The FED Slight of Hand Continues-A Quick Lesson in Creative Financing

Bottom Line—Taxpayers Lose! – Again

 

 The Federal will once again engage in what they call, quantitative easing.  Only strange people with

Barney Frank and Chris Dodd should be in JAIL

beards who walk hunched over would create such a phrase rather than just saying they are Stealing from You.  Why is this theft? 

Quantitative Easing: (QE)

 Let’s say it is the end of the month and you want your son to go to the market and buy milk and eggs but you don’t have any cash.  But, you have a printer hooked up to your home computer so you just print a $10.00 bill and give it to your son who goes and buys the milk and eggs.  You might call this practice Milk and Egg Easing or Household Budget Easing.

 The Feds do something quite similar.  They want to buy something, like US Government Bonds, Gold, or stocks.  Why?  They want to create a better market for the US Government Bonds, manipulate the gold market, or manipulate the stock market.  They have done all of these recently.  So, the Fed gives itself a “credit” to their own account and little Timmy Geithner can print some money for them equal to the credit they just gave themselves.  Like you printing the $10.00 Bill.  Then, they call some of those evil people on Wall Street and buy some US Government Bonds, Gold or Stocks.  

The Feds say they do this because the other thinks they try to manipulate have not worked!  Darn!  The other things that have not worked include: 

  •  Increase Bank Lending:  Lowering interest rates to zero so banks would loan more to us poor schmucks!  That did not work so well.  You ever wonder just how much banks make by borrowing money at zero and charging you 18% on your credit card.  Maybe 18%!
  • Lower Unemployment:  The only explanation I have found for Applying QE to help reduce unemployment……………  I can’t find a rational argument but they say they have to do SOMETHING!
  • Stimulate the Economy:  Ditto to Unemployment. 

Why are they doing this at all?  BECAUSE THEY THINK INFLATION RATES ARE LOW SO THIS PRACTICE WILL NOT RAISE INFLATION TO MUCH SO IT CAN’T HURT!  Gee, isn’t that awe inspiring…!

The Theft!:  This is where the theft comes in.  For every dollar they CREATE out of thin air, those dollars make yours worth less due to the overall increase in the money supply.  Let’s say you have $1,000 and your neighbor has $1,000 and you are the only two people left on earth.  Your neighbor cheats and uses his personal computer to print off $100 extra.  So, now there is $2,100 in circulation, not $2,000.  Therefore your $1,000 is now only worth $950.  Your neighbor’s original $1,000 is only worth $950 too but he has the extra $100 he printed so he just stole $50.00 from you!  Like the Feds and your Government.

Robbing Peter to Pay Paul:  It is actually much, much worse than this.  When they buy our own debt in the form of US Government Bonds, they have, in effect, lowered the value of the bonds for everyone else in the world who is trying to help us stay afloat by buying our bonds.  We just slapped them in the face for helping us.  They have another wonderful name for this practice, it is called “monetizing the debt”.  This is like when you make one credit card payment with another credit card.  Except, the FED does this with Billions of Dollars at a time.

Stock Market Manipulation:  When they mingle in the stock market, they artificially raise the price of stocks and the market goes up.  What goes up, must come …..?  Down.  If you are Joe Schmuck maybe shorting am stock while the Fed is buying that stock, they just invested against your trade and you lost money.  If the Fed decides to sell off their stocks, and you own that same stock, you lose again.  Same is true for gold.  The Fed owns gold.  What happens if they start dumping gold? 

 Clueless:  The Fed and the Government have no idea what they are doing, what the impacts of their actions will be, and they only care about the results to the point they can stay in the cushy jobs and trim their beards.  I have always thought Ron Paul was a little off when he would carry on about abolishing the Fed.  Not so sure now. 

 History of the Fed and the Mess we are in Now:

 Creating the Federal Reserve:  The Fed was created on December 23rd, 1913. The rationale behind creating the fed was to insure a consistent credit market and ease currency uncertainties. Before, credit was either easy to obtain or difficult depending on the value of US Treasury Bonds.  (Get the connection as to why the Fed manipulates the Bond Market)  So Congress, created this monstrosity that is really not accountable to anyone.  The Chairman is appointed by the President of the US but other than that the Fed is autonomous.  If The Fed wanted to raises interest rates to 100% tomorrow, there is nothing stopping them.  If they want to print twice as much money as is in circulation right now, thus devaluing every dollar you have in your pocket by 50%, there is nothing stopping them. 

 The Current Mess:  Why do we have this mess that we are in?  The old Fed guy, Greenspan, also known as “the Bush Tax Cuts were Great before the Bush Tax Cuts were Terrible GUY”, lowered interest rates 13 times from 2001-2003 and lowered the rates from 6.25% to 1.00%.  The interest rates have remained low FOR BANKS as the FED did not want to chance slowing down the economy by raising interest.  At the same time your mortgage, assuming you are a hard-working taxpayer and not a congressman or indigent, hovered around 7% and your credit cards between 8-24%.  Who made all that money in between 0% and 7% on your mortgage or between 0% and 24% on your credit cards?  Remember, politicians are expensive to keep in the manner in which they are accustomed!  Banks have to have lots of money to keep the politicians happy.

 While the Fed was easing interest rates and increasing the money supply by continuing to print new money, congress did not want to be outdone.  They, the Senate and House Finance committees got together with community organizers and the banks and came up with “SUB-PRIME LOANS”.  This is not for you poor schmucks who work and pay taxes and put 20% down on your 30 year mortgage.  They target borrowers who were low-income people who could not afford to repay their mortgage two months after closing.  Quote: “Subprime borrowers typically have weakened credit histories and reduced repayment capacity”.  Loan requirements were lowered to the applicant just stating their incoming and proving they have some cash in the bank.  No Tax Returns, no W-2’s, nothing.   When these people could not repay the loans, Obama, Jesse Jackson, Al Sharpton, Barney Frank, Chris Dodd and other community organizers and politicians blamed the PREDITORY LENDING PRACTICES OF THE BANKS WHO THEY FORCED TO MAKE THE LOANS.

Between the Fed Policy and the Larceny in Congress, the bubbles collided and burst all over the American Taxpayer…  And still are.

Finally:  Pass the Buck to the People:  Between the Fed creating unfounded low-interest rates, massive amounts of “new money in the credit system, and the Congress totally screwing up the banking, mortgage and credit card industry; the Credit and Housing Bubbles were created that burst together in 2006.  Then, if that was not bad enough, THE FED AND THE GOVERNMENT BLAMED YOU THE CONSUMER!  You overspent, were overcommited, and were not good stewards of the money that the government allowed you to keep even though you worked for it.

 RD Pierini

 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

http://en.wikipedia.org/wiki/History_of_the_Federal_Reserve_System

http://www.cnbc.com/id/39604937

http://en.wikipedia.org/wiki/Quantitative_easing

http://www.drudgereport.com/  (10/11/2010)

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