In the coming months, hundreds of billions of dollars that the Federal Reserve has zapped into existence out of nothing will be injected into our financial system.
So what will happen to all of this new money?
If banks and financial institutions use that money to make loans then it could have somewhat of a positive impact on the economy in the short-term.
However, the truth is that it isn’t as if banks are hurting for cash to loan out. In fact, right now banks are already sitting on $1.6 trillion in excess reserves. Just like with the first two rounds of quantitative easing, a lot of the money from QE3 will likely end up being put on the shelf.
But the stock market loved the news because they know that the previous two rounds of quantitative easing have been great for the financial markets. On Thursday, the stock market soared to levels not seen since December 2007.
There is much rejoicing on Wall Street right now.
And this stock market bounce is great for Bernanke’s good buddy Barack Obama.
Obama nominated Bernanke to a second term as Fed Chairman, and this might be Bernanke’s way of paying him back.
But of course the Fed is supposed to be “above politics” so that would never happen, right?
The Federal Reserve essentially “crossed the Rubicon” today. No longer will quantitative easing be considered an “emergency measure”. Rather, it will now be considered just another “tool” that the Fed uses in the normal course of business.
Considering how vulnerable the U.S. dollar already is, announcing an “open-ended” round of quantitative easing is utter foolishness. According to the Fed, when you add the 40 billion dollars of new mortgage-backed security purchases per month to all of the other “easing” measures the Fed is continuing to do, the grand total is going to come to about 85 billion dollars a month. The following is from the statement that the Fed released earlier today….
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
The Fed also promised to keep interest rates at “exceptionally low levels” until mid-2015….
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
It seems that whenever the U.S. economy gets into trouble, Bernanke and his friends at the Fed only have one prescription and it goes something like this….
“Print more money and promise to keep interest rates near zero even longer.”
Of course a lot of Republicans are quite disturbed that QE3 was announced with just a couple of months remaining in a very heated election battle.
Even big news organizations such as CNBC are commenting on this….
Though the Fed is ostensibly politically independent, the decision comes at a ticklish time with the presidential election less than two months away.
And without a doubt the mainstream media will be proclaiming this to be “good news” for the economy in the short-term.
But is QE3 really going to help the average person on the street?
Well, first let’s take a look at employment. We are told that one of the primary reasons for QE3 is jobs.
But did QE1 and QE2 create jobs?
The answer is clearly no.
As you can see from the chart below, the percentage of working age Americans with a job fell dramatically during the last recession and has not bounced back since that time despite all of the quantitative easing that has been done already….
So why try the same thing again when it did not work the first two times?
But what more quantitative easing is likely to do is to pump up stock market values because a lot of the money from QE3 is going to end up being put into stocks and other investments.
This is going to help the wealthy get even wealthier, and it is going to make the “wealth gap” between the rich and the poor even larger in America.
QE3 is also probably going to cause commodity prices to rise just like QE1 and QE2 did.
That means that you will be paying more for gasoline, food and other basic necessities.
So there may not be more jobs, but at least you will get the privilege of paying more for things.
The inflation that QE3 will cause will be particularly cruel for those on fixed incomes such as retirees.
None of the extra money from QE3 is going to go into their pockets, but they will have to pay more to heat their homes and fill up their shopping carts.
And the “exceptionally low interest rate” policy of the Federal Reserve is absolutely devastating for those that have saved for retirement and that are relying on interest income for their living expenses.
In short, quantitative easing is very good for the wealthy and it is very bad for the average man and woman on the street.
Perhaps the biggest danger from QE3 is that it could greatly hasten the day when the U.S. dollar ceases to be the reserve currency of the world.
The rest of the world is not stupid. They see that the Federal Reserve is now firing up the printing presses whenever they feel like it. They can see the games that we are playing with our currency.
Why should the rest of the world continue to use the U.S. dollar to trade with one another when the United States is constantly debasing it and playing games with its value?
As I wrote about the other day, China and Russia have been calling for a new reserve currency for the world for several years. They have been leading the charge to conduct international trade in currencies other than the U.S. dollar, and I have documented many of the major international agreements to move away from the U.S. dollar that have been made in the last couple of years.
The status of the U.S. dollar in the world has already been steadily slipping, and now Helicopter Ben Bernanke pulls this kind of nonsense.
We are handing the rest of the world an excuse to abandon the U.S. dollar on a silver platter.
And when the rest of the globe rejects the U.S. dollar as a reserve currency, the dollar will crash, the cost of living will increase dramatically, our standard of living will go way down and we will never fully recover from it.
So if you think that things are “bad” now, just wait until that happens.
The U.S. dollar is one of the best things that the U.S. economy still has going for it, and Helicopter Ben Bernanke is doing his best to absolutely destroy that.
What is your opinion of QE3? Please feel free to post a comment with your thoughts below….
When someone in the mainstream media goes out on a limb to tell the truth, then the rest of us should go out of our way to applaud that effort. Reporter Ben Swann of Fox 19 in Cincinnati is one of the few local television reporters in the United States that consistently tackles the tough issues. As you can see from his “Reality Check” archives, he regularly does reports on the Federal Reserve, the emerging police state, the loss of our freedoms and liberties, the advance of globalism, the economic collapse, political corruption, etc. etc. That is one reason why his YouTube channel is rapidly approaching a million views. In his most recent Reality Check, Ben Swann asked this question: “Is auditing the Federal Reserve really necessary?” In just four minutes, Swann covered the creation of the Federal Reserve, where money comes from, the 16 trillion dollars in secret loans given out by the Fed during the last financial crisis, and why an audit of the Fed is so important. It really was extraordinary to watch a local mainstream news reporter tell the truth about these things. We could definitely use about 1000 more reporters just like him.
The video of Ben Swann’s recent Reality Check is posted below. If you have not seen it yet, it is definitely worth the 4 minutes that it takes to watch it….
What in the world would this country look like if we had hundreds of other real journalists such as Ben Swann that were willing to tackle these kinds of issues head on?
Certainly nobody is perfect, but when a reporter like Swann is willing to go out on a limb and attack the Fed we need to applaud his efforts.
The mainstream media is supposed to hold those in positions of power accountable.
But most in the mainstream media treat the Federal Reserve with kid gloves. It is incredibly rare to hear any real criticism of the Fed by mainstream reporters.
If the mainstream media was actually doing their job, then perhaps we could get some answers to some questions that have gone unanswered for a very long time.
For example, Zero Hedge has published a “smoking gun” that proves that the Federal Reserve was heavily involved in manipulating the price of gold long after the gold standard was abandoned. If you have not read that piece yet, you can find it right here.
I would love to know to what extent this is still going on today, and why nobody ever asks Federal Reserve Chairman Ben Bernanke about this.
Another mystery that I would like to see addressed is the trillions of dollars of “off balance sheet transactions” that are unaccounted for at the Federal Reserve. This was brought up once during a Congressional hearing, but nobody seemed to have any answers. Video from this hearing is posted below….
As you can see from the video, nobody in the federal government seems to have any idea what is really going on over at the Fed.
But the Fed has more power over our economy and over our financial system than anyone else does.
Isn’t it about time that the American people got some answers?
The Federal Reserve is at the very heart of our debt-based financial system that was created by the big Wall Street banks and for the benefit of the big Wall Street banks.
The Federal Reserve (and virtually every other central bank in the world) is not accountable to the people. The Federal Reserve has created a perpetual debt bubble that is designed to systematically transfer the wealth of the American people to the banks. In this system, the total amount of money and the total amount of debt is designed to continually expand.
Since the Federal Reserve was created, the value of the U.S. dollar has declined by well over 95 percent and the U.S. national debt has gotten more than 5000 times larger.
But nobody seems to want to hold the Federal Reserve accountable for any of this.
If the Federal Reserve is supposed to prevent shocks to our economy, then why have there been 10 different economic recessions since 1950 and why are we about to enter another one?
Why did Barack Obama nominate Ben Bernanke for a second term as head of the Federal Reserve when Bernanke has a track record of failure that makes the Chicago Cubs look like a roaring success?
Why is the U.S. national debt more than 5000 times larger than it was when the Federal Reserve was created in 1913?
Why were the Federal Reserve and the personal income tax both pushed through Congress in the same year in 1913?
Why does the Federal Reserve argue that it is “not an agency” of the federal government in court?
Why do all 187 nations that belong to the IMF have a central bank?
Most Americans are pinning their hopes for an “economic turnaround” on the upcoming election in November.
But the truth is that until something is done about the Federal Reserve it isn’t going to matter very much who is in the White House.
As I wrote about yesterday, the total amount of all debt in America has grown from about 2 trillion dollars to nearly 55 trillion dollars over the past 40 years.
Yes, we should blame the American people for being really stupid about debt, but we also need to keep in mind that this is exactly what the debt-based Federal Reserve system was designed to do.
We have been enslaved by design and most Americans do not even realize what has happened.
Let us encourage reporters like Ben Swann to keep speaking out about the Federal Reserve, and the rest of us need to keep speaking out about the Fed too.
On Wednesday, Ron Paul’s bill to audit the Federal Reserve was overwhelmingly passed by the U.S. House of Representatives. The vote was 327 to 98. You would think that a bill with such overwhelming support would easily become law. But it won’t, because Barack Obama and the Democrats plan to kill it. Senate Majority Leader Harry Reid has already said that the Senate will not even consider the bill. But of course if Barack Obama called Harry Reid and told him that he wants this bill to get through the Senate so that he could sign it then Harry Reid would be singing a much different tune. Sadly, we all know that is not going to happen. Barack Obama’s good buddy Ben Bernanke called the Audit the Fed bill a “nightmare scenario” last week, and Obama is certainly not going to do anything to upset Bernanke – especially this close to the election. Obama needs Bernanke to do everything that he possibly can to stimulate the economy so that Obama will look as good as possible in November. The sad truth is that there is absolutely no chance that the Audit the Fed bill will become law and that is a crying shame.
So why is an audit of the Federal Reserve so important?
Why does Federal Reserve Chairman Ben Bernanke consider an audit of the Federal Reserve to be a “nightmare scenario” that must be avoided at all costs?
Well, perhaps it is because there has never been a true comprehensive audit of the Federal Reserve since it was created back in 1913.
The Federal Reserve has more power over the economy than anyone else in the country does, and yet they are virtually unaccountable and the American people have very little idea what has been going on behind closed doors over at the Fed for the past 100 years.
A very limited audit of the Fed that was passed a couple of years ago that examined transactions during the last financial crisis discovered that the Federal Reserve had actually loaned out more than 16 trillion dollars in nearly interest-free money to the “too big to fail” banks between 2007 and 2010.
Keep in mind that U.S. GDP for the entire year of 2011 was only slightly more than 15 trillion dollars.
The Federal Reserve loaned out trillions upon trillions of dollars to their friends and never told the American people about it.
Whoa.
You would think that Congress would be quite eager to see what else has been going on over at the Federal Reserve.
But instead, many Democrats are completely and utterly opposed to auditing the Fed any further.
U.S. Representative Barney Frank (a Democrat) seemed to regard the bill as a joke even after it overwhelmingly passed in the House. Frank stated that “nobody here thinks this will ever become law“.
According to Politico, there is zero chance that the bill will get through the U.S. Senate….
Senate Majority Leader Harry Reid (D-Nev.) has said the Senate will not consider the bill, effectively killing its chances of becoming law.
But we all know that if Obama wanted this bill to become law that it would be a done deal.
If Barack Obama came out tomorrow in front of the television cameras and declared his support for this bill it would sail right through the Senate.
Unfortunately, the Obama administration has made it very clear that it considers a comprehensive audit of the Federal Reserve to be a really, really bad idea.
For example, Treasury Secretary Timothy Geithner once stated that auditing the Fed is a “line that we don’t want to cross” and that if we did audit the Fed it would be “problematic for the country”.
So what exactly did he mean by that?
That is a very good question.
In any event, people should take this as an opportunity to confront Barack Obama about the Audit the Fed bill wherever he goes.
Perhaps Obama will prove me wrong.
Perhaps Obama will show that he is willing to stand up to the Federal Reserve.
In fact, if Obama gets this bill pushed through Congress and signs it into law, I will not criticize him for an entire month.
But we all know that will never happen.
The Federal Reserve is going to be able to continue to keep their secrets hidden from the American people.
The following is what Ron Paul had to say following the vote on Wednesday….
“I think the whole idea that they can deal in trillions of dollars and know that nobody is allowed to ask them a question is a moral hazard.”
And Ron Paul is right.
If the Federal Reserve can zap trillions of dollars into existence out of thin air and loan that money to their friends at the big banks and to central banks in other countries, then it should not be too much to ask them to be accountable to the American people.
Over the coming months, the American people will heatedly debate whether Barack Obama or Mitt Romney would be better for the U.S. economy.
But the truth is that the Federal Reserve has far more power over the U.S. economy than the president of the United States does.
The Federal Reserve has been called the “fourth branch of government” because of how much power it has. The Federal Reserve sets our interest rates, it determines the level of our money supply, it regulates and secretly bails out our banks, it determines the “target rates” for unemployment and inflation, and every small move the Fed makes causes global financial markets to swing wildly.
The Federal Reserve does all of this without ever having to be accountable to the American people. In fact, whenever a bill is introduced that would shed some light on their activities they whine and cry about how important their “independence” is.
In a previous article, I described how preposterous this all is….
For a moment, imagine that there is a privately-owned organization in the United States that can create U.S. dollars out of thin air whenever it wants and can loan that money to whoever it wants to. Imagine that this organization is able to act with the full power of the U.S. government behind it, but that nobody in the organization is ever elected by the American people, and that for all practical purposes the organization is not accountable to the president or to Congress. Imagine that the organization is able to make trillions of dollars of secret loans to banks, to foreign governments and even to their close friends without ever having to face a comprehensive audit. Does that sound preposterous? Well, such an organization actually exists.
The American people need to stand up and demand an audit of the Federal Reserve.
We deserve to know what is going on over there.
Sadly, the mainstream media makes it sound as if hell has a better chance of freezing over than this bill does of becoming law. The following is from a USA Today article that was posted on Wednesday….
The bill stands no chance of becoming law because the Democratic-controlled Senate will not take it up. The vote, however, served as a symbolic swan song for Paul, who is not seeking re-election. It is also an indicator of how Paul’s economic views have gone more mainstream, particularly within the Republican Party, in the wake of the 2008 financial crisis that shook Americans’ confidence in Wall Street and the federal government.
Well, let us hope that this kind of a bill keeps getting introduced in Congress.
Perhaps someday we actually will get a real audit of the Federal Reserve.
When that happens, the following is a list of questions that I would like to see asked by those auditing the Fed….
If the Federal Reserve is supposed to prevent shocks to our economy, then why have there been 10 different economic recessions since 1950 and why are we about to enter another one?
Why did Barack Obama nominate Ben Bernanke for a second term as head of the Federal Reserve when Bernanke has a track record of failure that makes the Chicago Cubs look like a roaring success?
Why is the U.S. national debt more than 5000 times larger than it was when the Federal Reserve was created in 1913?
Why were the Federal Reserve and the personal income tax both pushed through Congress in the same year in 1913?
Why does the Federal Reserve argue that it is “not an agency” of the federal government in court?
Why do all 187 nations that belong to the IMF have a central bank?
Do you have any other questions that you would like to have asked during an audit of the Federal Reserve? Please feel free to post a comment with your thoughts below….
How is money created? If you ask average people on the street this question, most of them have absolutely no idea. This is rather odd, because we all use money constantly. You would think that it would only be natural for all of us to know where it comes from. So where does money come from? A lot of people assume that the federal government creates our money, but that is not the case. If the federal government could just print and spend more money whenever it wanted to, our national debt would be zero. But instead, our national debt is now nearly 16 trillion dollars. So why does our government (or any sovereign government for that matter) have to borrow money from anybody? That is a very good question. The truth is that in theory the U.S. government does not have to borrow a single penny from anyone. But under the Federal Reserve system, the U.S. government has purposely allowed itself to be subjugated to a financial system in which it will be constantly borrowing larger and larger amounts of money. In fact, this is how it works in the vast majority of the countries on the planet at this point. As you will see, this kind of system is not sustainable and the structural problems caused by such a system are at the very heart of our debt problems today.
So where does money come from? In the United States, it comes from the Federal Reserve.
When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.
Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.
The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.
So why does the U.S. government go to all this trouble? Why doesn’t the U.S. government create the money itself?
Those are very good questions.
One of the primary reasons why our system is structured this way is so that wealthy people can get even wealthier by lending money to the U.S. government and other national governments.
For example, last year the U.S. government spent more than 454 billion dollars just on interest on the national debt.
Over the centuries, the ultra-wealthy have found lending to national governments to be a very, very profitable enterprise.
The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.
But wait.
There is a problem.
Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.
So where will the U.S. government get the money to pay that debt?
Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.
But that never actually happens, does it?
And the creators of the Federal Reserve understood this as well. They understood that the U.S. government would not have enough money to both run the government and service the national debt. They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.
That is why I call the Federal Reserve a perpetual debt machine. The Federal Reserve was created to trap the U.S. government in an endlessly expanding debt spiral from which there is no escape.
And the Federal Reserve is doing a great job at what it was designed to do. Today, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.
Another way that money comes into existence in our economy is through the process of fractional reserve banking.
I originally pulled the following simplified explanation of fractional reserve banking off of the website of the Federal Reserve Bank of New York, but it has been pulled down since then. But I still think it is helpful in understanding the basics of how fractional reserve banking works….
“If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+…=$1,000).”
When you put your money into the bank, it does not say there. The bank only keeps a relatively small amount of money sitting around to satisfy the withdrawal demands of account holders. If all of us went down to the banks right now and demanded our money, that would create a major problem.
If I put 100 dollars into the bank and the bank lends out 90 of those dollars to you, now it looks like there are 190 dollars floating around. I have “100 dollars” in my bank account and you have “90 dollars” that you just borrowed.
The new debt that you have taken on (90 dollars) has “created” more money. But of course you are going to end up paying back more than 90 dollars to the bank, so more debt has been created than the amount of money that has been created.
And that is one of the big problems with our financial system. It is designed so that the amount of debt and the amount of money are supposed to be perpetually expanding, and the amount of debt created is always greater than the amount of money that is created.
So is it any wonder that our society is swamped with nearly 55 trillion dollars of total debt at this point?
A debt-based financial system is unsustainable by nature because it will always create debt bubbles that will inevitably burst.
Our founding fathers never intended for our financial system to work this way.
According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
So why has this authority been given to a private institution that is dominated by the big Wall Street banks and that has actually argued in court that it is “not an agency” of the federal government?
I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.
But instead, we have become enslaved to a system where government borrowing actually creates our money.
The borrower is the servant of the lender, and we have allowed our government to enslave us to the tune of nearly 16 trillion dollars.
There are alternatives to this system. Things do not have to work this way.
Unfortunately, the vast majority of our politicians consider the Federal Reserve to be good for America and steadfastly refuse to do anything to change the status quo.
So if you are waiting for “solutions” to these problems on the national level you are going to be waiting for a very long time.
The debt problems that the United States and Europe are experiencing did not come into existence by accident. They are the result of fundamental structural problems with the financial system.
A debt-based financial system is always going to fail in the long run. Unfortunately, most Americans still do not understand this and so we will all get to suffer the consequences.
The Federal Reserve says that everything is going to be okay. The Fed says that unemployment is going to go down, inflation is going to remain low and economic growth is going to steadily increase. Do you believe them this time? As you will see later in this article, Federal Reserve Chairman Ben Bernanke has been dead wrong about the economy over and over again. But the mainstream media and many Americans still seem to have a lot of faith in the Federal Reserve. It doesn’t seem to matter that Bernanke and other Fed officials have been telling the American people lies for years. As I always say, most people believe what they want to believe, and many people seem to want to have blind faith in the Federal Reserve even when logic and reason would dictate otherwise. The truth is that things are not going to be getting much better than they are right now. When the next wave of the financial crisis hits, the U.S. economy is going to fall back into recession, financial markets are going to crash and unemployment is going to absolutely skyrocket. But you will never hear any of that from the Federal Reserve.
The following are 5 new lies that the Federal Reserve is telling the American people. After each lie I have posted what The Economic Collapse Blog thinks is actually going to happen….
#1 The Federal Reserve says that the labor market has improved and that unemployment is going to decline significantly over the next few years.
The following is a quote from the FOMC press release that was released on Wednesday….
Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated.
The Federal Reserve is projecting that the unemployment rate will fall within the range of 7.8 percent and 8.0 percent by the end of 2012.
The Federal Reserve is also projecting that the unemployment rate will fall within the range of 6.7 percent and 7.4 percent by the end of 2014.
The Economic Collapse Blog says that the labor market has not improved. In March 2010, 58.5 percent of all working age Americans had a job. Exactly two years later in March 2012, 58.5 percent of all working age Americans had a job. If the labor market was improving, the percentage of working age Americans with a job should have gone up.
The Economic Collapse Blog also says that while there is a chance the official unemployment rate may go down slightly in the short-term, the truth is that it is going to go up into double digits once the next wave of the financial crisis hits us.
#2 The Federal Reserve says that that U.S. economy is going to experience solid GDP growth over the next couple of years.
In fact, the Federal Reserve is projecting that U.S. GDP will be rising at an annual rate that falls between 3.1 percent and 3.6 percent by the end of 2014.
The Economic Collapse Blog says that a great economic cataclysm is coming….
“When the European banking system crashes (and it will) it is going to reverberate around the globe. The epicenter of the next great financial crisis is going to be in Europe, and it is getting closer with each passing day.”
#3 The Federal Reserve says that we can expect low inflation for an extended period of time.
The Federal Reserve is officially projecting that the annual rate of inflation will not be higher than 2.0 percent by the end of 2012. Federal Reserve Chairman Ben Bernanke reinforced this projection during his press conference on Wednesday….
“But we expect that to pass through the system, and assuming no new shocks in the oil sector, inflation ought to moderate to about 2 percent later this year.”
The Economic Collapse Blog says that the Fed is being tremendously dishonest and that if inflation was measured the exact same way that it was measured back in 1980, the annual rate of inflation would be more than 10 percent right now.
The truth is that most middle class families know that we do not have low inflation right now. This is hammered home millions of times a day when average Americans visit the gas station or the grocery store.
At the beginning of the next recession inflation will likely subside, but that will only be because economic activity will be slowing down dramatically.
#4 The Federal Reserve says that it has built up a 30 year reputation for keeping inflation low.
Ben Bernanke actually had the gall to make the following claim during his press conference on Wednesday….
“We, the Federal Reserve, have spent 30 years building up credibility for low and stable inflation, which has proved extremely valuable in that we’ve been able to take strong accommodative actions in the last four, five years to support the economy.”
Oh really?
The Economic Collapse Blog says that the Federal Reserve has nearly a 100 year reputation for destroying the value of the U.S. dollar. Even using the Fed’s doctored numbers, the value of the U.S. dollar has declined by more than 95 percent since 1913.
To get a really good idea of just how much the dollar has been destroyed by the Fed over the years, just check out this chart.
#5 Federal Reserve Chairman Ben Bernanke says that we should trust him because the Federal Reserve stands ready to do whatever is necessary to support the U.S. economy.
“If appropriate… we remain entirely prepared to take additional action”
The Economic Collapse Blog says that Federal Reserve Chairman Ben Bernanke is doing a great disservice by not warning the American people about the tremendous crisis that is coming. In a recent article I stated that this next crisis will blindside most Americans just like the last one did….
“Sadly, just like back in 2008, most people will never even see this next crisis coming.”
So who should you trust – the Federal Reserve or all of the half-crazed bloggers out there that are warning about the “serious doom” that is coming.
Well, come back to this article in a year or two and compare how accurate the predictions were.
In the end, time will tell who is telling lies and who is not.
If we do not learn from history, we are doomed to repeat it.
For example, let’s take a quick look at Ben Bernanke’s track record over the past several years.
#1 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”
#2 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”
#3 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
#4 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
#5 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”
#6 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”
#7 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”
#8 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”
#9 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”
But don’t worry, Ben Bernanke insists that he knows exactly what is going on this time.
So do you believe him?
A lot of Americans don’t. In fact, an “economic collapse” is the number one catastrophic event that Americans worry about according to one recent survey.
The central planners over at the Federal Reserve are not going to solve our economic problems.
The truth is that the Fed is at the very heart of our economic problems.
We have been living in the greatest debt bubble in the history of the world and that debt bubble has been facilitated by the Fed.
Over the past three decades, the total amount of debt in America has increased by about 50 trillion dollars. By stealing from future generations, we have been able to live like kings and queens, but there is going to be a great price to pay for our foolishness.
Ben Bernanke and the other folks running the Federal Reserve are just going to keep insisting that everything is going to be okay for as long as they possibly can. They are going to tell you that they know exactly how to fix things and that the economy will be back on track very soon.
For those waiting for our economic problems to be solved, you can quit holding your breath. There is simply not going to be a solution to our economic problems on the national level. So why is that the case? Well, it is because the economic policies of both major political parties are very, very similar when you take a close look at them. Yes, that statement may sound downright bizarre to many Americans, but it is true. Both major political parties supported the Wall Street bailouts, both of them fully support the job-killing “free trade” globalization agenda, both of them have dramatically increased the national debt when in power, both of them fully support the currency-killing policies of the Federal Reserve, and neither major political party would get rid of the income tax and the IRS. And that is just for starters. Yes, there are some minor differences when it comes to taxing and spending between the two parties, but the truth is that they are a lot more similar on economic issues than they are different. What we desperately need on the national level is a fundamental change in direction when it comes to economic policy, but we simply are not going to get that from either the Democrats or the Republicans. That means that there is no hope that the economic storm that is coming will be averted.
So why are the Democrats and the Republicans so similar on these issues? Well, a big reason is because of who they are trying to please.
The reality of the matter is that most politicians do not really care about what you or I have to say. Instead, what they are really concerned about is getting as much money for their campaigns as possible so that they can keep getting elected.
When you take a close look at the results of federal elections over the past several decades, it quickly becomes apparent that the candidate that raises the most money almost always wins.
So most politicians have learned to please those that fund their campaigns so that the money will keep rolling in.
Yes, there are a few candidates that are willing to rebel against “the system”, but they are few and far between and the major parties tend to marginalize them.
Once again in 2012, political races will overwhelmingly be won by those that raise the most cash. The following is from Politifact….
In congressional races in 2010, the candidate who spent the most won 85 percent of the House races and 83 percent of the Senate races, according to the Center for Responsive Politics. That’s a large percentage, but it’s lower than what the sign indicated.
Indeed, the percentage for 2010 was lower than it had been in recent election cycles. The center found that in 2008, the biggest spenders won 93 percent of House races and 86 percent of Senate races. In 2006, the top spenders won 94 percent of House races and 73 percent of Senate races. And in 2004, 98 percent of House seats went to candidates who spent the most, as did 88 percent of Senate seats.
Once you understand how Washington works, it becomes easier to understand why our politicians do such stupid things.
For example, big corporations tend to donate large amounts of money to political campaigns and they love the “free trade” globalization agenda.
They love to import massive quantities of super cheap foreign goods so that they can undercut the prices of goods made in the United States.
They love to set up manufacturing facilities on the other side of the globe where it is legal to pay slave labor wages to workers.
The “free trade” agenda is great for the largest corporations, but it is horrible for the average American worker.
According to the Economic Policy Institute, the U.S. economy loses approximately 9,000 jobs for every $1 billion of goods that are imported from overseas.
Trade with other countries can be good as long as it is balanced. Unfortunately, the U.S. trading relationship with the rest of the world is tremendously imbalanced.
In 2011, the United States bought more than 550 billion dollars more stuff from the rest of the world than they bought from us.
This trade deficit has enormous consequences that most Americans simply do not understand.
Over the past decade, tens of thousands of businesses, millions of jobs and trillions of dollars have left our country.
Our industrial base is being dismantled and we are rapidly becoming poorer as a nation.
According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.
Just think about that.
Every single day we lost 23 more.
Overall, America has lost a total of more than 56,000 manufacturing facilities since 2001.
Why do you think cities like Detroit are dying?
The truth is that we killed them with our idiotic policies.
America has a trade imbalance that is more than 5 times larger than any other nation on earth has. We are losing wealth, jobs and businesses at a pace that is absolutely astounding.
It is neither “conservative” nor “liberal” to commit national economic suicide.
Our trade imbalance with China is particularly bad. The U.S. spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
Does that sound fair to you?
China slaps huge tariffs on many of our products, they deeply subsidize their own national industries, the brazenly steal technology from us, and they manipulate currency rates so that their products end up being significantly cheaper than ours.
Our trade deficit with China in 2011 was nearly 300 billion dollars. That was the largest trade deficit that one country has had with another country in the history of the world.
Yet both major political parties refuse to do anything about it.
Back in 1985, the U.S. trade deficit with China was only 6 million dollars for the entire year.
In 2011, our trade deficit with China was more than 49,000 times larger.
The consequences of this trade deficit with China are being felt all over the United States every single day.
For example, the United States has lost an average of 50,000 manufacturing jobsper month since China joined the World Trade Organization in 2001.
Do you support losing more than half a million manufacturing jobs a year?
If not, then you should be for “fair trade” instead of “free trade” where other nations can cheat us blind as often as they want.
The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.
Do you think that the U.S. economy could use an extra 2.8 million jobs right now?
Sadly, if current trends continue things are going to get a lot worse.
According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades.
So why won’t our politicians do something?
The United States has run a trade deficit every single year since 1976.
That 7.5 trillion dollars could have gone to support U.S. jobs and U.S. businesses.
Taxes could have been paid on that 7.5 trillion dollars.
Instead, it went out of the country and made foreigners wealthier.
So what is Barack Obama doing about all of this?
Well, Obama has been aggressively pushing for even more “free trade” agreements. The Obama administration has inked deals with Panama, South Korea and Colombia and the Obama administration is making the Trans-Pacific Partnership (“the NAFTA of the Pacific“) a very high priority.
Well, Mitt Romney must be criticizing these moves, right?
Mitt Romney wants to make it even easier for jobs to go out of the country and for other countries to drain our wealth. The following quote comes directly from the Romney campaign website….
Access to foreign markets is crucial to growing our economy. We must reassert American leadership in international negotiations, follow through on commitments we have already made, and push aggressively for advantageous new agreements.
So we are not going to see a change in direction in trade policy no matter who wins the next election.
Well, what about the national debt?
Are there differences between the two parties on this issue?
Since Barack Obama entered the White House, the U.S. national debt has increased by $5,027,761,476,484.56.
That comes to $16,043.39 for every man, woman and child living in the United States.
What the Obama administration and the Democrats are doing to future generations is absolutely criminal.
So what about the Republicans?
Well, when the Republicans have had control of the White House they have run up debt “like a drunken sailor” as well.
If the Republican Party wants to have any credibility when it comes to fiscal issues, it needs to publicly admit that George W. Bush was a horrible failure when it came to the federal budget.
George W. Bush was a “big government” politician that dramatically increased the size of the federal government and spent money like it was going out of style.
He was not a conservative when it came to fiscal issues, and that is the truth.
Sadly, neither political party is proposing to balance the federal budget any time soon. There are a few politicians that have suggested doing this, but they have been marginalized.
So why don’t our politicians support living within our means?
Well, the truth is that if the federal government balanced the budget today, it would result in a catastrophic drop in living standards inside the United States. We are currently living in an era of debt-fueled “false prosperity”, and if that false prosperity were to disappear there would be riots in the streets of our major cities within months.
It is much easier for our politicians to continue to pile up more debt and to continue to kick the can down the road.
But this party cannot go on too much longer. Already, the United States has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
As you can see from the chart below, we are in a whole lot of trouble….
Our foolishness will catch up to us in a big way eventually.
Another area where the two major political parties agree is that they both fully support the Federal Reserve.
The Federal Reserve is supposed to keep inflation low, but the truth is that the Fed has absolutely killed the value of the U.S. dollar. Just check out the chart below which was produced by the Fed itself. It shows how dramatically the purchasing power of the U.S. dollar has declined over the years….
Keep in mind that the chart above is using official government numbers which actually downplay how much the U.S. dollar has been debased.
If inflation was measured the exact same way that it was back in 1980, the annual rate of inflation would be more than 10 percent right now.
By any measure, the Federal Reserve has been a colossal failure for the American people. Since the Fed was created, our currency has lost more than 95 percent of its value and our national debt has gotten more than 5000 times larger.
The current Federal Reserve Chairman, Ben Bernanke, has a track record of failure that is legendary. If you doubt this, just read this article, this article and this article.
But Barack Obama just loves Bernanke. He nominated him for another term as Fed Chairman and he never criticizes anything that he does.
Thanks Obama.
So will things be any different under Mitt Romney?
Of course not.
During one Republican debate, Mitt Romney actually had the gall to try to explain to all of us why “we need to have a Fed“.
But the Federal Reserve is at the very heart of our economic problems.
Doesn’t Mitt Romney understand that?
The mainstream media is already telling us not to expect any significant changes at the Fed if Romney wins. A recent Reuters article had the following headline….
Are you starting to understand why I am saying that there is not going to be a solution to our economic problems at the national level?
A great economic cataclysm is coming, and there is very little hope that it can be averted.
So what does that mean?
It means that we all need to start preparing to weather the coming storm on an individual level.
The nation as a whole may not change course, but as individuals and as families we can change course.
All of us can work to reduce our expenses, get out of debt, build up a six month financial cushion, learn to grow a garden and slowly become more independent of the system.
Both political parties are leading us down a road that will only end in economic disaster.
Instead of waiting for a “national solution” that is never going to come, you need to focus on being your own solution.
Federal Reserve Chairman Ben Bernanke claims that the Federal Reserve averted a second Great Depression by bailing out the big Wall Street banks during the last financial crisis, and he says that if a similar financial crisis comes along that the correct “policy response” will be to do the exact same thing again. This was the theme of the lecture that Bernanke delivered to students at George Washington University on Tuesday. In previous lectures Bernanke has defended the existence of the Fed and detailed the history of Fed activities, but on Tuesday he addressed things that have happened since he has been at the helm of the Fed. And according to Bernanke, he has been doing a great job. Bernanke told the students that the “threat of a second Great Depression was very real” and that the Federal Reserve did exactly what needed to be done to fix the financial system. Unfortunately, the truth is that all Bernanke did was kick the can a bit farther down the road. You can’t fix a debt problem with more debt, and the debt bubble we are living in today is far larger than it was in 2008. Will Bernanke still be trying to portray himself as a hero when this house of cards finally falls apart?
During his lecture to the students on Tuesday, Bernanke stated the following….
“I think the view is increasingly gaining acceptance that without the forceful policy response that stabilized the financial system in 2008 and early 2009, we could have had a much worse outcome in the economy.”
So what did that “forceful policy response” entail?
Well, on slide 24 of his presentation to the students Bernanke tells us….
• On October 10, 2008, G‐7 countries agreed to work together to stabilize the global financial system. They agreed to – prevent the failure of systemically important financial institutions – ensure financial institutions’ access to funding and capital – restore depositor confidence – work to normalize credit markets
Please note that not all financial institutions got bailed out.
In fact, hundreds of small and mid-size U.S. banks failed during the financial crisis.
It was only the “systemically important financial institutions” that got bailed out.
So who decided which financial institutions were important enough to be bailed out?
The Federal Reserve made those decisions. There were no Congressional votes and no input from the public. The Federal Reserve determined who the winners and the losers would be in secret and without any public debate.
So once the Federal Reserve bailed out the “too big to fail” banks, what was the outcome?
On page 25 of his presentation to the students Bernanke claimed that the bailouts successfully prevented the global financial system from collapsing….
• The international policy response averted the collapse of the global financial system.
But it wasn’t just big Wall Street banks that got bailed out. Bernanke says that AIG was also bailed out because the insurance company was deemed to be too “interconnected with many other parts of the global financial system” to be allowed to fail….
Because AIG was interconnected with many other parts of the global financial system, its failure would have had a massive effect on other financial firms and markets.
Once again, we see that it is the Federal Reserve who picks the winners and the losers.
AIG got bailed out and was then able to pay 100 cents on the dollar of what it owed to Goldman Sachs.
That sure worked out well for Goldman Sachs.
In all, the Federal Reserve issued a grand total of more than 16 trillion dollars in secret loans during the financial crisis.
The big Wall Street banks got showered with cash while hundreds of smaller banks were allowed to die like dogs.
The fact that the Fed greatly favors the big Wall Street banks has allowed them to grow massively in size and in power.
Back in 1970, the 5 biggest U.S. banks held 17 percent of all U.S. banking industry assets.
Today, the 5 biggest U.S. banks hold 52 percent of all U.S. banking industry assets.
The “too big to fail” banks just keep getting bigger and bigger and bigger.
Yet during his presentation to the students, Bernanke tried to talk out of both sides of his mouth by claiming that it is not a good thing for some banks to be “too big to fail”….
“But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.'”
So who is to blame for them being so big?
Well, the Federal Reserve is probably the biggest culprit.
Thanks Bernanke.
The big Wall Street banks are bigger than ever and they are also more unstable than ever.
According to the Comptroller of the Currency, the biggest U.S. banks have exposure to derivatives that is absolutely mind blowing. Just check out these numbers which have just been released….
JPMorgan Chase – $70.1 Trillion
Citibank – $52.1 Trillion
Bank of America – $50.1 Trillion
Goldman Sachs – $44.2 Trillion
So what is going to happen when that bubble pops?
Is Bernanke going to zap tens of trillions of dollars into existence to bail out that gigantic mess?
Meanwhile, the debt bubble that we are all living in just keeps exploding in size.
Total student loan debt in the United States is over 1 trillion dollars at this point. Consumer debt is rising. Millions of mortgages are past due.
The American people are not in better financial condition than they were during the last financial crisis. In fact, they are significantly worse off.
All over America, state and local governments are also drowning in debt. In fact, there have been several very notable municipal bankruptcies lately.
The best that can be said is that he kicked the can down the road a little bit and made our long-term financial problems a lot worse at the same time.
Bernanke can create money out of thin air and loan it to his friends all he wants, but he is not going to be able to prevent this house of cards from crashing down indefinitely.
So grab a bucket of popcorn and get ready. The next few years are going to be fascinating to watch.
Last week the mainstream media hailed QE3 as the “quick fix” that the U.S. economy desperately needs, but the truth is that the policies that the Federal Reserve is pursuing are going to be absolutely devastating for our senior citizens. By keeping interest rates at exceptionally low levels, the Federal Reserve is absolutely crushing savers and is systematically destroying Social Security. Meanwhile, the inflation that QE3 will cause is going to be absolutely crippling for the millions upon millions of retired Americans that are on a fixed income. Sadly, most elderly Americans have no idea what the Federal Reserve is doing to their financial futures. Most Americans that are approaching retirement age have not adequately saved for retirement, and the Social Security system that they are depending on is going to completely and totally collapse in the coming years. Right now, approximately 56 million Americans are collecting Social Security benefits. By 2035, that number is projected to grow to a whopping 91 million. By law, the Social Security trust fund must be invested in U.S. government securities. But thanks to the low interest rate policies of the Federal Reserve, the average interest rate on those securities just keeps dropping and dropping. The trustees of the Social Security system had projected that the Social Security trust fund would be completely gone by 2033, but because of the Fed policy of keeping interest rates exceptionally low for the foreseeable future it is now being projected by some analysts that Social Security will be bankrupt by 2023. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. Yes, you read that correctly. The collapse of Social Security is inevitable, and the foolish policies of the Federal Reserve are going to make that collapse happen much more rapidly.
