On Wednesday, Federal Reserve Chairman Ben Bernanke warned Congress that the Federal Reserve does not plan to “print money” to help Congress finance the exploding U.S. national debt. In fact, Bernanke told Congress that the U.S. could soon face a debt crisis as bad as the one in Greece if the U.S. government does not get things in order financially. This represents a fundamental change in policy for the Federal Reserve, because they have been enabling the massive borrowing by the U.S. government over the past couple of years by “buying” the majority of new U.S. government debt that has been issued. But now the fat cats over at the Federal Reserve have apparently changed their minds. Using uncharacteristic bluntness, Bernanke told Congress that the Federal Reserve is “not going to monetize the debt”.
So why is the Federal Reserve changing course?
Well, there are a couple of possibilities. One is that the Federal Reserve could legitimately be concerned that the exploding U.S. debt could actually collapse the U.S. economy and ultimately the U.S. government.
You see, the Federal Reserve is a parasite. They make money for their owners by sucking money out of the U.S. government and out of U.S. taxpayers. So, just like any parasite, they must strike a delicate balance. They have to keep feeding off the host without killing off the host completely. If the host dies it could end up killing the parasite. So the Federal Reserve actually needs to try to keep the U.S. economy alive so that it can slowly keep draining it.
In fact, during his remarks to Congress, it certainly sounded like Bernanke honestly desires that the U.S. government will come up with a sustainable financial plan for the future….
“It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position.”
The second possibility is a bit more insidious. As we have written previously, it looks like “the financial powers that be” have decided to reduce the money supply, tighten credit and hoard cash. All of those things reduce economic activity.
This new public stance by Bernanke is right in line with that. If the Federal Reserve will not finance the exploding U.S. government debt, then either the U.S. government will have to dramatically cut back on spending (which would seriously slow down the U.S. economy) or the U.S. government will have to borrow from other sources at much higher interest rates (which will have very serious negative effects on the U.S.. economy). Either way, this new stance by the Federal Reserve is not good news for those hoping for U.S. economic growth.
The truth is that someday the exponential growth of the U.S. national debt will basically force the Federal Reserve to “print money”, but for now it looks like the financial powers have another agenda.
From all indications, it look like that agenda is seriously going to slow down the U.S. economy.
That is likely to seriously anger American voters. Already, millions of Americans have lost their homes and their jobs, and things are probably only going to get worse.
The result is that there is likely to be an overwhelmingly strong anti-incumbent mood in the nation as we approach the election season of 2010. Even now, only 10% of American voters say that Congress is doing a good or excellent job.
That is not good news for the fat cats in Washington.
Not that we should feel sorry for them when they get voted out.
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