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Record Low Mortgage Rates, A Record Low Federal Funds Rate And Obscene Economic Stimulus Spending Have All Failed – Will Nothing Stimulate This Dead Horse Of An Economy?

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Over the past several years, the Federal Reserve and the U.S. government have tried everything that they can think of to stimulate this dead horse of an economy but nothing has worked.  The Fed has slashed the federal funds rate to record low levels, mortgage rates have been pushed to all-time lows and the U.S. government has spent hundreds of billions of dollars in an effort to get the economy going.  But despite all these of these extraordinary efforts, the U.S. economy continues to just lie there like a dead corpse.  Never before have the Federal Reserve and the U.S. government done more to try to stimulate the economy and never before have their efforts produced such poor results.  Home sales continue to set new record lows, more than 14 million Americans continue to be unemployed, foreclosures continue to soar, personal bankruptcies continue to soar and an increasing number of Americans continue to sign up for food stamps and other anti-poverty programs.  All of the things that once worked so well to stimulate the U.S. economy seem to be doing next to nothing here in 2010, and the American people are becoming increasingly frustrated by economic problems that just keep getting worse.

Once upon a time, a big drop in mortgage rates would get Americans running out to buy homes in big numbers.  But that is just not happening this time. 

As you can see from the chart below, mortgage rates are at ridiculously low levels right now.  The average rate for a 30-year fixed mortgage was 4.32 percent this week.  That is the lowest it has ever been since Freddie Mac began tracking mortgage rates back in 1971.

These low rates have motivated millions of Americans to refinance their existing home loans, but sales of new and existing loans remain at record low levels.  In fact, the number of Americans refinancing their homes is now at its highest level since May 2009, but the U.S. housing crisis just continues to get worse.  Despite these record low mortgage rates, existing home sales declined 27 percent during the month of July and new homes sales dropped to the lowest level ever recorded in July.

So if Americans are not buying houses when mortgage rates are this ridiculously low, what in the world is going to cause a turnaround in the U.S. housing market?

The Federal Reserve has sure been trying to do what it can to resuscitate the U.S. economy.  For decades, a drop in the federal funds rate could always be counted on to give the economy a jump start.  But the Fed has dropped the federal funds rate almost to zero for quite some time now and it has done next to nothing to get things moving again. 

So is the Federal Reserve out of ammunition?  Well, let’s just say that they have used up all of their “best” ammunition.  The Fed has been telling us since March 2009 that the federal funds rate will remain between zero and 25 basis points “for an extended period” of time, but the U.S. economy doesn’t seem to care. 

Of course Ben Bernanke insists that the Fed is not out of ammunition and that everything is going to be okay, but at this point there is just not a lot left of Bernanke’s fading credibility.

The U.S. government tried to do their best to help the economy by passing stimulus bill after stimulus bill, but it just has not helped much.  The government spent hundreds and hundreds of billions of dollars on some of the most wasteful things imaginable, and while the massive injection of cash may have helped temporarily stabilize the economy, it has not brought about the “recovery” that our politicians were hoping for.

Now the pendulum has swung the other way in Congress and there is very little appetite for more economic stimulus spending.  But if the economy was not recovering when the government was throwing giant piles of money at it, what is going to happen as the economic stimulus totally dries up?

Already there are signs that the U.S. economy is in big, big trouble.  General Motors announced this week that U.S. sales in August fell 24.9% to 185,176 vehicles from 246,479 vehicles in August 2009.

But don’t let up and down sales reports fool you.  One month they may be down and the next month they may be up a bit.  The important thing is to keep your eyes on the truly disturbing long-term trends.

Thanks to the nightmarish U.S. trade deficit, far more wealth leaves the United States each month than enters it.  That means that the United States is getting significantly poorer each month.  As I noted yesterday, the United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.  That is not sustainable and China is going to continue to bleed us dry for as long as we allow it to continue.

In addition, the United States continues to go into more debt every single month.  Each month the U.S. national debt gets bigger, state governments go into more debt and local governments go into more debt.

So what we have is a nation that is getting poorer and that is going into more debt month after month after month.

We are on the road to economic hell, and the American people don’t even realize it because things are still relatively good – at least for now.

But as the economy continues to unravel, is there anything that the folks over at the Federal Reserve can do?

Well, yes there is.  It is called “quantitative easing” and the Fed has already indicated that they are going to start doing it again.  Essentially, quantitative easing is when the Federal Reserve creates money out of thin air and starts buying things like U.S. Treasuries, mortgage-backed securities and corporate debt.

But isn’t there a good chance that this could cause inflation?

Well, yes.

But “Helicopter Ben Bernanke” seems determined to live up to his nickname.  Anyone who thinks that Bernanke is going to just sit there and do nothing is delusional.  At some point he is going to fire up his helicopter and start showering the economy with money. 

And the reality is that feeding massive quantities into the economy will create more economic activity.  However, it will also come with a price.

Someday soon, you may wake up to newspaper headlines that declare that our economy is growing at a 10% annual rate, but what they won’t tell you is that the real rate of inflation will be running about 15 or 20 percent at the same time.  In fact, the U.S. government will probably try to convince us that the “official” rate of inflation is only about 5 or 6 percent.

The cold, hard truth is that the U.S. economy is going to continue to get worse.  Whether it will be a deflationary decline or an inflationary decline depends on the boys over at the Fed.  But it is going to be a decline.

Meanwhile, millions of American families are hanging on by their fingernails and are hoping in vain for the great economic recovery which is never going to come.

  • Gary

    There are a lot of us who are underemployed and only making 1/2 of their former salary. How in the world are we supposed to buy anything except the bare necessities? When I hear of how the wealthy are always buying all the luxury goods while most people struggle to survive it is hard to believe anyone can seriously be for extending the buck tax cuts for the wealthiest 2%.

    I say we need to tax the rich and spread the wealth period!

  • Death Spiral

    Breaking News!! Flash spike in Gold Prices which went to $3,401 on Yahoo. Amazingly it was a Yahoo finance ‘freak accident’ only and happened on Sept 1st. Check it out:

    This is opposite of the flash crash that happened to the DOW a couple months ago when it dropped a 1,000 points in a few minutes.

    Something big is brewing! Unfortunately I don’t think it will be good news for the average American.

  • mbabsit

    The trade imbalance with China will never right itself, nor will the economy get better, unless drastic action is taken. This drastic action involves getting rid of all these laws that stifle business for many in favor of the few. (In other words, if a “law” is not grounded in the Constitution, it needs to go.)

    Congress needs to repeal “minimum” wage which bars young people from their first job. It is up to the markets to decide a “fair” wage, not the corrupt unions.

    The Civil Rights Act of 1964 also needs to go, as well as racial quotas, so that businesses can hire the best people for the job.

    Onerous “clean” environment laws also need to go, to bring back manufacturing. Unions also need to be thrown out. They do nothing but steal from the workers and force businesses and local governments to downsize (having been formerly forced to “join” a union, I was witness to union greed and corruption).

    Government needs to remove the many restrictions so that MORE people can start businesses, and so that tax breaks can be given to all, not just a few large companies.

    Smaller government is also needed, badly, at all levels. The drones who are bringing down the economy with their expensive “busy work” need to be let go, so that taxes can be reduced, or even eliminated. The laid off bureaucrats can then do where their “talents” take them – meaning we will see an upsurge in janitorial, landscaping, and other low-skilled positions currently filled by illegals.

  • What we are actually experiencing is a paradigm shift that is being brought to us by an economic meltdown. How our paradigm shifts is up to us; but the days of designer jeans and labels being what’s important are quickly coming to an end. In many ways, that’s the good news, stepping away (albeit by force) from materialism gone wild and stepping into something else. Could that something else be a return to the family, spirituality, purpose and dare I say, love. Now, I’m sounding like Glen Beck. But something big is afoot; and, Yes, it’s going to be very challenging; but once we’re through the hard part, we believe there’s a fresh, new way to live life waiting just around the bend. Maybe we’re taking a step back into our future. Anyone up for growing your own food, canning, making your own bread, sewing your own clothes, hunting for your own meat, and bartering? Could be interesting. Visit for the growing your own food part; and start imagining the new paradigm you want to step into.

  • Maria

    Does anyone remember…

    Æsop. (Sixth century B.C.)

    The Ant and the Grasshopper

    IN a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest. 1
    “Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?” 2
    “I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.” 3
    “Why bother about winter?” said the Grasshopper; “we have got plenty of food at present.” But the Ant went on its way and continued its toil. When the winter came the Grasshopper had no food, and found itself dying of hunger, while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew:


    All of the “fixes” are just throwing fuel on the fire. Nothing will prevent this economy from hitting rock bottom.

    You have two choices…be an ant or be a grasshopper.

    Food, water, shelter, protection, and gold!

    Pray like you have never prayed in your life.

  • After a few decades of all the rewards of productivity increases going to capitalists and little or none to middle class working people, consumers are broke and working off their debts, thereby killing demand, while the piles of capitalist money are overwhelming the paucity of capital investment opportunities. The only thing that will get us back to square one is to tax the capital away from the capitalists and completely remove the income tax on people making less than the median wage. (about $50,000) These middle class people spend their income and create most of the demand. So, this will reinvigorate the demand for goods and services and rebalance the available capital with the need for capital to finance real growth. This balance must be maintained if we want to avoid asset bubbles in the future.

  • ZeroCool

    @mbabsit: “Onerous “clean” environment laws also need to go, to bring back manufacturing.”.

    WTF? You want to kill your life basics just to allow companies to exploit your labour? No, instead asian countries as well as india needs to implement new standards to better support the environment.

    There’s NO WAY around nature. You need it, regardless if you have a job or none. You need food, air and clean water, else human race won’t survive. And I do not talk about Carbon Dioxide. I talk about mercury, heavy metals, nanotubes and so much other bad types of toxic poisons spilled to air and our lands.

  • Tim S.


    None of what you suggest will work. In the past in this country, we have had laws regulating business: Minimum wage, Civil Rights Act, environmental regulations, etc., and we prospered.

    The change happened when globalization started in the early 1990s. Government interference in the marketplace started with trade treaties such as NAFTA, GATT and WTO. These treaties helped protect the assets of U.S. corporations in foreign countries and allowed for the offshoring and outsourcing of U.S. jobs. This greatly increased corporate profits at the expense of the income of middle class Americans.

    Easy credit was made available to Americans to offset their decline in income due to globalization. That credit bubble has now popped. There will be no recovery unless we repeal the NAFTA, GATT and WTO treaties and discourage the offshoring/outsourcing of jobs.

  • ForcedToBeAFarmer


    I love this site and all, but, seriously a picture of a dead horse? I find this offensive and sad, just what I need to start my day. How about a dead cartoon horse instead?

    • Michael

      You are right. Sometimes I try to push the envelope a little bit too much just to get a reaction.

      I have changed the picture.

  • Not so Mad Max

    Chopper Ben and his cronies are now slack jawed and fresh out of ideas. The issue with QE is most investors are looking for inflation. Any sign of serious signs of inflation or the hint of inflation, Treasuries will be dumped like an ugly fat chick on prom night.

    People used their homes as ATM machines running up the price of their homes and using the excess equity as added income. Now that the bubble has burst and folks are now waking up to the hang over of credit card debt, upside down in cars, declining home values, and if their really unlucky no job, you can’t fix that with QE. Incomes are declining because of illegal immigrants, and a real unemployment rate of 17%+. That can only be fixed with punishing employers who hire illegal immigrants and stop off shoring jobs.

    People on unemployment are not taking jobs for salaries far less than what they where making. If you had a year plus of Unemployment to go though would you work for $9.50 an hour? Hope being what it is most people would wait for the “Recovery” or try and improve their skills. Having been though the job-training program in my own state after the tech bust, any job training I would give serious thought to. The people running these programs are looking for bodies though the program and out the door it doesn’t matter if you can get a decent paying job in that field or not. Getting people successfully though the program is what they care about that’s how they get funding and keep there own jobs.

  • TnAndy

    You know…it’s like the Perfect Storm has lined up over this country.

    –Jobs outsourced because we like cheap stuff

    –Personal debt at all time highs, because real wages stagnated 20 years ago because we like cheap stuff, AND like LOTS of it.

    –Compounding debt is finally catching Govt where it hurts, and their ability to raise taxes is just about maxed out. When future liabilities exceed the entire wealth of a country, you tend to have a problem.

    –A population, that as a whole, has gotten fat, lazy and ignorant.

    Nope…..don’t see a way out of it.

    All that is left is for the robber barons to circle the wagons, pull up the drawbridge, close their castle gates and let the peasants outside fight over the scraps they left.

  • Tim S.


    Modern ending for Æsop’s “Ant and the Grasshopper” story:

    “When winter came, the grasshopper drove his motorcar to Florida, and the ant got stepped on.”

  • gm_general

    The trouble with this situation is we are suffering from an impossible contract problem existing with the monetary system. If you charge interest for money but create no additional money to pay the interest, there is never enough money to pay all debts. The result is an accumulation of debt over time. In the 19th century, when gold controlled the money supply, the cyclical nature of the supply allowed the air to be let out periodically, in that there were alternating cycles of inflation and deflation. Periods of bankruptcy would cancel debt. Not the best situation, but with the Fed and its “elastic currency”, the debt just grows and grows for many decades, until there is one huge BLAM! If you look at a graph of change in debt (public and private) over change in GDP, you will see that in the 1960s, for every $1 of new debt money, you got $1 of GDP. This has dropped steadily as the debt has accumulated till now creating more debt money actually collapses the economy, because of the debt load.

    What is the solution? How about money created actually and only by the government, which would owe no one as a result. This money would only be created when the government does some business with someone, and would be given as a receipt for the work/goods. If you like, when this money circulates in the economy, collect some of it back in taxes. Now you’re probably saying “what stops them from producing too much money?” Well, the limit is the need for commerce that must back the money. The return of money in taxes could reduce the need to create more money at some point, perhaps when there is a sufficient supply of money for all in the economy. Now this system could be thwarted by the unscrupulous I’m sure, but really, as long as there are dishonest people running things, we are screwed no matter what.

  • Richard Allen

    #1 There are No Real Jobs to be found, 90% of the crap is commission only or “intern” we violate labor laws so take it or leave it jobs.

    #2 Bush was the greatest presidentt in creating underground jobs and ohbahhhma is a close second

    #3 We have bailed out irresponsible people , and given NO help to the new underclass.. RENTERS. Yes we will give $50K for mortgage assistance yet my rent for a 2bedromm in NYC with a roommate is $15K a year….

    #4 We need direct intervention, how about pay down my Credit card by $3000…or make the banks give us 5 years at Zero percent so we wont default, and have some extra $$ each month to spend.

    #5 We have dumbed down America so badly, we need to eliminate most summer vacation keep kids in school 11 months a year, and demand they learn to read write and speak English to graduate. No more ghetto crap.

    This would have the added benefit of being smart enough never to have to take remedial courses to get into college and maybe able to skip the first 2 years and have very little student debt when you graduate…

  • Well the rich keep getting richer. I believe some of these issues will get fixed over time. I don’t like the fact that theres really nothing we can do about whats going on. Its up to the rich.

  • TripSeven


    What you propose is called stealing.

    Sorry to hear you were taxed out of a job which was re-distributed to someone more needy. The guy who now has your job, thinks you are rich because he is only getting paid a buck a day, and lives in a hovel. you have a house or an apartment nicely furnished etc. etc. etc.

    Don’t vote for a politician who will tell you what he’ll give you. vote to reduce the size of government so they get out of the way to “our” wealth and prosperity


  • Lennie Pike

    As Tim S. said: no amount of stimulus will work for the reasons he gave, and as Not so Mad Max said: any attempt at a stimulus large enough to work (and only very temporarily), would cause inflation which would cause Treasuries be dumped as fast as the dead horse picture.

    Not so Mad Max’s reason is one big reason there actually is not a lot of stimulus. The Elite prefer to let us struggle without stimulus since we will struggle either way. This way, they remain in the nice position they are in now. Inflation would destroy their position.

    Large banks are bankrupt and are causing dead Accounting Professors to turn over in their graves. The money they make will never cover their losses, and the money they do make is not made by lending money, which used to be needed for economic growth. Can’t blame them, they know that loans will not result in any sustainable economic growth at this point. The train has run out of track.

    Products need to be manufactured here to be sold here, very high import tariffs need to collected, bribery of Congress has to stop, the Fed has to leave our country, Wall Street has to be regulated, all debt has to be defaulted on, the Federal Government has to be cut in half, and then cut in half again. All of those unemployed bureaucrats could have factory jobs, and never ever be allowed into management.

    Laws with severe penalties to enforce all of this need to be enforced.

    Or we could just stimulate a little or a lot, or not stimulate at all to see what happens. And of course keep the Fed and Wall Street criminals active.

    To bring these changes an armed revolution lead by either the Military or a large group of armed American Civilians will probably be necessary.

    Our Constitutional Government has already been overthrown and the laws against overthrowing it has already been broken. These laws would be enforced when our government is taken back and becomes of the People and for the People once again.

  • Mitch Mader

    I don’t know what all the economic fuss is about!! Sit back, relax and wait for the Mexican drug cartels to work their way north from Arizona. Inflation, deflation….economic difficulties won’t make any difference when your head is on a stick.

  • The stimulis package an the super low interest rates. Wasnt for the people it was for the goverment. They loaned it to them selfs. For reasons unknown? Is the gov not telling all. Is japan an china not buying our toilet paper at all now? The true an best answer to fix the economy is easy.If the stimulis money was actually used 100% for recovery inflation would be as high as heaven would be.It wasnt. They loaned it to the gov. Any way to fix the economy fast all it would take is for the gov to inject $500 billion into the banks an leave it there. Then the banks loans out a 1 to 10 ratio to the people of america. Thats alot of money $500 billion times 10. The banks are happy the people are happy. But the gov not it has to create the problem so the can attempt to solve it. The question here is the gov smarter then a 5th grader?

  • Maria

    Tim S.

    LOL. Your version is definitely modern and funny in a sick way.

    Still gotta pick though…guessing you’ll be the grasshopper then?

  • Joey

    Actually, the modern ending to the Aesop fable of the ant and the grasshopper is that the grasshopper got bailed out by the government, who took a large share of the ant’s provisions. Equal outcomes, you know. Redistribute the wealth.

  • sharonsj

    mbabsit–you have got to be crazy, joking, or a conservative troll. Repeal minimum wage? Maybe you’d prefer we work for what the Chinese get paid: $3 a day. Repeal environmental laws? That’s why we get poisonous milk and fish from China and salmonella eggs from unlawful companies. No unions either? Sure, who need worker protection anyway? Let ’em get killed on the job–it will make room for new workers.

    TripSeven is another conservative/libertarian who thinks that a progressive tax is stealing. He probably thinks that Gary (now reduced to lower middle class like the rest of us) should pay the same tax rate as Goldman Sachs.

    The size of government doesn’t matter. What matters is if the government is doing its job, which is to defend and protect its citizens. Instead what the government is doing is protecting the very, very rich.

    I say the solution is revolution!

  • Laticia

    Another great article by a person with the ability to see through and explain complex realities.

    I only have one reservation. The Fed is not trying to save the American economy. Just the opposite. Its actions suggest three overlapping goals: 1. Wealth transfer from 99.999% of Americans to the obscenely rich 0.o01% 2. Destroy the middle class, as documented recently in this very website. 3. Destroy the USA.

    No other explanation makes sense. Compare the government’s behavior in this crisis to its behavior in the 1930s. Or compare its behavior to actions of the more patriotic Chinese government. The Rockefellers and Rothschilds are not stupid. That is also why they continue the Iraqi (Obama’s lies notwithstanding) and Afghanistan occupation. The goal is to render the majority of Americans into paupers, hence powerless, and hence, makes scum like the Rockefeller and Koch brothers the new emperors, far more powerful than Alexander the Little.

  • Owen

    TripSeven, au contraire, Gary is right, we must make stealing by the ultra-wealthy unprofitable and taxing is the best way. It is the ultra-wealthy that are the true destabilizing force in our world. When they passed the 16th Amendment back in 1913, the ultra-wealthy sold it to the American public by assuring them that only the top 5% of income earners would ever be taxed. Almost 100 years later, many of us have figured out why they really wanted income taxes.

  • TnAndy

    Sharonsj has no clue how things are in the real world.

    How’s Karl Marx’s theory working out around the world, anyway ?

    Seems he didn’t take into account that when you take from the people doing the plowing and give to the ones sitting on their asses under the shade tree, eventually everybody ends up under the tree, and NOBODY is plowing.

    I’d love to hire a kid to help me out around the farm in the summer….but I have to pay 7 bucks/hr + matching SS + unemployment tax + workman’s comp, and quite frankly, a kid WHO KNOWS NOTHING is NOT WORTH 12bucks/hr that it costs me….so he gets no work experience and I simply pick up the slack, or it doesn’t get done. Great system, huh ?

    Progressive income tax ? Well aside from the fact it is unconstitutional, being neither a direct ( which must be apportioned among the States ) nor indirect tax, why is it moral for govt to tax one individual more than another ?

    Goldman Sachs ? ahahahahaaa…’re one of those idiots that think business actually PAY taxes…..guess what….they don’t….they simply pass it on to anyone using their service or buying their product….PEOPLE PAY ALL THE TAXES, dear.
    Business should not pay ANY income taxes at all…..that is simply a little game politician play to fool people like yourself.

  • Bruce

    What is a liberal? adolescent screechers whose mentally maturity of a 12 year old. Yes repeal the evil Eco Nazi rules to help promote business in American. But being an adolescent screechers liberal we know you don’t have the thinking power to research the facts. There is an evil green wacko group called the Center for Biology Diversity these nutcases sue the Federal Government over the biggest bunch of cry baby BS in the world. Why do they do this? to save the environment? Hell no they do it cause that idiot Billy Bob Clinton signed an Executive order saying win or lose the Eco Nazi law sue is paid by the Government. It is all about greed. Now what destruction have these nut jobs cause for American jobs? Millions of jobs are gone due to these eco Nazi and the general gullible public has no clue. Yes it is fine with liberals to put thousands of Americans out of work for a fake endangered species like the spotted owl. It is great for the liberals simple mind set when wolves wipe out and put ranchers out of work yes we need more imported beef from China. It is fine with the adolescent screechers when the delta smelt another fake endangered species force 40,000 people to go on unemployment. The adolescent screechers don’t drill for oil in ANWR screams adolescent screechers like a spoiled brat you liberals are now facing what you supported for decades putting Americans out of work. Now the shoe is on the other foot and your jobs are leaving all of sudden you care about jobs. LOL Keep screaming and stomping your feet children like spoiled brats as you put millions of more Americans out of work. It is time you liberal adolescent screechers grow up and face reality. You want jobs then we need to open up the land to Americans so we can work. But you don’t care you are liberals too lazy to find out the truth and too gullible to see the Eco Nazi pull your strings like the puppets you truly are.

  • From what I’ve read (Bob Chapman) our government has to come up 3.5 trillion dollars by the end of the year, I’m guessing that’s December. Usually we roll over our short term debt to China with T bills, but China is buying gold now and wants nothing to do with American toilet paper Treasury Bills. China has rated our T bills as “JUNK” status. They might buy “some” but there is no way they’ll purchase 3.5 trillion! So here’s what will happen. Bernanke will start QE2. Then around the world, countries will absolutely lose faith in the dollar and sell their American Treasury Bills. The U.S. will be stuck in a corner with no where to go to finance their debt. Then all hell breaks loose.

  • Another modern ending for the Ant and the Grass-hopper story.

    The ant dragged the corn to it’s nest for the winter. The grasshopper ate the corn all during the summer and stored nothing for the winter. The corn was Monsanto’s Genetically Modified Corn sliced with a gene of a shark and rat. Both the ant and the grasshopper croaked, tits up, dead. End of story.

  • Gary

    I like writing comments to blogs. I get to practice my writing skills, vent my frustrations, and just like all my college term papers–nobody will read it.

    When I ponder it all, it makes sense to allow everything to collapse and start over, with a one world money and government. 666 scares me, but doesn’t it make sense to allow a world leader to be the king.

    It makes sense to me, for two reason: it would be the most efficient and effective form of government, and it would confront the prophecy to see what happens.

  • Something Wicked This Way Comes

    Snipped from Zero Hedge

    The Economics Of It All:

    In essence, the Fed (like any central bank) is the “fourth arm of government”. The executive branch makes policy. The legislative branch translates it into legislation. The judicial branch is supposed to ensure that legislation is permissible under the Constitution – the law which GOVERNMENT must obey. Originally, the system was set up to ensure a division of power between the branches. A “government bank” or “central bank” was not deemed necessary because the powers of government were thought to be limited by the Constitution to the extent where “financing” these operations would not be necessary. They weren’t (except for the post Revolutionary and Civil War periods) for well over a century. But by the turn of the twentieth century, the US government, like so many governments before them, decided that their reach should extend beyond the borders of the nation they governed. This promised to be expensive.

    The Fed was initially set up under the pretense that an institution was necessary to provide an “elastic currency” to meet the needs of business. An elastic currency was deemed necessary alright. But it wasn’t to meet the needs of business, it was to meet the needs of government. And that is what the Fed has been doing ever since. As the powers of government expanded and as the COST of government soared, the Fed was always there, the banker of last resort, the branch of government which would “pay” for whatever government chose to do. The government needs the Fed as a guaranteed buyer of its debt.

    It is obvious to anyone who takes the time to EXAMINE the situation that the Fed is the fourth and specifically, the economic/financial branch of the US government. It should be equally obvious that this marriage of convenience has been progressively impoverishing the American people. Apparently, it isn’t.

  • Lennie Pike

    Something Wicked This Way Comes,

    Please allow me to add to your thought even though you did cover what I want to say in your last sentence:

    At the time the Federal Reserve was set up, it was under the pretense that an institution was necessary to provide an elastic currency to meet the needs of business, when actually it was set up to meet the needs of government.

    Government needed the Fed, but the Fed was willing to pay the pittance (up till now) required to pay the Government’s bills if it could own the government, and the immense wealth that could be derived from their new power of stealing from the American People.

    The government needed the Fed, but the Fed wanted the government badly. The government, business, and the Fed naturally wanted to extend their reach beyond our borders, but even if for some reason that would not have been possible, the Fed still would have wanted to control the government.

    That was the day our government was overthrown by the very real people behind the Federal Reserve.

  • Lennie Pike

    Something Wicked This Way Comes,

    And about “paying the pittance of the government’s bills up till now” – the Fed is already saying: No problem, government debt (and our debt) has gotten to the point where the currency will soon be destroyed, we will simply come up with a new currency – for the World this time. Part of the plan from day 1. It’s just a temporary cash flow problem.

    The other governments of the World covet, need, and will profit greatly from the financial skills that only the people behind the Federal Reserve possess. Although it was a Chinese National, David X. Lee I believe, who came up with the theory which allowed the invention of Credit Default Swaps.

    Maybe two groups of people with the same gifts have finally met and are joining forces, or have already joined forces and we’re just waiting for the ribbon cutting ceremony.

    Strange first name for a man from China. (My actual first name also which I am proud of).

  • Jeff D.

    This economy doesn’t need “stimulus” – it needs to DIE!

    What do you do when you play a game of Monopoly and the winner has ALL the money?


    All “rich” people don’t actually have any more than the poor. It’s all false perception when a system has already collapsed.


  • lostinmissouri

    It is no wonder why our economy is collapsing, when even a good portion of the posters here, have bought into the government lie to “tax the rich.”

    Why do any of you think, it is right, for the government to make laws, that takes money from one citizen, and gives it, to another?

    “Spreading the wealth lie” is the biggest one of all. All it does, is rob the productive, to feed the unproductive. “Why should I work my ass off, if the government, is going to make sure you, who are sitting on your asses, are handed half of my money?” I will eventually join the ass sitters.

    As far as the “rich are getting richer”, well duh! The “rich” are the PTB, feeding you the lie, and buying your votes.

    Others, with money and formally productive, are simply John Galting it, or leaving this country in mass.

    Let’s see how “spreading the wealth” works, when top incomes, in private sector America, become $20,000 a year.

    Who’s John Galt?

  • Mick

    @lostinmissouri – with respect,when people talk about “taxing the rich” they are talking about the 1% of the population who own 50% or more of the wealth of the country, who Gerald Celente calls the white shoe gang. I have a feeling, from what you say that you might not fit into the Ivy league set. I could be wrong.

    What nobody has mentioned is that route of the problem is the fed. The fed is a private bank, and only works for its own profit. It has engineered all the booms and busts over the last 100 years by controlling money supply, and was the designer of the great depression and is surely behind this one. The government issues bonds and exchanges them for cash, it must pay the fed the base rate for all the money it (the fed) prints as money is created from debt. The fed has no money of its own by the way.

    Western society is so debt ridden that business borrow money for short term cash flow, as we saw at the time of the crash. They pay high interest on it, making products more expensive. This also means that banks take a cut in nearly every transaction made, like a tax.

    When you use a credit or debit card the banks charge the retailer 2-4% commission. Consumer pays interest on credit.

    All of this money goes to the banks! No wonder they make so much money.

    Here you can see that if the treasury printed its own money, business only spent what they had instead of borrowing and people stop using credit and debit cards, there would be between 6% and 25% more (real) money in circulation. Conceivably, taxes could be cut by around this much.

    Disbanding the fed and reigning in credit and the fractional banking system would be the first step for growth. No chance of this happening though.

  • alice

    Correction, not hundreds of billions of dollars, 10 TRILLION DOLLARS HAVE BEEN THROWN AT THIS, AND IT ONLY SERVED TO PROVIDE A SOFTER LANDING! Deeper in debt, prolonged if any recovery, but not in my lifetime. It will stop when the world’s wages, rise to our level!

Finca Bayano

Panama Relocation Tours



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