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Economic Warning! 4 Signs That U.S. Financial Authorities Plan To Reduce The Money Supply, Tighten Credit And Hoard Cash

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More than ever before in U.S. history, American society absolutely relies on credit in order to function.  In fact, if you cut off all sources of credit to U.S. businesses, most of them would go out of business fairly quickly.  The truth is that when the money supply expands and credit flows freely, the U.S. economy usually hums along pretty good.  But when the money supply contracts and the financial powers tighten credit, it almost always means that an economic slowdown is coming.  That is why recent signals by the Federal Reserve and the major banks in the U.S. are so alarming.

But why would the financial authorities want to contract the money supply and tighten credit just when the U.S. economy is showing some signs of life?

Well, the truth is that nobody can read their minds.  In the long run, the massive size of the U.S. national debt is going to force a massive increase in the size of the U.S. money supply and will eventually lead to hyperinflation.

However, in the short term U.S. financial powers may see this as a chance to further consolidate their power.  There are rumors that they still desire much greater “consolidation” in the banking industry.

So how would this “consolidation” be achieved?

Well, a massive “second wave” of mortgages is scheduled to reset over the next two to three years.  If credit is tight and the U.S. economy is struggling, then another huge wave of mortgage defaults could potentially destroy hundreds of small to mid-size banks across the United States.

The big banks would be in prime position to come in and buy many of them up for a song.

You see, this is very similar to what happened during the Great Depression.

During the Great Depression, the financial powers reduced the money supply, tightened credit and hoarded cash.  The U.S. economy seized up and suddenly nobody had any money.  Those who did have money (the financial powers) were in many cases able to come in and buy assets up for pennies on the dollar.

Not that we are expecting an extended deflationary depression this time.  Instead, it is perhaps likely that they are planning a “consolidation phase” before they really blow out the dollar.

In any event, a reduction in the money supply, the tightening of credit and the hoarding of cash by banks is really bad news for the average American because there will be less jobs and less opportunity as the economy slows down.

The following are 4 signs that this is exactly what we are about to see….

#1) The Federal Reserve is in talks with money-market mutual funds on agreements to help drain as much as 1 trillion dollars from the financial system.  The Federal Reserve is reportedly seeking to “withdraw” some of the record monetary stimulus pumped into the U.S. economy to fight the recession.  But when you withdraw stimulus money from the system, what happens?  That’s right – the opposite of stimulus.

#2) There are persistent rumors that Federal Reserve policy makers are plotting a course for a series of interest rate hikes.  Federal Reserve Chairman Ben Bernanke says that the Federal Reserve may raise the discount rate “before long” as part of the “normalization” of Fed lending.  By raising that rate, Bernanke says that the central bank “will be able to put significant upward pressure on all short-term interest rates”.  When the Federal Reserve raises rates, this has a ripple effect throughout the entire economy.  Higher rates mean that credit will tighten and loans will be more expensive for individuals and businesses.  In turn, this will cause the U.S. economy to slow down.

#3) Recent data suggests that there has been a substantial drop in the “real” M3 money supply, and every time that this has happened in the past it has resulted in a drop in economic activity.  In fact, this contraction in the money supply has some economic analysts now saying that it is not a matter of “if” we will have a “double-dip” recession, but of “when” it will occur.

#4) There are also signs that the major U.S. banks are now hoarding cash.  In fact, the biggest banks in the U.S. cut their collective small business lending balance by another $1 billion in November 2009.  That drop was the seventh monthly decline in a row.

So what does all of this mean?

It means that the collapse of the U.S. dollar will be put off for a little while but that the U.S. economy is in for some hard times ahead.

More people are going to lose their jobs and more people are going to lose their homes.

Eventually though, after this apparent “consolidation phase” is over, the U.S. government and the financial powers will swoop in with another round of bailouts and another round of “stimulus packages” to save the day.  Once again they will be hailed as heroes and saviors.

And this current “consolidation phase” does not change the long term forecast at all.  Eventually the U.S. dollar will collapse and the United States will experience hyperinflation in one form or another.

Just not yet.

  • Big J

    I’m totally on board with what you are saying, but what I can do to prepare my family for this credit shock? I already have manageable bills, but what else can I do to prepare??

    • Admin

      The number one thing is to get out of debt.

      Those who are out of debt will have the best chance to weather what is coming.

  • I tell you we have less than 2 years before the total collapse of the dollar. Get your precious metals immediately. There is still a window of time to get your cheap silver and gold while we speak. Also, Watch out for the declaration of a world currency.

  • TJ


  • Admin – a question I have. Should people like me dump out their IRA and take the tax hit? Or will there even be an IRS?

    • Admin


      That is a very tough question. Each financial situation is different. If you think that you are going to need that money to survive, then you need to do what you have to do. But if you are going to be okay without it, then that gives you some flexibility. We are moving into times when it is going to be really hard to know what to do financially. There are so many variables that go into a decision like that. What I would recommend is sitting down with someone that you trust about financial matters and getting their honest opinion. Each situation is different, and the answer is not always going to be the same for everyone.


  • sharonsj

    Reduce the money supply, tighten credit, and hoard cash–the banks have already done this. The rest of the headline is also misleading; it’s not the government that will do the same thing, it’s the Fed…which is the banks.

    The stimulus and TARP are two completely separate entities. Because the banks have already done those three things, it’s left to the stimulus bill to try and help Main Street. But the stimulus is probably too little too late, and the Fed is primarily concerned with helping its friends (and itself).

    What is happening is a downward spiral in the real economy: more jobs lost, more house foreclosures, more bankruptcies, more welfare and food stamps, and less revenue collected by the states–which have to balance their budgets, unlike the Federal government. So the states will cut services, raise taxes, and lay off more workers.

    Unless Wall Street and Congress can find a way to create jobs, we are all screwed.

  • Skip

    Add the 4 signs to PIIGS,Iran,Korea and whatever other potential threat that is around the corner, I lean towards “collapse”. Possibly a rapid change. My thoughts on Annie’s question is that the IRS, in one form or another, will be around forever. They get thiers when I am pull my IRA (before it drops again), paying off everything and investing in commodities, booze and beans. If the stockmarket does hang on, my few stocks will be helpful and my pension will do me fine. A collapse without preps in hand leaves my family eating tree bark after a while! Pray for us all. ….Skip

  • i have o debt-bought 1000 american silver eagles-invested in gold and silver mines-have a years worth of food,etc.-my neighbor taught me to drive a big rig and bought my own,paying cash, hauling local work-i will never be out of work again-might be working cheap but will always be able to make cash flow because of no debt-it looks real ugly out there and bothers me greatly that this is the world we are handing to our kids…..

  • Mike

    February 16th, 2010 at 2:41 am
    The number one thing is to get out of debt.

    This is something I have wondered about for some time. The “old question”, save…or pay debt. Part of me, naturally, say’s get out of debt. Seems logical with instant savings in interest payments. But in the event of a total collapse, when basically everyone is equally screwed, wouldn’t the debt be essentially worthless??? (don’t mean to sound like a deadbeat, but seriously, if it gets really bad and survival is on the line…the lender loses IMO)

  • Claude

    This economic mess is happening right under our noses and we all seem to think we are doomed. YES WE ARE!!! Unless the public stood up/took to the streets and demanded the following;

    Reduce military spending to 100billion a year.

    Close the Fed and remove fractional banking system.

    Remove all government subsidies for corporations and farming industry especially the corn subsidies.

    a nation health system- 400billion is giving to one industry that does nothing to improve health care. Imagine 400billion put back into the economy per year!!!!! If I don’t have to send an insurance company money every month, what would I do with the money…pay a mortgage, go for dinners, trips , save for school.

    That is the key to getting out of this depression (not recession)!!!!

  • Jay

    Ever heard of debtors prison? Yep, they really existed. You might also be interested in doing a little search about IRS headquarters in London England.

  • Mike

    February 19th, 2010 at 5:53 am

    Jay – With all the people in trouble already, in the event of a total collapse, do you think it would be feasible to lock up a third or more of the country? Also, I am very curious about your statement regarding the IRS. What part do they play, and in particular, an office in London?

  • Thierry


    Yes, you nailed it : the big point is to ban the fractionable reserve banking system.
    That’s what created the black hole the world banking system is sucked in because of the hundreds of trillions of potential losses on the OTC derivatives. No TARP ever will be efficient or big enough to close that hole. More outrageously, we are seeing the big banks use the taxpayer’s money to increase its radius by emitting more and more derivatives ! It needs to be stopped.

  • JC

    The only solution I see is to eliminate property taxes nation wide and let people do what they did for thousands of years. Grow food and live off the land you live on. The only reason people can not do this now is because of property taxes. You can’t grow enough food to earn enought money to pay your property taxes! Give us back our land and we can survive. Government does not and never has created a job. It is not governments place to create jobs. Lower property taxes and America can be competitive again in the global economy.

  • Do you factor peak oil when while making your predictions on the coming collapse? I agree with almost everything you write but what makes it scarier is peak oil. Once the recession slackens a little, the demand for oil will continue to grow, while the finite supply dwindles.

    The inflationary effect this will have, will be crippling considering our entire infrastructure is based on cheap gas. Eventually the cost of the gas to transport goods to iowa or what have you will exceed the value of the contents in the trucks. Driving 30 minutes to work and another 20 minutes to drop your kids off at soccer practice will be ungodly.

    • Capitalist pig

      Peak oil is a crock! More oil has been discovered in the last 5 years than previously existed. Its just a scare tactic like climate change. Oh eventually we will run out of oil and the climate has and always will change. This is an attempt to pick your pockets clean to lower your standard of living. The IMF is issuing SDR bonds. This is the beginning of one world currency. But 132 yen to one US dollar was unexceptable to the Japanese, or any other country that will get the new currency after the collapse. SDR’s are a basket of currencies in proportion to the value, 1 US dollar to 132 YEN, to I don’t know maybe 41 PESO’s etc….. to much imbalance. They have been trying to raise other countries standards up, to no avail. So now they are trying to destroy your and my wealth.

  • allmhuran

    I thinks its time to come to terms with the fact that the economy is being destroyed on purpose by world elites including those in Washington. Its not coming back. Its time to put your faith in the Holy Bible instead of government. Not once was the Bible mentioned in any of the comments I’ve read.

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