Federal Reserve

QE3? Several Top Federal Reserve Officials Seem To Think That More Quantitative Easing Is Necessary

The end of QE2 is still several months away and yet quite a few top Federal Reserve officials are already hinting that more quantitative easing may be necessary.  Apparently the U.S. economy is not moving forward as rapidly as they would like.  So it looks like “QE3” could be on the way.  But did anyone out there actually believe that quantitative easing would come to a complete stop in June?  Whether they call it “QE3” or something else entirely, the reality of the matter is that we have now come to a time when the Federal Reserve is going to be continually purchasing a significant percentage of all new U.S. government debt.  This is essentially a gigantic Ponzi scheme, but sadly there is just not enough money in the rest of the world to be able to continue to feed the U.S. government’s voracious appetite for debt.  Right now Ben Bernanke and his cohorts are trying to break the news to us gently, but anyone with half a brain can see what is happening.  The only way for the game to keep going is for the Federal Reserve to print lots more money, and that is going to be incredibly bad for the U.S. economy in the long run.

The other day James Bullard, President of the Federal Reserve Bank of St. Louis, made national headlines when he declared that Fed officials should “never say never” when it comes to QE3 and more quantitative easing.  But the truth is that other Fed officials have been dropping public hints about the “need” for QE3 for several weeks now.  Just consider the following quotes from top Federal Reserve officials….

Federal Reserve Chairman Ben Bernanke in response to a question about the potential for QE3 at the National Press Club….

“In the end, we’ll just ask the same questions. Where’s the economy going, and what do various inflation indicator look like? We’ll ask those questions. If unemployment is still too low, then we may continue. If we’re moving towards full employment, then we won’t need to stimulate more.”

William Dudley, President of the Federal Reserve Bank of New York during a recent speech at New York University….

“The economy can be allowed to grow rapidly for quite some time before there is a real risk that shrinking slack will result in a rise in underlying inflation.”

James Bullard, President of the Federal Reserve Bank of St Louis during a recent speech at the Bowling Green Area Chamber of Commerce….

“The natural debate now is whether to complete the program, or to taper off to a somewhat lower level of asset purchases. Quantitative easing has been an effective tool, even while the policy rate is near zero. The economic outlook has improved since the program was announced.”

Charles Evans, President of the Federal Reserve Bank of Chicago during a recent interview with The Financial Times….

“The message that comes out of what I think of as high-quality research on this subject is that policy ought to remain accommodative for really quite a while, even a while after conditions start to improve.”

So how in the world did things get to the point where the Federal Reserve feels forced to recklessly print gigantic piles of money?

Well, it didn’t happen overnight.  Back during the 1980s and 1990s there were many people that desperately tried to warn about what would happen if U.S. government debt was not brought under control.

Unfortunately, our politicians did not heed those warnings.

Today, the U.S. national debt has reached a grand total of $14,137,541,098,872.71.  It is 14 times larger than it was just 30 years ago.  It is the largest single debt in the history of the world.

So why don’t our politicians just balance the budget now so that we don’t keep having to borrow so much money?

Well, there are some huge problems.  First of all, when you combine entitlement programs such as Social Security and Medicare with interest on the national debt, it comes to approximately 64 percent of all federal government spending.

But that is not the bad news.

In the years ahead, entitlement spending and interest on the national debt are both projected to absolutely explode.

We are rapidly approaching a time when spending on entitlement programs and interest on the national debt will be significantly greater than all of the revenue that the federal government brings in each year.  All federal revenues will be spoken for even before a single penny is spent on defense, education, running the government or anything else.

Either entitlement programs are going to have to be seriously reformed or the U.S. government is going to have to come up with a massive amount of extra money from somewhere or the U.S. government is going to have to borrow increasingly large piles of money from someone.

Unfortunately, there are no easy solutions and most of our politicians are scared to death to touch entitlement programs because it will mean that they will lose votes.

But our entitlement programs were never meant to be as massive as they are today.  Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 American is on Medicaid.

Obviously something has to be done, because the debt that we are passing on to future generations is absolutely criminal.

For example, every single child born in America today inherits $45,000 in U.S. government debt.

Isn’t that lovely?

Of course our liberal friends believe that the answer is just to raise taxes.

Oh really?

The truth is that our taxation system is deeply broken.

Small business owners and middle class Americans are being taxed into oblivion while those at the top of the food chain often pay no federal taxes whatsoever.

For example, did you know that Citigroup did not pay a dime of federal taxes in the third quarter?  Meanwhile, their executives continue to bring in bonus packages worth millions.

Did you know that even though Boeing receives billions in federal subsidies every year and even though it has a bunch of juicy government contracts it did not pay a single penny in federal corporate income taxes from 2008 to 2010?

Did you know that while Exxon-Mobil did pay $15 billion in taxes in 2009, not a single penny went to the U.S. government?  Meanwhile, their CEO brought in over 29 million dollars in total compensation that year.

You can find a lot more examples of this phenomenon right here.

Those at the top of the food chain are experts at avoiding federal taxes.  So liberals can raise rates all they want but it won’t do much good.

As I have written about previously, the truth is that approximately a third of all the wealth in the world is now held in “offshore” banks.  The ultra-wealthy and the monolithic predator corporations that dominate the global economy don’t mess around when it comes to paying taxes.  They don’t care if they aren’t paying their “fair share”.  They simply know how to play the game and they laugh at all the rest of us.

Our entire system is broken beyond repair and needs to be reconstructed from the ground up.

But of course that simply is not going to happen.

So what can be done?

Not a whole heck of a lot.

The truth is that the U.S. economy is on the verge of a major collapse.

Marc Faber, the author of the Gloom, Boom and Doom report recently gave a speech in which he declared that the U.S. financial system is in such disastrous shape that only a “reboot” will be able to save it….

I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.

But can we just “reboot” the system and expect things to go back to normal?

Of course not.

The truth is that when the rest of the world completely loses faith in the U.S. dollar and in U.S. Treasuries the dominoes are going to start to fall.  Eventually we are going to see a financial panic that is going to make 2008 look like a Sunday picnic.  Our economic system will massively implode as all of the gigantic mountains of debt and paper money collapse like a house of cards.

Right now the Federal Reserve is desperately trying to hold the system together by “papering over” all of the mistakes.  But in the end it is not going to work.  In fact, what we are witnessing now are the very early stages of hyperinflation.  A lot of other nations in the past have thought that they could just print their way out of trouble, but many of those “experiments” ended in total disaster.

Marc Faber is certainly right about one thing – all of this money printing is going to give us substantial inflation to go along with the high unemployment that we already have.  This is called “stagflation” and anyone that remembers the 1970s knows that it is not a lot of fun.

But the Federal Reserve seems absolutely determined to print more money.  Fed officials are doing the same thing now that they did right before QE2.  They are dropping hints about QE3 and they are trying to break it to us gently.

Well, it is about time that someone told the American people the truth.  All of this money printing is going to end in disaster and so you had better get prepared.

Is Ben Bernanke A Liar, A Lunatic Or Is He Just Completely And Totally Incompetent?

Did you see Ben Bernanke’s testimony before the House Budget Committee on Wednesday? It was quite a show. Bernanke seems to believe that if he just keeps on repeating the same mantras over and over that somehow they will become true. Bernanke insists that the economy is getting much better, that quantitative easing will lower long-term interest rates, that all of this money printing by the Federal Reserve is not causing inflation and that the Fed knows exactly what needs to be done to dramatically reduce unemployment inside the United States.  So is anyone out there still actually buying what Bernanke is selling?  Sure, a handful of people in the mainstream media still have complete faith in Bernanke.  But for the rest of us, it is becoming increasingly clear that there is something really “off” about Bernanke.  So just what is going on with him?  Is he lying to all of us on purpose?  Could he be insane?  Is he just completely and totally incompetent?

Bernanke’s track record of failure is absolutely stunning.  Before discussing some of his most recent comments, let’s review some of the pearls of wisdom that Bernanke has shared with us in recent years….

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.”

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.”

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.”

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.”

2007: “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

2008: “The Federal Reserve is not currently forecasting a recession.”

So should we believe anything that Bernanke is saying now?

Of course not.

Obviously Bernanke has been feeding us all a whole bunch of nonsense for a very long time.

So what conclusion should we come to about Bernanke at this point?

Well, as I see it, there are three primary alternatives….

1 – Bernanke knows that what he is telling us is wrong and he is purposely trying to deceive us.  That would make him a liar.

2 – Bernanke actually believes what he is saying because he is completely delusional.  That would make him a lunatic.

3– Bernanke actually believes what he is saying because he simply does not understand economics.  This would make him completely and totally incompetent.

In any event, someone with Bernanke’s track record should not still have such a high level job.  He should have been asked to resign long, long ago.

But instead, Obama nominated him for another term and he was approved by our incompetent Congress.

It is a crazy world in which we live.

So what is Bernanke saying now?

Let’s take a look at some of his main points…..

Bernanke Says That One Of The Main Goals Of Quantitative Easing Is To Reduce Long-Term Interest Rates

During one interview about QE2, Bernanke made the following statement….

“The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.”

In fact, Bernanke elaborated on that point during his remarks on Wednesday….

Conventional monetary policy easing works by lowering market expectations for the future path of short-term interest rates … By comparison, the Federal Reserve’s purchases of longer-term securities do not affect very short-term interest rates, which remain close to zero, but instead put downward pressure directly on longer-term interest rates.  With the Fed funds rate at the zero bound, the Fed had to resort to unconventional policy to provide further accommodation.

So how is all that working out?

Terribly.

The yield on 10-year U.S. Treasury notes has risen from 2.49 percent back in November to 3.65 percent at the close of business on Wednesday.

Oops.

Long-term interest rates were supposed to go down as a result of quantitative easing, but instead they have increased substantially.

Looks like Bernanke was wrong about another one.

Bernanke Says That Quantitative Easing Is Not Going To Cause Inflation

The price of wheat has roughly doubled since last summer, the price of corn has roughly doubled since last summer and the price of oil is marching up towards $100 a barrel.

But oh, there is no inflation so there is no need to worry according to Bernanke.

Food riots are breaking out around the globe, but Bernanke says that the inflation in those countries is being caused by their own central banks.

Bernanke says that the Federal Reserve has nothing to do with international inflation even though the U.S. dollar is the primary reserve currency of the world.

Bernanke says that even though consumers are seeing huge price increases in the supermarket and at the gas pump that we aren’t really seeing any real inflation because the fraudulent U.S. consumer price index says so.

It is a wonder that anyone still considers this guy to be credible.

Bernanke Says That Quantitative Easing Is Helping The Economy Recover And Is Reducing Unemployment

During his remarks on Wednesday, Bernanke said that the recent decline in the U.S. unemployment rate was “grounds for optimism”.

And, of course, he is glad to take part of the credit for the “recovery”.

Oh really?

Things are getting better?

As I wrote about a few days ago, the “decline” in the U.S. unemployment rate during January to 9.0% is no reason to celebrate.

First of all, the U.S. economy must add 150,000 jobs each month just to keep up with population growth.

During January, the U.S. economy only added 36,000 jobs.

So why did the unemployment rate go down?

Well, the U.S. government said that 504,000 American workers “dropped out of the labor force” in January.

Well, isn’t that convenient.

Let’s just pretend a half million unemployed workers are not even there.

Yeah, that will make the numbers look better!

Sadly, the number of Americans that are “not in the labor force” but that would like a job right now has hit an all-time record high.  If you add all of those people into the official unemployment figure it would jump to 12.8%.

The truth is that the employment situation in America is not getting any better.  In fact, according to Gallup, the unemployment rate actually increased to 9.8% at the end of January.

Perhaps Bernanke should reconsider how much “better” things are really getting.

Bernanke Says That Now Is Not The Time To Reduce The Deficit

When it comes to the national debt, Ben Bernanke is constantly talking out of both sides of his mouth.

Bernanke is constantly saying that the exploding U.S. national debt is very dangerous (and he is very right about that point), but Bernanke also says that now is definitely not the time to do anything about it.

In fact, recently Bernanke has been purposely stepping into the partisan debate about whether to raise the debt ceiling or not.

Bernanke says that Republicans should stand down and that now is not the time to be playing political games with the debt ceiling.  Bernanke has been warning that the consequences for not raising the debt ceiling could be catastrophic….

“We do not want to default on our debts. It would be very destructive.”

Over and over Bernanke has been saying that the economic recovery is still fragile and that now is not the time be cutting deeply into the federal budget.

So when is the right time?

Well, with these central bankers it seems like it is never time to address all of this debt.  It seems like they always want us to “have a long-term plan” to tackle the debt in the future but to keep borrowing and spending in the present.

Well, it looks like that is exactly what the Obama administration plans to keep doing.  This year it is being projected that the U.S. government will have the biggest budget deficit ever recorded – approximately 1.5 trillion dollars.

Keep in mind that the total U.S. national debt did not surpass 1.5 trillion dollars until the mid-1980s.

That means that this year we will accumulate more debt than we did for over the first 200 years that this nation was in existence.

Oh, but according to Bernanke we better not do anything to address our out of control debt because that would “harm the economic recovery”.

In the end, all of this government debt is going to become so monstrous that it is going to swallow us whole.  We can try to keep running from it, but we can’t hide.  Someday the gigantic debt monster that we have created is going to catch up with us.

So, yes, there are a whole lot of reasons to be really upset with Ben Bernanke.

Perhaps he would be a fun guy to sit down and talk to at a backyard barbecue, but he isn’t the type of person that you would want to entrust with any real responsibility, and he most definitely is not someone that should be running the largest economy in the history of the planet.

Shut Down The Federal Reserve, Break Up The Big Banks And 16 Other Ideas Barack Obama Could Have Proposed If He Actually Wanted To Fix The Economy

How do we fix the economy?  That is a question that tens of millions of Americans are asking right now.  Republicans are harshly criticizing the empty economic proposals being put forward by Barack Obama and the Democrats, but the Republicans don’t seem to have any real solutions either.  There is talk of cutting taxes a little bit more, reducing federal spending a little bit and getting rid of a few useless federal regulations but doing any of those things would essentially be like spitting into Niagara Falls – the effect would not really be noticeable at all.  As this column has documented over and over and over, the economic and financial problems that we are facing are so enormous that radical solutions are needed.  In essence, what we need is not an “economic bandage” or two – what we need is major reconstructive surgery.  If dramatic action is not taken, our economy is going to completely collapse.

Is anything that Barack Obama is currently proposing going to help fix the economy?  No, of course not.  As I wrote about the other day, Obama’s address to the nation was packed with empty promises and a whole lot of inspirational nonsense.  There were no real solutions to the very real problems we are facing.

So is there anything that we could do to actually start fixing things?

Yes, but the solutions are radical.  They would cause quite a bit of chaos.  They would not be easy for people to accept.

But the truth is that our economy and our financial system have terminal cancer.  If something radical is not done quickly we are going to lose the patient.

The following are 16 ideas that Barack Obama could have proposed if he actually wanted to fix the economy….

#1 We Must Shut Down The Federal Reserve

If you are not willing to accept this, you may as well not read the rest of the solutions.  The truth is that the U.S. government will never be able to solve the national debt problem until the Federal Reserve is shut down.  The U.S. government should nationalize all Federal Reserve assets and start issuing currency that is completely and totally debt-free.

Under such a system, it is conceivable that U.S. budget deficits could be eliminated entirely and that over time the entire U.S. government debt could be retired.

One of the biggest threats of going to such a system would be inflation, but remember, the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.  The U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created, and so it is hard to imagine that we would do even worse without the Federal Reserve.

In any event, it is the fundamental right of any sovereign nation to be able to issue and control its own currency.  This right was given to the U.S. government by the U.S. Constitution and it is time for the U.S. government to reclaim that right.

#2 We Must End Trade With All Nations That Allow Their Citizens To Be Paid Slave Labor Wages Or That Do Not Respect Basic Human Rights

This would dramatically reduce the “outsourcing” of our jobs and our industries almost overnight.  The truth is that it was never a good idea to put American workers in direct competition with hundreds of millions of workers that are making slave labor wages on the other side of the globe.

Trading with nations that have a similar wage structure to ours and that respect basic human rights (Canada, for example) is a very good thing.  However, all of the “free trade” agreements that politicians from both parties have been pushing down our throats for decades are literally wrecking the U.S. economy.

Since 2001, over 42,000 factories have been shut down in the United States.  This proposal would go a long way towards stopping the bleeding, and if some of these countries are willing to raise their wage levels significantly then we would be able to resume trade with them in the future on a much more level playing field.

#3 We Must Radically Reduce The Size Of The Federal Government

Our big, fat government is a big, fat drain on our economy.  We have millions of paper pushers that don’t contribute much of anything of real value.

Not only that, but some of the things that the U.S. government wastes money on are absolutely mind blowing.  There is a reason why our founders insisted that we have a very limited government.  It is time to get back to those principles.

The Congressional Budget Office is projecting that the U.S. government budget deficit for this year will be nearly $1.5 trillion.

Talk about ridiculous!

I estimate that we could easily cut the size of government in half without hampering how effective it is.

We could start by abolishing the Department of Education.  After that, there are several dozen other government agencies and institutions which are worthy candidates for elimination.

#4 We Must Provide Temporary Jobs For The American People During The Economic Transition

If the Federal Reserve is shut down and the size of the federal government is cut in half, it would cause quite a bit of economic chaos.  During this transition it will be important to help people survive.

Instead of just passing out a bunch of handouts, a better alternative would be getting the American people working on something constructive.

During this time, the U.S. government could use all of the untapped labor of the unemployed to build massive infrastructure projects.

According to the American Society of Civil Engineers, we need to spend approximately $2.2 trillion on infrastructure repairs and upgrades just to bring our existing infrastructure up to “good condition”.

So there is certainly a lot to do.

These jobs would just be temporary until new manufacturing facilities are set up and jobs in private industry are plentiful again.

Having the American people produce something of value is better than just handing them endless unemployment checks.

#5 We Must Ban All Short Selling

When you allow greedy individuals the opportunity to make lots of money by betting against the U.S. economy, it gives those individuals an incentive to make sure that those bets pay off.

Yes, this proposal is controversial, but it just makes sense.  If people want to make money, it should be because a company is doing well and not because someone is failing.

#6 We Must Ban Virtually All Derivatives

Once upon a time, derivatives were for hedging risk, but that is not what they are primarily being used for anymore.

Now derivatives are being used to bet on almost anything that you can possibly imagine.

Our financial markets have been turned into a gigantic financial casino.

The derivatives bubble is somewhere in the neighborhood of one quadrillion dollars and it could burst at any moment.

These weapons of financial mass destruction must be banned.

#7 We Must Break Up The Big Wall Street Banks

The big Wall Street banks have far too much power and far too much control.  They have come to dominate our entire financial system.

In a capitalist system, too much power concentrated in too few hands is not a good thing.  The corruption that has gone on at many of these institutions is absolutely unbelievable.

These banks need to be broken up into much smaller pieces for the good of our country.

#8 We Must Initiate A Massive Law Enforcement Crackdown On Our Financial Markets

As noted above, the corruption that has been going on down on Wall Street has been absolutely sickening.  We need a massive law enforcement crackdown on all of this fraud in order to restore faith in the financial system.

Just one small example of this corruption happened during the recent housing crash.  Goldman Sachs sold mortgage-related securities that were absolute junk to trusting clients at vastly overinflated prices and then made huge profits betting against those exact same securities.

So do you think that Goldman Sachs or any of the other major players on Wall Street will ever receive more than a slap on the wrist for all the things that have gone on in recent years?

Of course they won’t – unless the American people start demanding it.

#9 We Must Order U.S. Oil Companies To Use Untapped Oil Reserves In The United States And We Must Aggressively Develop Alternative Energy Sources

Right now, the price of oil is pushing up towards 100 dollars a barrel.  If oil passes that mark, it is going to put tremendous inflationary pressure on the entire global economy.

Sadly, there is no need for such a high price for oil.  There are vast, vast reserves of oil that are virtually untapped inside the United States.  These are mostly in the western states and up in Alaska.  We have enough to supply very cheap oil to the entire country for decades.

The U.S. government needs to order these oil companies to quit playing games and to start pumping this oil.

However, it is undeniable that we also need to develop alternative energy sources.  In fact, we should set up a “Manhattan Project”-style team to aggressively pursue this goal.

In the past, U.S. oil and car companies have blatantly repressed alternative energy projects.  The U.S. government should tell U.S. corporate executives that if they ever even think of doing such a thing again that they will be locked away so fast that it will make their heads swim.

#10 We Must Stop Paying Farmers Not To Grow Food

Instead of paying farmers not to grow food, we need to find ways to encourage them to grow as much food as possible.  A horrible global food crisis is coming and we are going to need huge stockpiles of everything.

#11 We Must Secure The U.S. border With Mexico

Illegal immigration costs the U.S. economy tens of billions of dollars (conservatively) every single year.  We need to secure the border and make sure that all of our immigrants are coming through the “front door”.

#12 We Must Shut Down The IRS

Did you know that the United States has only had an income tax for less than 100 years?  For most of our history, the U.S. government got along just fine without taxing personal income.

The IRS is massive waste of time, energy and resources.  There are many alternatives that could easily replace the income tax and the ridiculous tax code that we have right now.

For example, a flat tax or a national sales tax could both potentially work, although both have their problems.

Personally, I am convinced that we could have a system that would not require any taxation of income by the U.S. government whatsoever.

Just imagine how much time, how much energy and how many resources would be saved!

#13 We Must Slash Red Tape And The Miles Of Ridiculous Regulations

In the United States today, you almost have to be insane to start up a new business.  When you consider all sources of taxation, U.S. businesses face one of the highest overall levels of taxation in the entire world.  Not only that, but U.S. businesses face miles and miles of absolutely ridiculous regulations and red tape.

As I wrote about in a previous article, if you want to do business in the United States today, you better be prepared for a regulatory nightmare….

If you plan to start a business in America today, you better get a hold of a good lawyer.  In fact, if you want to be safe, you better get a small army of lawyers.  You are going to need an expert on the federal regulations that apply to your business, you are going to need an expert on the state regulations that apply to your business and you are going to need an expert on the local regulations that apply to your business.

There are going to literally be thousands of regulations that apply to any business started inside the United States today.  There is no way that you will ever be able to learn them all.  Not only that, but the truth is that your lawyers will only be aware of a small fraction of them.

Until the regulatory environment in this country dramatically changes, companies are going to continue to be motivated to leave the United States.

#14 We Must Conduct A Massive Law Enforcement Crackdown On The Health Care Industry

It should not cost $30,000 for a one day stay in the hospital in this country.

The truth is that the American people are being ripped off big time.

We need to conduct a massive law enforcement crackdown on all the big hospitals and all the big health care companies.

We need to conduct a massive law enforcement crackdown on all the big health insurance companies.

We need to conduct a massive law enforcement crackdown on all the big pharmaceutical companies.

We also need massive medical malpractice reform.

Not only that, we also should end the monopoly of the AMA immediately.  We need to reintroduce honest, legitimate competition back into the medical system.

In addition, we need to make sure that natural health practitioners are able to compete on a fair and equal basis in this country.

As I have written about previously, the health care industry in the United States has become all about making as much money as possible.

That must change.

#15 We Must Stop Trying To Police The World

We will always need a very strong military force, but it is absolutely ridiculous that we have troops stationed in approximately 130 different countries today.

This is a tremendous drain on our national resources and we are spread way too thin militarily.  It is about time that many off these other countries started protecting themselves for a while.

#16 We Must Pull Out Of The United Nations And We Must Dramatically Reduce Foreign Aid

The United Nations is a massive waste of time, energy and resources.  We should have pulled the plug on that ridiculous globalist organization long before now.

In addition, we need to dramatically cut back on foreign aid until we get our own house in order.  We should only help the most desperate nations until we get our own economy back on track.

#17 We Must End All Of The Ridiculous Police State Measures Which Are Chasing Tourists Away From Our Soil

Tourism is a very, very important industry to the United States.  But today, all of the incredibly intrusive police state measures that the past few administrations have introduced are chasing millions of tourists away and are ruining our national reputation.

For example, there are many cultures around the globe where it would be unthinkable to have anonymous security goons feel up the private areas of women and children before they are allowed to get on an airplane.  Rather than put up with such nonsense, millions of tourists are simply going to choose to spend their money somewhere else.

#18 We Must Seize The Assets Of The Ultra-Wealthy Individuals And International Banks That Have Been Committing Fraud Against The U.S. Government For Decades

Once the Federal Reserve is shut down, it will be important to hold those that have been defrauding the U.S. government responsible.  Once a full audit of the Federal Reserve is conducted and evidence of criminal activity is uncovered, those involved should be arrested and all of their assets should be seized and frozen pending trial.

If the things that have been going on inside the Federal Reserve are ever fully exposed, it will make the whole Bernie Madoff scandal look like a nickel and dime operation.

But that is why there has never been a full, comprehensive audit of the Federal Reserve since it was created back in 1913.  The American people are not supposed to see what happens inside that institution.

Unfortunately, even though economic times are a little rough, things are still good enough that the vast majority of Americans are not ready to start demanding the kind of radical changes listed above.

Not only that, but the kind of radical changes listed above would be fought against by the establishment every step of the way.  Those with money and power are not going to step aside just because “justice” demands it.

What is probably going to happen is that the “establishment politicians” that the establishment has bought and paid for are just going to continue to propose half-baked solutions to our problems as this country continues to tumble towards economic oblivion.

So what do all of you readers think?  Is there hope that someday we will see some real economic solutions implemented in this country?

10 Things That Would Be Different If The Federal Reserve Had Never Been Created

The vast majority of Americans, including many of those who believe that they are “educated” about the Federal Reserve, do not really understand how the Federal Reserve really makes money for the international banking elite.  Many of those opposed to the Federal Reserve will point to the record $80.9 billion in profits that the Federal Reserve made last year as evidence that they are robbing the American people blind.  But then those defending the Federal Reserve will point out that the Fed returned $78.4 billion to the U.S. Treasury.  As a result, the Fed only made a couple billion dollars last year.  Pretty harmless, eh?  Well, actually no.  You see, the money that the Federal Reserve directly makes is not the issue.  Rather, the “magic” of the Federal Reserve system is that it took the power of money creation away from the U.S. government and gave it to the bankers.  Now, the only way that the U.S. government can inject more money into the economy is by going into more debt.  But when new government debt is created, the amount of money to pay the interest on that debt is not also created.  In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely.  In the process, the international bankers would become insanely wealthy by lending money to the U.S. government.

Every single year, hundreds of billions of dollars in profits are made lending money to the U.S. government.

But why in the world should the U.S. government be going into debt to anyone?

Why can’t the U.S. government just print more money whenever it wants?

Well, that is not the way our system works.  The U.S. government has given the power of money creation over to a consortium of international private bankers.

Not only is this unconstitutional, but it is also one of the greatest ripoffs in human history.

In 1922, Henry Ford wrote the following….

“The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.”

It is important to try to understand how the international banking elite became so fabulously wealthy.  One of the primary ways that this was accomplished was by gaining control over the issuance of national currencies and by trapping large national governments in colossal debt spirals.

The U.S. national debt problem simply cannot be fixed under the current system.  U.S. government debt has been mathematically designed to expand forever.  It is a trap from which there is no escape.

Many liberals won’t listen because they don’t really care about ever paying off the debt, and most conservatives won’t listen because they are convinced we can solve the national debt problem if we just get a bunch of “good conservatives” into positions of power, but the truth is that we have such a horrific debt problem because it was designed to be this way from the beginning.

So how would America be different if we could go back to 1913 and keep the Federal Reserve Act from ever being passed?  Well, the following are 10 things that would be different if the Federal Reserve had never been created….

#1 If the U.S. government had been issuing debt-free money all this time, the U.S. government could conceivably have a national debt of zero dollars.  Instead, we currently have a national debt that is over 14 trillion dollars.

#2 If the U.S. government had been issuing debt-free money all this time, the U.S. government would likely not be spending one penny on interest payments.  Instead, the U.S. government spent over 413 billion dollars on interest on the national debt during fiscal 2010.  This is money that belonged to U.S. taxpayers that was transferred to the U.S. government which in turn was transferred to wealthy international bankers and other foreign governments.  It is being projected that the U.S. government will be paying 900 billion dollars just in interest on the national debt by the year 2019.

#3 If the U.S. government could issue debt-free money, there would not even have to be a debate about raising “the debt ceiling”, because such a debate would not even be necessary.

#4 If the U.S. government could issue debt-free money, it is conceivable that we would not even need the IRS.  You doubt this?  Well, the truth is that the United States did just fine for well over a hundred years without a national income tax.  But about the same time the Federal Reserve was created a national income tax was instituted as well.  The whole idea was that the wealth of the American people would be transferred to the U.S. government by force and then transferred into the hands of the ultra-wealthy in the form of interest payments.

#5 If the Federal Reserve did not exist, we would not be on the verge of national insolvency.  The Congressional Budget Office is projecting that U.S. government debt held by the public will reach a staggering 716 percent of GDP by the year 2080.  Remember when I used the term “debt spiral” earlier?  Well, this is what a debt spiral looks like….

#6 If the Federal Reserve did not exist, the big Wall Street banks would not have such an overwhelming advantage.  Most Americans simply have no idea that over the last several years the Federal Reserve has been giving gigantic piles of nearly interest-free money to the big Wall Street banks which they turned right around and started lending to the federal government at a much higher rate of return.  I don’t know about you, but if I was allowed to do that I could make a whole bunch of money very quickly.  In fact, it has come out that the Federal Reserve made over $9 trillion in overnight loans to major banks, large financial institutions and other “friends” during the financial crisis of 2008 and 2009.

#7 If the Federal Reserve did not exist, it is theoretically conceivable that we would have an economy with little to no inflation.  Of course that would greatly depend on the discipline of our government officials (which is not very great at this point), but the sad truth is that our current system is always going to produce inflation.  In fact, the Federal Reserve system was originally designed to be inflationary.  Just check out the inflation chart posted below.  The U.S. never had ongoing problems with inflation before the Fed was created, but now it is just wildly out of control….

#8 If the Federal Reserve had never been created, the U.S. dollar would not be a dying currency.  Since the Federal Reserve was created, the U.S. dollar has lost well over 95 percent of its purchasing power.  By constantly inflating the currency, it transfers financial power away from those already holding the wealth (the American people) to those that are able to create more currency and more government debt.  Back in 1913, the total U.S. national debt was just under 3 billion dollars.  Today, the U.S. government is spending approximately 6.85 million dollars per minute, and the U.S. national debt is increasing by over 4 billion dollars per day.

#9 If the Federal Reserve did not exist, we would not have an unelected, unaccountable “fourth branch of government” running around that has gotten completely and totally out of control.  Even some members of Congress are now openly complaining about how much power the Fed has.  For example, Ron Paul told MSNBC last year that he believes that the Federal Reserve is now more powerful than Congress…..

“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”

#10 If the Federal Reserve had never been created, the American people would be much more free.  We would not be enslaved to this horrific national debt.  Our politicians would not have to run around the globe begging people to lend us money.  Representatives that we directly elect would be the ones setting national monetary policy.  Our politicians would be much less under the influence of the international banking elite.  We would not be at the mercy of the financial bubbles that the Fed has constantly been creating.

There is a reason why so many of the most prominent politicians from the early years of the United States were so passionately against a central bank.  The following is a February 1834 quote by President Andrew Jackson about the evils of central banking….

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.

But we didn’t listen to men like Andrew Jackson.

We allowed the Federal Reserve to be created in 1913 and we have allowed it to develop into an absolute monstrosity over the past century.

Now we are drowning in debt and we are on the verge of national bankruptcy.

Will the American people wake up before it is too late?

Will Ron Paul Be Able To End The Fed?

Is Ron Paul finally in position to really do something about the Federal Reserve?  U.S. Representative Spencer Bachus, the chairman-elect of the House Financial Services Committee, has announced that Ron Paul will chair the domestic monetary policy subcommittee starting next month.  This puts Ron Paul in tremendous position to be able to put significant pressure on the Federal Reserve.  In previous years Ron Paul has introduced legislation to end the Federal Reserve but it never got any traction.  During this most recent session of Congress an effort by Ron Paul to have a full audit of the Federal Reserve conducted gathered quite a bit of momentum for a while, but in the end it did not get passed.  However, a very limited examination of Fed activities during the recent financial crisis was passed, and that examination has revealed some really shocking things.  With so many Tea Party members entering Congress this upcoming session there may be more momentum than ever to hold the Federal Reserve more accountable.  Ron Paul is already talking about how he is planning for a full slate of hearings on U.S. monetary policy and he has indicated that he plans to restart a push to have the Fed audited.

And why shouldn’t the Federal Reserve be fully audited?  The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.

So what would an audit accomplish?

Well, it would hopefully expose what is going on inside the Federal Reserve.

A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion dollars.  It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.

These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.

For example, U.S. Senator Bernie Sanders was absolutely outraged by these “backdoor bailouts” by the Federal Reserve….

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution.”

More members of Congress than at any other time in recent memory are openly wondering if it is now time “to pull back the curtain” at the Federal Reserve.  For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.

Expose the Federal Reserve.

The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.

During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it….

“Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling.”

Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.

In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans….

“I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans.”

However, there is evidence that the tide is turning with the American public.

According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing….

Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Those are very exciting numbers.  A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.

If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.

So what is so bad about the Federal Reserve?

Well, think of it as a perpetual debt machine.

Did you know that the U.S. national debt is 5,000 times larger than it was a hundred years ago?

That’s right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

Since that time, our debt has been endlessly skyrocketing.

Under the Federal Reserve system, the U.S. government cannot just go out and print money.  It is actually the Federal Reserve that issues our currency.

The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time.  In fact, as I have written about previously, all of our money is now based on debt.

No debt, no money.

What we desperately need is for the current monetary system to be scrapped.  The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.

The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.

Instead, what we have under the Federal Reserve system is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.

Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.  This continual debasement of our currency is called “inflation” and it is a hidden tax on every man, woman and child in the United States.

It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.

But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most “rational” economic system that humanity has ever come up with.

So who benefits from all this?

Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt.  In future years that number is projected to rapidly skyrocket even more.

Wouldn’t you like to be getting a nice chunk of that 413 billion dollars?

It turns out that loaning money to the U.S. government is very, very profitable.

That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.

So what did we get in return for our 413 billion dollars?

Nothing.

Sadly, this is not just going on in the United States.  This is going on literally in almost every nation on earth.

All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.

In the book of Proverbs, it tells us that “the rich ruleth over the poor, and the borrower is servant to the lender.”  Americans like to think that they live in “the land of the free”, but the truth is that we have become enslaved to debt.

But even worse, we have consigned our children and our grandchildren to a lifetime of debt.  They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.

How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?

There is a reason why people like Ron Paul are so obsessed with the Federal Reserve.  It is not because they don’t have anything better to do.  It is because the future of our country literally hangs in the balance.

Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank.  In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.

But we didn’t listen to the warnings.

We were convinced that we knew better.

Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.

Perhaps we were not as smart as we thought we were.

Say What? 30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To Laugh Or Cry

Did you see Federal Reserve Chairman Ben Bernanke on 60 Minutes the other night?  Bernanke portrayed the Federal Reserve as the great protector of the U.S. economy, he claimed that unemployment would be 15 percent higher if the Federal Reserve had sat back and done nothing during the financial crisis and he even started laying the groundwork for a third round of quantitative easing.  Unfortunately, 60 Minutes did not ask Bernanke any hard questions and did not challenge him on his past record.  It was almost as if they considered Bernanke to be above criticism.  But someone in the mainstream media should be taking a closer look at this guy and his record.  The truth is that the incompetence that Bernanke has displayed over the past few years makes the Cincinnati Bengals look like a model of excellence.  Bernanke kept insisting that the housing market was stable even while it was falling apart, he had absolutely no idea the financial crisis was coming, he declared that Fannie Mae and Freddie Mac were in no danger of failing just before they failed, his policies have created asset bubble after asset bubble and the world financial system is now inherently unstable.  But even with such horrific job performance, Barack Obama and leaders of both political parties continue to publicly praise Bernanke at every opportunity.  What in the world is going on here?

Not that Bernanke is solely responsible.  His predecessor, Alan Greenspan, was responsible for many of the policies that have brought us to this point.  In addition, most of the other presidents of the individual Federal Reserve banks across the United States seem just as clueless as Bernanke.

But you would think at some point someone in authority would be calling for Bernanke to resign.  Accountability has to begin somewhere.

The Bernanke quotes that you will read below reveal a pattern of incompetence and mismanagement that is absolutely mind blowing.  Looking back now, we can see that Bernanke was wrong about almost everything.

But the mainstream media and our top politicians keep insisting that Bernanke is the man to lead our economy into a bright future.

It is almost as if we have been transported into some bizarre episode of “The Twilight Zone” where the more incompetence someone exhibits the more they are to be praised.

The following are 30 Ben Bernanke quotes that are so stupid that you won’t know whether to laugh or cry….

#1 (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.”

#2 (On 60 Minutes in response to a question about what would have happened if the Federal Reserve had not “bailed out” the U.S. economy) “Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent.”

#3 (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.”

#4 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

#5 (When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) “The Federal Reserve will not monetize the debt.”

#6 “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”

#7 “The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.”

#8 (November 21, 2002) “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

#9 (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.”

#10 (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.”

#11 “Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.”

#12 (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.”

#13 (October 31, 2007) “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

#14 (On the possibility that the Fed might launch QE3) “Oh, it’s certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.”

#15 (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.”

#16 (January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”

#17 “I wish I’d been omniscient and seen the crisis coming.”

#18 (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.”

#19 “The GSEs are adequately capitalized. They are in no danger of failing.”

#20 (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

#21 (September 23rd, 2008) “My interest is solely for the strength and recovery of the U.S. economy.”

#22 “Economics has many substantive areas of knowledge where there is agreement but also contains areas of controversy. That’s inescapable.”

#23 “I don’t think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.”

#24 “We’ve been very, very clear that we will not allow inflation to rise above 2 percent.”

#25 “…inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Federal Reserve’s dual mandate in the longer run.”

#26 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

#27 “Not all information is beneficial.”

#28 “The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again.”

#29 “Similarly, the mandate-consistent inflation rate–the inflation rate that best promotes our dual objectives in the long run–is not necessarily zero; indeed, Committee participants have generally judged that a modestly positive inflation rate over the longer run is most consistent with the dual mandate.”

#30 (October 4, 2006) “If current trends continue, the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account.”

Trillions In Secret Fed Bailouts For Global Corporations And Foreign Banks – Has The Federal Reserve Become A Completely Unaccountable Global Bailout Machine?

Has the Federal Reserve become the Central Bank of the World?  That is what some members of Congress are asking after the Federal Reserve revealed the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than $3 trillion on Wednesday.  Most of these transactions involved giant loans that were nearly interest-free from the Federal Reserve to some of the largest banks, financial institutions and corporations all over the world.  In fact, it turns out that foreign banks and foreign corporations received a very large share of these bailouts.  So has the Federal Reserve now become a completely unaccountable global bailout machine?  Sadly, the truth is that we would have never learned the details of these bailouts if Congress had not forced this information out of the Fed.  So what other kinds of jaw-dropping details would be revealed by a full audit of the Federal Reserve?

It is important to try to understand exactly what went on here.  Banks and corporations from all over the globe were allowed to borrow gigantic piles of money essentially for free.  Yes, when you are getting interest rates such as 0.25 percent, the money is essentially free.  These loans were not available to everyone.  You or I could not have run over to the Federal Reserve and walked away with tens of billions of dollars in loans that were nearly interest-free.  Rather, it was only the megabanks and megacorporations that are friendly with the Federal Reserve that were able to take advantage of these bailouts.

In this way, the Federal Reserve is now essentially acting like some kind of financial god.  They decide who survives and who fails.  Dozens and dozens and dozens of small to mid-size U.S. banks are failing, but the Federal Reserve does not seem to have much compassion for them.  It is only when the “too big to fail” establishment banks are in trouble that the Federal Reserve starts handing out gigantic sacks of nearly interest-free cash.

Just think about it.  Which financial institution do you think is in a better competitive position – one that must survive on its own, or one that has a “safety net” of nearly unlimited free loans from the Federal Reserve?

Now that is oversimplifying the situation, certainly, but the truth is that the Federal Reserve had fundamentally altered the financial marketplace and is significantly influencing who wins and who loses.

But even more disturbing is what the Federal Reserve is turning into.  This is an institution that is “independent” of the U.S. government, that does not answer to the American people, that controls our money supply and that is just tossing tens of billions of dollars to foreign banks and to foreign corporations whenever it wants to.

In fact, if Congress had not forced the Fed to tell us what was going on with these bailouts we would have never even found out.

The truth is that the Fed is taking incredible risks with “our money” and yet they want to continue to exist in a cloak of almost total secrecy.

In a recent article in the Washington Post, Dallas Federal Reserve President Richard Fisher acknowledged that the Federal Reserve played fast and loose with trillions of dollars of our money….

“We took an enormous amount of risk with the people’s money.”

Are you deeply disturbed by that quote?

Well, if not, you should be.

The American people became so infuriated about the bailouts and stimulus packages passed by Congress, but it turns out that they were nothing compared to these Federal Reserve bailouts.

U.S. Senator Bernie Sanders is one of the members of Congress that is now expressing extreme outrage about what the Federal Reserve has done….

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution.”

In fact, Senator Sanders was so disgusted by how much of the money went overseas that he was led to make the following remark….

“Has the Federal Reserve become the central bank of the world? I think that is a question that needs to be examined.”

Advocates for the Federal Reserve insist that if all of these foreign banks and foreign corporations were not bailed out the financial crisis would have been much worse.  In fact, they say we should be thankful that the Federal Reserve prevented a total financial collapse.

Well boo-hoo!

If our financial institutions are so fragile that a stiff wind will knock half of them over maybe they need to just fail.

You know what, life is tough.  Nobody is going to cry most of us a river of tears if we lose our jobs.  Most of us have learned to scratch and claw to survive with no safety net underneath us.

So maybe it is time for these big financial institutions to start playing by the same rules the rest of us are playing by.

No, when these “too big to fail” financial institutions get into a little trouble they start whining like a bunch of little babies.

“Give us some big sacks of cash!”

“Waaaaaaah!”

Well guess what?  Most of the rest of us are just not going to have too much sympathy for these big banks from now on.

The following is a list of just a few of the banks, financial institutions and global corporations that received nearly interest-free loans from the Federal Reserve during the financial crisis…..

Big U.S. Banks And Financial Institutions

Goldman Sachs
Citibank
JP Morgan Chase
Morgan Stanley
Merrill Lynch
Bank of America
Bear Stearns
Pacific Investment Management Co. (PIMCO)

Big Global Corporations

General Electric
Caterpillar
Harley-Davidson
Verizon
McDonald’s
BMW
Toyota

Canadian Banks

Royal Bank of Canada
Toronto-Dominion Bank
Scotiabank

European And Asian Banks

Barclays Capital
Bank of Scotland
Deutsche Bank
Credit Suisse
BNP Paribas
Societe Generale
UBS
Dexia
Bayerische Landesbank
Dresdner Bank
Commerzbank
The Korean Development Bank (South Korea)

But those defending the Federal Reserve will insist that the financial world as we know it would have ended if the Fed had done nothing.

That may well be true.

The entire financial system might have gone down in flames.

But that just proves the main point that this column has been trying to make for months.

An economic collapse is coming.

The Federal Reserve can desperately try to keep all of the balls in the air for as long as it can, but eventually it is inevitable that this entire thing is going to come crashing down.

The fact that the Federal Reserve had to resort to such extreme measures to “save” the financial system just shows how desperate things really are.

We really have reached a “tipping point” for the world financial system.  There is going to be crisis after crisis after crisis and even bigger bailouts are going to be required in the future.

The world financial system is a house of cards built on a foundation of sand.  The Federal Reserve can keep throwing around gigantic sacks of “our money” as much as it wants, but in the end there is nothing that can be done to prevent the inevitable collapse that is coming.

How In The World Did We Get To The Point Where The Federal Reserve Is Printing Money Out Of Thin Air Whenever It Wants?

Ben Bernanke and the rest of the folks over at the Federal Reserve did not just wake up one day and decide that they wanted to start printing hundreds of billions of dollars out of thin air.  The truth is that the economic forces that have brought us to this point have taken decades to develop.  In the post-World War 2 era, when the U.S. economy has fallen into a recession, either the Federal Reserve would lower interest rates or the U.S. government would indulge in even more deficit spending to stimulate the economy.  But now, as you will see below, both of those alternatives have been exhausted.  In addition, we are now rapidly reaching the point where there are simply not enough lenders out there to feed the U.S. government’s voracious appetite for debt.  So now the Federal Reserve is openly printing hundreds of billions of dollars that will enable them to finance U.S. government borrowing, and (they hope) stimulate the U.S. economy at the same time.  Unfortunately, the rest of the world is not amused.  Nations such as China, Japan and many of the oil-exporting nations of the Middle East have accumulated a lot of U.S. dollars and a lot of U.S. Treasuries and they are not pleased that those investments are now being significantly devalued.

So how did we get to this point?  Why is the Federal Reserve printing money out of thin air in a desperate attempt to stimulate the economy?

Well, the Federal Reserve has more or less exhausted all of the other tools that it has traditionally used to help the economy during an economic downturn.  As you can see from the chart below, the Federal Reserve has lowered interest rates during past recessions.  The goal of lowering interest rates is to make it less expensive to borrow money and thus spark more economic activity.  Well, as you can see, the Federal Reserve has no place else to go with interest rates.  Over the past 30 years, rates have consistently been pushed down, down, down and now they are kissing the floor….

Another way that the U.S. economy has been “stimulated” over the past 30 years is through increased government spending.  The theory is that if the government spends more money, that will get more cash into the hands of the people and spark more economic activity.  That was the whole idea behind the “economic stimulus packages” that were pushed through Congress.  However, increased government spending always comes at a very high cost under our current system.  Government debt is now totally out of control.  As you can see below, the U.S. national debt has exploded from about one trillion dollars in 1980 to over 13 trillion dollars today.  Currently, there is very little appetite in Congress for more government spending to stimulate the economy, especially after the results of the November election.

Most Americans don’t realize it, but much of our incredible “prosperity” over the last 30 years has been fueled by the mountains of debt that we have accumulated.  Now U.S. government debt is exploding at an exponential rate….

Sadly, the U.S. government has absolutely no self-control when it comes to spending money.  Our politicians are absolutely addicted to debt.

The truth is that the U.S. government just can’t seem to stop wasting money. One of the most comical news stories of the past few days involved the Recovery Independent Advisory Panel, which is a sub-committee of the larger Recovery Accountability and Transparency board.  This panel will be holding a meeting on November 22nd to discuss how to prevent “fraud, waste, and abuse” of economic stimulus funds.

So where will this meeting be held?

It is going to be held at the ultra-luxurious Ritz Carlton Hotel in Phoenix, Arizona.

Yes, seriously.

You just can’t make this stuff up.

So if the Federal Reserve cannot stimulate the economy through lower interest rates and the U.S. government cannot stimulate the economy by spending even more money, what does that leave us with?

Unfortunately, that leaves us with either doing nothing or with having the Federal Reserve print money out of thin air and shovel it into the economy.

Sadly, even after months of news headlines about quantitative easing, most Americans still do not understand what it is.  The following is a short video that is very humorous but that also does a good job of simply explaining what quantitative easing is and why it is bad for the U.S. economy….

Quantitative Easing Explained

For much more on why quantitative easing is so destructive, please see an article that I previously authored entitled “9 Reasons Why Quantitative Easing Is Bad For The U.S. Economy“.  The truth is that in an all-out effort to give the U.S. economy a short-term boost, the Federal Reserve is putting the entire world financial system in peril.

One group of prominent economists was so alarmed by this new round of quantitative easing that they recently wrote an open letter to Ben Bernanke warning of the dangers that flooding the economy with new money could create.  The following is an excerpt from the text of that open letter which was also posted on the website of the Wall Street Journal…..

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

But it isn’t just a few prominent economists that are expressing disapproval for this new round of quantitative easing.  The truth is that almost every major industrialized nation has spoken out against all of this money printing by the Fed.  Meanwhile, Barack Obama continues to publicly defend Ben Bernanke and this new round of quantitative easing at every opportunity.

That is some “change you can believe in”, eh?

Unfortunately, the danger that quantitative easing poses to our financial system is much greater than most Americans realize.

In order for the world financial system to operate smoothly, the rest of the world much have a great deal of faith in the U.S. dollar and in U.S. Treasuries.  Ben Bernanke had promised Congress (and the rest of the globe) that the Federal Reserve would not monetize U.S. government debt and that he was going to keep the U.S. dollar strong.  But now Bernanke has broken his promises once again.  At this point Bernanke has lost a ton of credibility.  Unfortunately, Barack Obama and many of the key members of Congress continue to express unwavering support for him.

The rest of the world can see what is going on.  They are not stupid.  They are not going to keep pouring hundreds of billions into U.S. Treasuries if the Federal Reserve is going to “cheat” whenever economic conditions get a little tough.

If the day arrives when the rest of the globe completely loses faith in the U.S. dollar and in U.S. Treasuries, it is going to create a complete and total financial disaster – especially for the United States.

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