Wednesday, December 17, 2008

When the Dollar Becomes Worthless? What Then?

Wasn't it Albert Einstein who said, "Insanity is doing the same thing over and over again and expecting different results"? Isn't that what the Federal Reserve is doing? Cheap money got us into this mess, so, how exactly is cheapening it even more going to save us?

The Federal Open Market Committee (FOMC), the policy making arm of the Federal Reserve, in response to the financial crisis and committed to making sure liquidity remains in the system, cut the interest rate banks charge each other on overnight loans to an all time low, ranging between 0-0.25%. This aggressive move intends to "promote the resumption of sustainable economic growth and to preserve price stability."

In addition, the Fed promised to use all the tools at their disposal to speed up the process of economic recovery, including, purchasing Treasury notes and bonds to bid up the price and lower the yield, essentially, lowering the entire Treasury yield curve - the spread between the federal funds rate, and the 10-year Treasury note yield which is linked to the pricing of traditional fixed-rate mortgages. In reality, the Federal Reserve is using the crisis as an excuse to trade U.S. Treasuries for toxic debt, hence, their reluctance to disclose the recipients of $2 trillion.

It all sounds good, but why do visions of people hovered over cash-filled wheelbarrows, lined up outside the local store, waiting to buy a loaf of bread, stream through my mind?

Massive liquidity injections - Greenspan's hallmark - created an excess of cheap money, which, in turn, fueled the debt bubble which, in turn, caused the colossal rise in home prices. And, now, that the bubble has burst, sparking a financial crisis...what are we doing to repair the damage? The exact same thing that caused it...printing even more money. When borrower income is insufficient in relation to its debt, the Federal Reserve has no power to be a borrower of last resort, yet they are running the show, portraying themselves as martyrs for the cause. expanded the monetary base by 76%.

"Like gold, US dollars have value only to the extent that they are strictly limited in supply. But the US government has a technology called a printing press (now its electronic equivalent), that allows it to produce as many US dollars as it reduces the value of a dollar in terms of goods and services..." - Ben Bernacke
So, why, in the midst of economic and fiscal meltdowns, do we continue to "trust" these politicians who have turned our nation’s fate over to private bankers and corporate crooks? We know damn well that Henry Paulson, with his long history of intimate connections to the political and financial elite, and politicians do not have the public’s welfare as a priority. These major players along with central bankers lock in their profits all the while driving down the living standards of the population.

The banks have intentionally failed us miserably, yet use the crisis they have created - from their own fraud and criminal behavior - as an opportunity to generate new profits for themselves. The media coverage of the auto industry bailout is providing cover for TARP and the actions of the Treasury and Federal Reserve. The scrutiny of the auto workers and ever increasing standards to be met in comparison to the bankers, for one-fiftieth of the amount, speaks volumes.

Consider the $700 billion bailout, once the domain of the Treasury is now in the process of being inadvertently transferred to the Federal Reserve, a private corporation and therefore is not required by law to disclose their accounting and does not have the burden of oversight. The Fed has loaned trillions of dollars of our money, with no oversight or accountability.
"In the macroeconomic sense, foreclosure reduction is an essential part of getting us out of the problem we're in. The refusal so far to use the money to that purpose has been I think a violation of the intent and undermines the ability to get the votes in this Congress to do things in the future." - House Financial Services Committee Chairman Barney Frank, D-Mass
Just like the trillions of dollars that have gone unaccounted for during the Iraq War, trillions of dollars are now being transferred in the largest transfer of wealth in history.

How do they get away with robbing us blind, so easily, considering their "secrets" are hidden in plain sight? Well, besides relying on the vast majority of people to act like sheep, and the fact that anyone who is perceptive enough to figure out what is going on is immediately branded a crackpot, one tried and true method is cooking the calculations of economic and government reporting. By altering the way certain statistics are calculated - such as the inflation rate, unemployment rate, GDP, etc - and disclosing only what they want us to know, it has proven to be a great way to keep people in the dark and in denial of what's really happening.

"In politics, nothing happens ‘by accident.’ If it happened, you can bet it was ‘planned’ that way." - Franklin D. Roosevelt


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