Banksters

Debt = Money, Money = Debt

Where does money come from?  You would think that question should be so simple that any 10-year-old child could answer it, but that is not the case.  You see, the truth is that the vast majority of American adults cannot even answer that question.  Yet we all use money every day.  Without money our lives would fall apart fairly quickly.  But most of us never stop to think about how it comes into existence.  The truth is that bankers are the source of all money in the United States.  Either the Federal Reserve bankers create it, or individual bankers create it through the mechanism of fractional reserve banking.  In both cases, it is bankers that are creating the money.  In our financial system, the U.S. government cannot print money and no individual citizens are allowed to create money.  Rather, it is the bankers who have a complete and total monopoly on the creation of money in the United States.

Most of the time, any money that is created comes into existence as debt.  Either the U.S. government goes into more debt when it gets more dollars from the Federal Reserve or individual Americans go into more debt when they take out loans from individual banks.

First, let’s examine what happens when the U.S. government gets more money from the Federal Reserve.

Under our current system (which is fundamentally flawed), the U.S. government cannot just fire up the printing presses and print a bunch of dollars if it decides that more money needs to be produced.

Rather, if the U.S. government needs more money it asks the Federal Reserve for it.

So who is the Federal Reserve?  Well, they are actually not part of the U.S. government.  In fact, the Federal Reserve is about as “federal” as Federal Express is.

The Federal Reserve is actually a privately-owned central bank that has been given authority by the U.S. Congress to issues our currency, set our interest rates and essentially run our economy.

All U.S. government debt is created through the Federal Reserve system.

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt.  Usually the money isn’t even printed up – most of the time it is just electronically credited to the government.  The Federal Reserve creates these “Federal Reserve notes” out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

The Federal Reserve then sells these U.S. Treasury bonds to investors, other nations (such as China) or sometimes they “sell” them back to themselves.  In fact, the Federal Reserve has been gobbling up a whole lot of U.S. Treasuries lately.  Some refer to this as “monetizing the debt”, but that is not quite an accurate statement.

When the Federal Reserve creates money this way, it does not also create the money to pay the interest on the debt that has been created.  Eventually this puts pressure on the U.S. government to borrow even more money to keep the game going.  So what this creates is a spiral where the U.S. government must keep borrowing increasingly larger amounts of money, where the money supply is endlessly expanding and where the value of the U.S. dollar is destined to continue going down forever.

Do you think it is some big mystery why the value of the U.S. dollar has declined over 95 percent since the Federal Reserve was created in 1913?  Just look at what our national debt has been doing over the last 40 years.  It just continues to go up and up and up….

As long as the Federal Reserve system exists, the national debt will keep going up, the money supply will keep going up and the U.S. dollar will continue to decline in value.

This is not because of some big mistake.  This is what the Federal Reserve system was designed to do.  It was designed to trap the U.S. federal government (and by extension all of us) in perpetual debt.

If the U.S. government really wanted to get out of debt it would take back control of our currency from the bankers and would start issuing debt-free money.  But don’t expect that to happen any time soon.

In fact, the Federal Reserve is just getting more powerful and becoming more out of control.  According to data released on Wednesday, over $9 trillion in overnight loans were made by the Federal Reserve to major banks and large financial institutions during the financial crisis in 2008 and 2009.

Now, the truth is that this number is inflated because each time one of these loans was “rolled over” it was counted as a new loan by the Fed.  So don’t get too excited about the $9 trillion figure.  But still, the amount of money that the Federal Reserve just whipped up out of thin air and lent out to its friends at extremely low interest rates is absolutely mind blowing.

In 2010, the Federal Reserve has initiated a massive new round of “quantitative easing“, and it is yet another example of how out of control the Federal Reserve is becoming.  So exactly what is quantitative easing?  Well, essentially what happens is the Federal Reserve conjures up gigantic amounts of money out of thin air and uses it to buy up things like U.S. Treasury bonds and mortgage-backed securities.  The Fed hopes that by injecting hundreds of billions into the system it will “stimulate” the economy.

Prior to 2008, the Federal Reserve had never been so bold as to print up hundreds of billions of dollars whenever it wants.  But now it seems as though the Federal Reserve is just going to zap hundreds of billions of dollars into existence whenever their friends are in trouble or whenever they feel the economy needs a little “stimulus”.

So can you or I “zap” money into existence?  No, if we print money we go to jail.

Can the U.S. government “zap” money into existence?  No, only the Federal Reserve is allowed to do that.

But most Americans will never understand how this system works.

The second primary way that our money comes into existence is through fractional reserve banking.

According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way….

“If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+…=$1,000).”

This is actually an oversimplification, but let’s roll with it.  Many Americans would be shocked to learn that if we all went down to the bank today and wanted to take our money out, the bank would only be able to satisfy a small fraction of our requests.

The bank does not keep all of your money in the bank.  It lends most of it out.

In fact, any bank can loan out as much money as it wants as long as it keeps enough in reserve to satisfy legal requirements.

Each time a loan is made by a bank, more money is created and more debt is created.

Isn’t this kind of insane?

Well, yes, but at least banks have to maintain a certain amount of discipline by keeping some money in reserve.

Unfortunately, Federal Reserve Chairman Ben Bernanke is on the record as saying that he wants to completely remove all reserve requirements for banks.

Keep in mind that Bernanke is in charge of “running” our economy.

There are a few members of Congress such as Rep. Ron Paul that have tried to hold the Federal Reserve accountable.  The following is an excerpt from remarks that Ron Paul made to Bernanke during a congressional hearing a while back….

“The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either.”

Unfortunately, Ron Paul is vastly outnumbered by members of Congress who seem to believe that the Federal Reserve is doing a great job.  In fact, a bill that would have provided for a one-time audit of the Federal Reserve got shot down.  Apparently members of Congress did not think it was a good idea for the American people to be able to get a peek inside the institution that issues our money and runs our economy.

It is time for the American people to wake up.  The borrower always ends up the servant of the lender.  In America today, virtually all of our money comes into existence as debt, nearly all of our major purchases are made with debt, the popping of debt bubbles has caused almost every major financial crisis we have had, our state and local governments are drowning in a sea of debt, and our federal government has piled up the biggest mountain of debt in the history of the world.

Any economic system that is based on debt is destined to fail – including ours.  Isn’t it about time to start asking ourselves how we got into this gigantic mess in the first place?

Unfortunately, Americans have been so dumbed-down by our pathetic education system and are so busy gorging themselves on endless amounts of entertainment that they literally have no idea how our system works.

Most people will never wake up until a complete and total economic collapse happens.  By then, it will be far too late.

20 Statistics That Prove That Global Wealth Is Being Funneled Into The Hands Of The Elite – Leaving Most Of The Rest Of The World Wretchedly Poor

Today global wealth is more highly concentrated in the hands of the elite than it ever has been at any other point in modern history.  Once upon a time, the vast majority of the people in the world knew how to grow their own food, raise their own animals and take care of themselves.  There weren’t many that were fabulously wealthy, but there was a quiet dignity in having land you could call your own or in having a skill that you could turn into a business.  Sadly, over the past several decades an increasingly growing percentage of agricultural land has been gobbled up by big corporations and by corrupt governments.  Hundreds of millions of people have been pushed off their land and into highly concentrated urban areas.  Meanwhile, it has become increasingly difficult to start a business of your own as monolithic global corporations have come to dominate nearly every sector of the world economy.  So more people than ever around the world are forced to work for “the system” just to make a living.  At the same time, those at the very top of the food chain (the elite) have spent decades rigging the system to ensure that increasing amounts of wealth will continue to flow into their pockets.  So now in 2010 we have a global system where a few elitists at the top are insanely wealthy while about half the people living on earth are wretchedly poor.

There are very few nations around the world that have not been almost entirely plundered by the global elite.  When the elite speak of “investing” in poor countries, what they really mean is taking control of the land, water, oil and other natural resources.  In dozens of nations around the world today, big global corporations are stripping fabulous amounts of wealth out of the ground even as the vast majority of the citizens of those nations continue to live in abject poverty.  Meanwhile, the top politicians in those nations are given huge bribes to go along with the plundering.

So what we have in 2010 is a world that is dominated by a very small handful of ultra-wealthy elitists that own an almost unbelievable amount of real assets, a larger group of “middle managers” that run the system for the global elite (and are rewarded very handsomely for doing so), hundreds of millions of people who actually do the work required by the system, and several billion “useless eaters” that the global elite don’t really need and that they don’t really have much use for.

The system was not ever designed to lift up the poor.  Nor was it ever designed to promote “free enterprise” and “competition”.  Rather, the elite intend to funnel all wealth to themselves and to have the rest of us enslaved either to debt or to poverty.

The following are 20 statistics that prove that the wealth of the world is increasingly being funneled into the hands of the global elite, leaving most of the rest of the world wretchedly poor and miserable….

#1 According to the UN Conference on Trade and Development, the number of “least developed countries” has doubled over the past 40 years.

#2 “Least developed countries” spent 9 billion dollars on food imports in 2002.  By 2008, that number had risen to 23 billion dollars.

#3 Average income per person in the poorest countries on the continent of Africa has fallen by one-fourth over the past twenty years.

#4 Bill Gates has a net worth of somewhere in the neighborhood of 50 billion dollars.  That means that there are approximately 140 different nations that have a yearly GDP which is smaller than the amount of money Bill Gates has.

#5 A study by the World Institute for Development Economics Research discovered that the bottom half of the world population owns approximately 1 percent of all global wealth.

#6 Approximately 1 billion people throughout the world go to bed hungry each night.

#7 The wealthiest 2 percent own more than half of all global household assets.

#8 It is estimated that over 80 percent of the world’s population lives in countries where the income gap between the rich and the poor is widening.

#9 Every 3.6 seconds someone starves to death and three-quarters of them are children under the age of 5.

#10 According to Gallup, 33 percent of the people on the globe say that they do not have enough money for food.

#11 As you read this, there are 2.6 billion people around the world that lack basic sanitation.

#12 According to the most recent “Global Wealth Report” by Credit Suisse, the wealthiest 0.5% control over 35% of the wealth of the world.

#13 More than 3 billion people, close to half the world’s population, live on less than 2 dollar a day.

#14 CNN founder Ted Turner is the largest private landowner in the United States.  Today, Turner owns approximately two million acres.  That is an amount greater than the land masses of the states of Delaware and Rhode Island combined.  Turner also advocates restricting U.S. couples to 2 or fewer children to control population growth.

#15 There are 400 million children in the world today that have no access to safe water.

#16 Approximately 28 percent of all children in developing countries are considered to be underweight or have had their growth stunted as a result of malnutrition.

#17 It is estimated that the United States owns approximately 25 percent of the total wealth of the world.

#18 It is estimated that the entire continent of Africa owns approximately 1 percent of the total wealth of the world.

#19 In 2008, approximately 9 million children died before they reached their fifth birthdays.  Approximately a third of all of these deaths was due either directly or indirectly to lack of food.

#20 The most famous banking family in the world, the Rothschilds, has accumulated mountains of wealth while much of the rest of the world has been trapped in poverty.  The following is what Wikipedia has to say about Rothschild family wealth….

It has been argued that during the 19th century, the family possessed by far the largest private fortune in the world, and by far the largest fortune in modern history.

Nobody seems to know exactly how much the Rothschilds are worth today.  They dominate the banking establishments of England, France, Germany, Austria, Switzerland and many other nations.  It was estimated that they were worth billions back in the mid-1800s.  What the total wealth of the family is today is surely an amount that is almost unimaginable, but nobody knows for sure.

Meanwhile, billions of people around the globe are wondering where their next meal is going to come from.

At this point, many readers will want to start arguing about how horrible capitalism is and about how wonderful socialism and communism are.

But capitalism is not the problem and as we have seen countless times over the past several decades, government ownership of business is not the solution to anything.

What we have in the world today is not capitalism.  Rather, it more closely resembles “feudalism” than anything else.  The elite are “monopoly men” who use their unbelievable wealth and power to dominate the rest of us.  In fact, it was John D. Rockefeller who once said that “competition is sin”.

It would be great if we lived in a world where those living in poverty were encouraged to start owning land, to create businesses and to build better lives for themselves.

But instead, things are going the other way.  Wealth is becoming more concentrated in the hands of the elite, and the middle class is starting to be wiped out even in prosperous nations such as the United States.

It turns out that the global elite have decided that they don’t really need so many expensive American “worker bees” after all and they have been moving thousands of factories and millions of jobs overseas.  Meanwhile the American people are so distracted watching Dancing with the Stars, Lady Gaga and their favorite sports teams that they don’t even realize what is going on.

There is no guarantee that America will be prosperous forever.  Today, a record number of Americans are already living in poverty.  Today, a record number of Americans are on food stamps.  The median household income went down last year and it went down the year before that too.

So wake up.  America is being integrated into a world economic system that is dominated and controlled by the insanely wealthy elite.  They don’t care that you have to pay the mortgage or that you intend to send your kids to college.  Mostly what they care about is making as much money for themselves as they can.

Greed is running rampant around the globe, and the world is becoming a very cold place.  Unfortunately, unless something really dramatic happens, the rich are just going to continue to get richer and the poor are just going to continue to get poorer.

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.

Barack Obama And Ben Bernanke Continue To Defend Quantitative Easing, But For The Rest Of The World The Verdict Is In: They Hate It

Even as Barack Obama and Ben Bernanke publicly defend the Federal Reserve’s new $600 billion quantitative easing program, top finance officials around the globe are expressing alarm and outrage.  But what did Obama and Bernanke expect?  “Quantitative easing” is little more than legalized cheating.  For a moment, imagine that the global economy is a giant game of Monopoly.  Essentially what Bernanke has done is that he has just reached under the table and has slipped another $600 billion on to his pile of money, hoping that the rest of the players will not call him out on it.  The rest of the world has heavily invested in the U.S. dollar and in U.S. Treasuries, and this new quantitative easing program is going to devalue all of those holdings.  If the Federal Reserve continues to go down the road of monetizing U.S. government debt, other nations are rapidly going to get spooked and will soon refuse to invest in U.S. dollars and U.S. Treasuries.  When that day arrives, it is going to cause mass panic in the world financial system.

Already, investors across the globe are flocking out of the U.S. dollar and into safe investments such as gold and silver.  On Monday, gold closed at an all-time record high of $1,403.20 an ounce on the New York Mercantile Exchange, and silver closed at a 30-year high of $27.43 an ounce.

Unfortunately, our leaders seem absolutely clueless about what is really going on.  In fact, Barack Obama is very much in Bernanke’s corner.  During his trip to India, Barack Obama made it clear that he very much supports this new round of quantitative easing by the Federal Reserve….

“I will say that the Fed’s mandate, my mandate, is to grow our economy. And that’s not just good for the United States, that’s good for the world as a whole.”

This is the exact opposite of what Barack Obama should be doing.  He should be demanding accountability from Ben Bernanke and the Federal Reserve.  He should be trying to get the U.S. financial system back on some kind of solid footing.

But we all know that is not going to happen.  Obama had no problem renominating Bernanke to another term, and Obama has publicly supported him at every opportunity.

Well, if Obama isn’t going to do it, shouldn’t some of our other representatives in Washington D.C. be calling for the resignation of Bernanke?  After all, how many chances does one guy get?  Bernanke’s record is littered with so much gross incompetence that it makes Wade Phillips of the Dallas Cowboys look like Coach of the Year.  The video posted below shows Bernanke reassuring the public over and over and over between 2005 and 2007 that the U.S. economy was in great shape and that we would continue to experience solid growth….

How long is it going to be until everyone wakes up and starts acknowledging that “the emperor has no clothes” and Bernanke is running the U.S. economy into the ground?

At this point, Bernanke has lost virtually all credibility.  In 2009, he promised the U.S. Congress that the Federal Reserve would not monetize U.S. government debt, but now that is exactly what is happening.

Most of the top finance officials in other countries realize what is going on, and they are really starting to make their displeasure known.  The following are just a few examples of the global outrage that has been expressed about the Fed’s new quantitative easing program over the past few days….

*Xia Bin, an important member of the monetary policy committee of China’s central bank has called the Fed’s new quantitative easing plan “abusive” and is warning that it could set off a global economic meltdown.

*On Monday, Chinese Finance Vice Minister Zhu Guangyao expressed his extreme dismay regarding the Fed’s new quantitative easing scheme….

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets.”

*German Finance Minister Wolfgang Schäuble, who has called current Fed policy “clueless”, says that he is absolutely disgusted with the Federal Reserve at this point….

“They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous.”

*Luiz Inácio Lula da Silva, the President of Brazil, says that he is incredibly upset about QE2 and that he is going to arrive for the G20 meetings in Seoul ready “to fight”.

*Bloomberg is reporting that at the upcoming G20 meetings, Russian President Dmitry Medvedev is going to “insist” that any future quantitative easing measures be globally coordinated.

*Even some top Fed officials are speaking out publicly against this new round of quantitative easing.  For example, Kansas City Fed President Thomas Hoenig recently made the following statement about the new direction the Fed is taking….

“I worry that by pumping in significant amounts of dollars we then build the inflationary pressures for the future, and we do encourage then an easier credit environment that helped create this problem in the first place.”

The Federal Reserve had better hope that the rest of the world does not get scared off from buying U.S. government debt.  According to the Wall Street Journal, in order to repay maturing bonds and finance the budget deficit, the U.S. government will have to come up with 4.2 trillion dollars over the next year.

If the rest of the world cuts back on buying U.S. Treasuries, the Federal Reserve is going to find itself with a gigantic mountain of debt that it will be forced to monetize.

So what happens someday when China, Japan, Russia and the major oil producers in the Middle East decide that enough is enough and they are not going to buy any more U.S. debt?

Don’t think it can’t happen – these nations are not stupid and if they realize that the U.S. dollar is going to continually keep falling in value there could be a dramatic move away from U.S. debt.

If the rest of the world quits lending massive amounts of money to the U.S. government, our leaders will be faced with three options.  The U.S. government could start trying to operate within a balanced budget (which would crash the economy), interest rates on U.S. government debt could be raised until people would be willing to invest in Treasuries again (which would probably crash U.S. government finances and the economy), or the Federal Reserve could just start monetizing most of the debt on a regular basis (which would likely eventually crash the entire world financial system).

In order for the current world financial system to maintain stability, it is essential for there to be faith in the U.S. dollar and for there to be faith in U.S. Treasuries.  Once faith in them is lost, it will only be a matter of time until the world financial system totally crumbles.

This new round of quantitative easing could be the “tipping point” that opens the door to the eventual complete and total collapse of the U.S. dollar.  Let us hope that the dollar does not completely fail any time soon, but with jokers like Bernanke and Obama running the show, there is not much reason for optimism.

Caught In A Lie: Bernanke Promised Congress The Federal Reserve Would Not Monetize The Debt But Now That Is Exactly What Is Happening

On June 3rd, 2009 Federal Reserve Chairman Ben Bernanke promised the U.S. Congress that the Federal Reserve would not monetize the debt of the U.S. government.  On November 3rd, 2010 the Federal Reserve announced a massive quantitative easing plan which will involve the purchase of 600 billion dollars of U.S. Treasury securities by the middle of 2011.  Creating 600 billion dollars out of thin air and using them to buy up U.S. government securities is monetizing the debt.  So Federal Reserve Chairman Ben Bernanke has been caught in a lie.  Will we ever be able to trust a single word that he says ever again?

Monetizing the debt is a desperate act.  It is a signal that we are rapidly reaching the end of the game.  Slamming interest rates all the way to the floor did not revive the U.S. economy.  Hundreds of billions of dollars in extra government spending did not do the trick either.  The U.S. economy is still dying and the U.S. government is now beginning to find it very difficult to locate buyers for all the debt that it is constantly issuing.

So the Fed apparently hopes that this new round of quantitative easing will be a way to finance the exploding U.S. government debt and spark an “economic recovery” at the same time.

But didn’t Bernanke promise that the Fed was not going to do this?

Didn’t he pledge to Congress that the Federal Reserve would not monetize the debt?

Yes, he did.  The following is video footage of Bernanke from June 3rd, 2009 promising that the Federal Reserve would not monetize the debt….

So much for keeping his promises.

But what else can Bernanke do?

The truth is that we are reaching the end of the economic rope and the Federal Reserve has already played all of the other tricks that they have in their bag.

Buying up massive amounts of U.S. government debt and showering the U.S. economy with money is a desperate attempt to keep the shell game going for a few more rounds.

Once upon a time, the U.S. dollar was the strongest currency on the planet.  The rest of the world loved to use it as a reserve currency and they were more than glad to buy up U.S. Treasuries.

But now the mood has changed dramatically.  The rest of the world does not intend to keep lending us well over a trillion dollars each and every year.  The market for dollar-denominated debt is not what it once was.

In fact, Peter Schiff, the CEO of Euro Pacific Capital, believes that the primary reason for this new round of quantitative easing is that the U.S. government is having an increasingly difficult time financing its debts….

At the end of the day, all this deflation talk is a red herring. The true purpose of QE 2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem.

But the markets are not populated by a bunch of idiots.  They are going to see what is going on.  The Federal Reserve is monetizing the debt.  This is going to make U.S. government debt even less attractive to foreign investors as I wrote about yesterday….

As foreigners begin to balk at all of this nonsense, the U.S. government will either have to start paying higher interest rates on government debt in order to attract enough investors, or the Federal Reserve will just have to drop all pretense and permanently start buying up most of the debt.  Either way, once faith has been lost in U.S. Treasuries the financial world will never, ever be the same.

If there comes a point when China and Japan realize that the game is up, they are going to start bailing out of U.S. Treasuries faster than you can say “panic”.  That could create a crisis of unprecedented proportions.  Of course the Federal Reserve could just keep whipping up increasingly large batches of dollars out of thin air to soak up all the excess debt flooding the market, but that kind of a Ponzi scheme would not work for long, and it would likely set off horrific inflation.

In order for the current world financial system to maintain stability, there must be faith in the U.S. dollar and in U.S. Treasuries.  Once faith in those two pillars is gone, it is inevitable that the whole system will come crashing down.

Most Americans have no idea that the entire global financial system is hanging by a thread.  They have no idea that their futures could be radically altered if things go badly.

We like to think that we live in such a “democratic” society, but the decisions on which our economic future rest are in the hands of a group of unelected, unaccountable central bankers.

The truth is that the Federal Reserve is about as “federal” as Federal Express is.  The Fed is not part of the U.S. government.  If you watch interviews with top Federal Reserve officials, they love to talk about how “independent” they are.  In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was “not an agency” of the U.S. government and therefore it was not subject to the Freedom of Information Act.

The institution that has the most power by far over the U.S. economy does not answer to the American people, and the American people are so “comfortably numb” that they don’t even realize it.

In fact, most Americans do not even know that the Federal Reserve, in association with their buddies on Wall Street, caused the first Great Depression.

But Ben Bernanke does.

At a November 8th, 2002 conference to honor Milton Friedman’s 90th birthday, Bernanke actually confessed that Milton Friedman and Anna J. Schwartz were right when they wrote that the Federal Reserve caused the Great Depression….

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

So does that make you feel better?

Ben Bernanke says that the folks over at the Federal Reserve are very sorry that they caused the Great Depression of the 1930s and they promise not to do it again.

Of course we have already seen how much Ben Bernanke’s promises are worth.

With people like Bernanke in charge, there is not a lot of reason for optimism.

Meanwhile, Bernanke and his fellow central bankers are heading down to Jekyll Island this weekend for a grand celebration.

That’s right.

The Federal Reserve is holding a conference this weekend entitled “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve” to celebrate the 100 year anniversary of the infamous 1910 Jekyll Island meeting that spawned the draft legislation that would ultimately create the U.S. Federal Reserve.

They will surely be congratulating themselves on doing such a fine job of running the U.S. economy.

Yeah, they are doing a fine job of running it – right off a cliff and into oblivion.

The Federal Reserve Is Holding A Conference On Jekyll Island To Celebrate 100 Years Of Dominating America: “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve”

The Federal Reserve is going back to Jekyll Island to celebrate the 100 year anniversary of the infamous 1910 Jekyll Island meeting that spawned the draft legislation that would ultimately create the U.S. Federal Reserve.  The title of this conference is “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve”, and it will be held on November 5th and 6th in the exact same building where the original 1910 meeting occurred.  In November 1910, the original gathering at Jekyll Island included U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and many representatives from the upper crust of the U.S. banking establishment.  That meeting was held in an environment of absolute and total secrecy.  100 years later, Federal Reserve bureaucrats will return to Jekyll Island once again to “celebrate” the history and the future of the Federal Reserve.

Sadly, most Americans have no idea how the Federal Reserve came into being.  Forbes magazine founder Bertie Charles Forbes was perhaps the first writer to describe the secretive nature of the original gathering on Jekyll Island in a national publication…. 

Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily riding hundred of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned, lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance. I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written… The utmost secrecy was enjoined upon all. The public must not glean a hint of what was to be done. Senator Aldrich notified each one to go quietly into a private car of which the railroad had received orders to draw up on an unfrequented platform. Off the party set. New York’s ubiquitous reporters had been foiled… Nelson (Aldrich) had confided to Henry, Frank, Paul and Piatt that he was to keep them locked up at Jekyll Island, out of the rest of the world, until they had evolved and compiled a scientific currency system for the United States, the real birth of the present Federal Reserve System, the plan done on Jekyll Island in the conference with Paul, Frank and Henry… Warburg is the link that binds the Aldrich system and the present system together. He more than any one man has made the system possible as a working reality.

It was a system that was designed by the bankers and for the bankers.  Now, the bureaucrats running the system are returning to Jekyll Island to congratulate themselves.  Those attending the conference on November 5th and 6th include Federal Reserve Chairman Ben Bernanke, former Fed Chairman Alan Greenspan, Goldman Sachs managing director E. Gerald Corrigan and the heads of the various regional Federal Reserve banks.  You can view the entire agenda of the conference right here.  It looks like that there will be plenty of hors d’oeuvres to go around, but should the Federal Reserve really be celebrating their accomplishments at a time when the U.S. economy is literally falling to pieces?

Today, 63 percent of Americans do not think that they will be able to maintain their current standard of living.  1.47 million Americans have been unemployed for more than 99 weeks.  We are facing a complete and total economic disaster.

Today, the Federal Reserve has more power over the economy than any other single institution in the United States.  It is the Fed that primarily determines if we will see high inflation or low inflation, whether the money supply with expand or contract and whether we will have high interest rates or low interest rates.  The President and the U.S. Congress have far less power to influence the economy than the Federal Reserve does.

As this election has demonstrated, the American people are absolutely furious about the state of the U.S. economy, but American voters have been mostly blaming our politicians.  They just don’t understand that it is actually the Federal Reserve that has the most control over the performance of the economy.

It would be hard to understate how powerful the U.S. Federal Reserve really is in 2010.  U.S. Representative Ron Paul recently told MSNBC that he believes that the Federal Reserve is actually 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.”

So how has the Federal Reserve performed over the years?

Well, since 1913 inflation has been on a relentless march upwards, U.S. government debt has increased exponentially and the U.S. dollar has lost over 96 percent of its value.

That is not a record to be celebrating.

The truth is that the Federal Reserve was created to enslave the United States government in an endlessly expanding spiral of debt from which it would never be able to escape.  As I wrote about yesterday, that is exactly what has happened.  The U.S. government debt is escalating at an exponential rate.  It is a trap from which the U.S. government will never be able to get out of under our current system.

Now many at the Federal Reserve are touting more “quantitative easing” as the solution to our economic problems.  But anyone with a brain should be able to see that creating a gigantic pile of paper money out of thin air and dumping it into the economy is only going to make our long-term problems even worse.

But the Federal Reserve system was never designed to benefit the American people.  It was designed to make massive amounts of money for the banking establishment.  As I wrote about in “11 Reasons Why The Federal Reserve Is Bad“, the Federal Reserve was created to transfer wealth from the American people to the U.S. government and from the U.S. government to the super wealthy.

The sad truth is that the Federal Reserve is at the very core of our economic and financial problems, and that is nothing to celebrate.

The Big Wall Street Banks Have Found A New Way To Strangle The American People: Predatory Property Tax Collection

It turns out that the big Wall Street banks have found a dirty new way to make loads of cash from U.S. homeowners, and they really, really don’t want to talk about it.  So what is this dirty new business?  America’s biggest financial institutions have become property tax collectors, and it is extremely lucrative.  From coast to coast, the big Wall Street banks are buying up thousands upon thousands of tax liens and are making a killing by socking distressed homeowners with predatory interest, outrageous penalties and almost unbelievable legal fees.  In some areas, the big banks are able to foreclose on these homes in as little as six months.  The elderly and the poor are the most common targets of these practices.  An absolutely brilliant expose in the Huffington Post has brought these issues to light, and it is creating quite a controversy in the financial world.  The big banks are doing nothing illegal here.  Local governments are offering to sell thousands of tax liens and somebody is going to end up buying them.  But something seems extremely unsavory about the big Wall Street banks capitalizing on the economic downturn that they were so instrumental in causing in such a predatory manner. 

Today, millions of American families are barely hanging on to their homes by their fingernails.  Millions are out of work and millions of others are barely making enough to put food on the table.  Meanwhile, property taxes have absolutely soared in most areas of the nation over the past decade.  Many Americans are finding that when that time rolls around they simply do not have a big chunk of extra money to pay a property tax bill. 

So millions of American families, including many that have completely paid off their homes, now find themselves in danger of being thrown out on to the street over an unpaid property tax bill.

For many local governments, the headache of trying to collect on thousands of property tax liens is just too much, so they are glad to “outsource” the work of collection.

So how do the big Wall Street banks get involved?  Well, it goes something like this….

1) The big Wall Street banks set up or invest in shell companies that will disguise who they really are.

2) These shell companies run around and buy up all of the tax liens that they can get their hands on.

3) Predatory levels of interest (in some states as high as 18 percent), fees and penalties rapidly pile up on these unpaid tax liens.  The affected homeowners quickly end up owing much, much more than what the original tax bills were for.    

4) If the collecting firm has to hire a lawyer, then that gets charged to the homeowner as well.  The bloated legal fees for some of these lawyers can end up being the biggest expense of all.

5) If the tax liens do not get paid, the collecting firms move in to foreclose as quickly as legally possible.       

According to the Huffington Post, Wall Street banks such as Bank of America and JPMorgan Chase have been gobbling up several hundred thousand tax liens from local governments.  It appears that “distressed housing markets” are being particularly targeted.

Many of these tax liens are sold in online auctions, so it is unclear if many local government officials even realize who the big money behind many of these shell companies is. 

Once again, this is all perfectly legal, but it is more than a little distasteful.

The following video by the Huffington Post does a good job of summarizing what they found….

The truth is that there is a huge difference between the letter of the law and true justice.

Just consider the following tragic story from the Huffington Post article….

Barbara Carpenter, a 58-year-old disabled Ohio retiree, found herself in such a situation. The former worker for the American Red Cross struggled to save her Toledo home from a JPMorgan entity called Plymouth Park Tax Services, which in recent years has been among the nation’s top buyers of tax liens.

“It’s a great neighborhood and the house is in good condition,”said Carpenter, who paid $67,000 for the one-story home in 2004. But she fell behind in paying her taxes and a certificate for $1,500 in unpaid taxes was sold off to Plymouth Park, which is based in New Jersey.

Carpenter’s lawyer, Joseph Westmeyer, said Plymouth Park routinely charges an upfront fee of around $1,500 as soon as it buys the lien and 18 percent interest on the debt. If they don’t get paid, they foreclose.

“It’s not a good deal for poor customers,” said Westmeyer. Carpenter wound up selling the house in August for less than half what she had paid. Plymouth Park received about $12,000 in legal fees and other charges, including some additional taxes, Westmeyer said, quoting from court records.

Does that sound like an honorable way of making money to you?

Would you like to make your living by throwing elderly women out of their homes and into the street over unpaid tax bills?

Unfortunately, this problem is not going to go away any time soon.  One out of every six Americans is enrolled in a government anti-poverty program.  Tens of millions of Americans are barely hanging in there.  In addition, tens of millions of elderly Americans live on fixed incomes.  Meanwhile, property taxes just continue to go up in many areas of the United States.

Unless the U.S. economy experiences a dramatic turnaround, we are going to continue to see large numbers of Americans get behind on their property taxes, and the big banks will continue to be there to scoop up the tax liens.

Large numbers of poor and elderly Americans that don’t even have a mortgage will lose their homes and it will all be perfectly legal.  Executives at the big banks will be having a good laugh about their huge bonus checks as thousands upon thousands of our most vulnerable citizens are dumped out into the street.

But weren’t the big banks largely responsible for causing the housing crash and the economic meltdown that followed? 

Yes.

But so far none of them is really paying any kind of a price.  The big banks got bailed out by the U.S. government, and now it looks like the Federal Reserve is preparing another round of “backdoor bailouts” to help them out again.

But do the big banks show any mercy on the poor and the elderly who have gotten behind on their property taxes?

Not at all.

This is 2010 – a time when greed dominates the financial world and when most banks don’t seem to know a thing about kindness or mercy.

The Biggest Bank Robbery In History? More Quantitative Easing = Backdoor Bailouts For The Big Banks Without Having To Go Through Congress

The U.S. Federal Reserve is getting ready to conduct another gigantic bailout of the big banks, but this time virtually nobody in the mainstream media will use the term “bailout” and the American people are going to get a lot less upset about it.  You see, one lesson that was learned during the last round of bank bailouts was that the American people really, really do not like it when the U.S. Congress votes to give money to the big banks.  So this time, the financial “powers that be” have figured out a way around that.  Instead of going through the massive headache of dealing with the U.S. Congress, the Federal Reserve is simply going to print money and give it directly to the banks.  To be more precise, the Federal Reserve is going to use a procedure known as “quantitative easing” to print money out of thin air in order to purchase large quantities of “troubled assets” (such as mortgage-backed securities) from the biggest U.S. banks at well above market price.  Some are already openly wondering if this next round of quantitative easing is going to be the biggest bank robbery in history.  Most Americans won’t understand these “backdoor bailouts” well enough to get upset about them, but that doesn’t mean that they won’t be just as bad (or even worse) than the last round of bailouts.  In the end, all of the inflation that this new round of quantitative easing is going to cause is going to be a “hidden tax” on all of us.

These new backdoor bailouts are going to work something like this….

1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.

2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these “toxic assets” at way above market price.

3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets.  The public is told that all of this “quantitative easing” is necessary to stimulate the U.S. economy.

4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.

During a recent appearance on MSNBC, Matt Taibbi of Rolling Stone did a great job of explaining how this all works….

http://www.youtube.com/watch?v=uwhMVB0XzPU&feature=player_embedded

But this isn’t the only way that the Federal Reserve forks over massive amounts of cash to the big U.S. banks.  In a previous article, I described how the U.S. Federal Reserve lends huge quantities of nearly interest-free money to big U.S. banks which they turn around and invest in U.S. Treasuries which bring in a return of three percent or so.  In essence, it is a legalized way for the big U.S. banks to make mountains and mountains of free money.

The truth is that the Federal Reserve does whatever it can to ensure that the big U.S. banks stay fat and happy. 

So what about the small banks?  What happens to them?

Well, the vast majority of the small banks are considered “not big enough for bailouts” and they are allowed to die like dogs.

Don’t let anyone ever fool you into thinking that the U.S. banking system has a level playing field.

For weeks, Federal Reserve officials have been coming out and have been dropping hints about how important it is for them to take “action” and implement another round of quantitative easing in order to help stimulate the U.S. economy.

In fact, during his speech on Friday, you could almost hear Ben Bernanke salivating at the thought of printing more money.

But nobody ever really asks who is going to be the first to get their hands on all this money that the Fed is going to pump into the economy.

The answer, of course, is obvious.

It is going to be the big banks – the same banks that are part-owners of the Federal Reserve and that have tremendous influence over Fed policies.

But even though this is all more than a little shady, is it such a bad thing for the rest of us if the Federal Reserve bails out the big banks and brings some much needed stability back to the U.S. financial system?

After all, if “Foreclosure-Gate” could potentially cause a nightmarish financial meltdown, isn’t it better for the Federal Reserve to step in and soak up large amounts of these toxic assets?

Those are legitimate questions.

Certainly the Federal Reserve has the power to step in and smooth over all sorts of short-term problems by papering them with money, but in the end printing more money will just make our long-term problems even worse.

Whenever a new dollar is introduced into the system, every other dollar in existence loses a little bit of value.

When trillions of new dollars get introduced into the system, it has the potential to create an inflationary nightmare. 

Already, a number of top Fed officials are publicly saying that inflation is “too low” and that we need to purposely generate more inflation in order to “stimulate” the U.S. economy.

Yes, that is just as insane as it sounds, but that is what they are actually proposing.

Apparently many top Federal Reserve officials honestly believe that they can pump trillions into the economy, jack up inflation significantly, and little harm will be done.

But even before “QE2” has begun, we are already starting to see all kinds of little bubbles beginning to develop in the financial system.  For example, commodity prices are skyrocketing right now, and that will soon be affecting the price we pay for food at the supermarket.

We are already on the road to serious inflation and the Federal Reserve has not even fired up the money hoses yet.  So what is going to happen after they pump trillions more into the economy?

Printing more money and giving it to the banks is not going to solve our economic problems.  It is just going to make them worse.

But unfortunately, American voters get no say about any of this.  Our national monetary policy is in the hands of an unelected central bank that does pretty much whatever it wants.   

An economic nightmare is coming, and you had better get ready.

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