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Why the Federal Reserve Is A Threat to Little Old Ladies

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By bgamall


The Federal Reserve is a Threat to Little Old Ladies

Update: The United States government debt will be in excess of 100 percent within 5 years, according to Bill Gross, manager of PIMCO funds. The danger of this massive debt is obvious. It could 1. weaken the ability of the US government to become free of moneychanger international banker debt or 2. cause a default of the United States, which could result in a currency devaluation and possibly a new reserve currency that is WORLDWIDE.

There are many east coast professors who want a one world currency. (See the link for "We Already Have One World Government" below.) The moneychangers will have absolute power once this is accomplished and they have near absolute power now. The cost to borrow money in the USA will SKYROCKET. Prosperity in the United States will become even more difficult to achieve, putting the country at risk.

Why would the federal reserve be a threat to little old ladies? Because they have decided to purchase treasury bonds out of money created from nothing. The ultimate immediate impact of these purchases is to:

1. give more business to the banks,

2. keep interest rates low, (since they have already driven short term rates to zero through monetary policy so they can do nothing there), and

3. worst of all, to debase the value of the dollar.

The first two reasons would be ok, except that to decrease the value of the dollar sets a dangerous precedent. The result is that already overpriced assets, such as cars, houses and food will not fall to fair value. Gas could go through the roof with a weak dollar.

All this will likely not be accompanied with appropriate wage increases or cost of living increases to the little old ladies of the USA which are generally capped This is, in effect, a tax, a market manipulation, a government interferance into the free market.

You are saying, "what else is new", but this is indeed new. The fed is not in the habit of debasing the currency of the United States in this fashion. What is happening is that the government prints treasury bonds. The fed prints money. Then they make an exchange, and the money that is used to purchase treasuries is not coming from production of goods and services.

Evidently, Bernanke and the fed just want to steal from the savings of the little old ladies, and then they want the same little old ladies to go out and buy a Mazerati or something on credit! Helicopter Ben is messing up the economy in very unpredictable ways.

If Americans start borrowing up to their eyeballs when they are already tapped out what good result can come of this?

 


Unintended Consequences of Helicopter Ben's Currency Debasement Policy

There are intended and unintended consequences of the policy to buy up bonds by the Federal Reserve Bank. The first, and maybe intended consequence, is that China will be happy for awhile because their bonds will be worth more, backed by Helicopter Ben's purchases of more of those bonds.

But remember, we would not have to be buying bonds if we weren't printing so many bonds because of our refusal to nationalize the banks. Our refusal to let the bondholders of the banks and insurance companies take shared pain and our continual raiding of the treasury to bail out the likes of AIG is making it necessary to buy these excess MBS, GSE and Treasury bonds, quelling our creditors' (like China) concerns.

There is a worry that there will be so many bonds coming onto the market that demand will dry up. While that is doubtful there could be softening of demand, ultimately defeating the aim of the Federal Reserve.

But there could be other unintended consequences. One unintended consequence is that inflation could rage in the near future causing those who buy houses at the new low rates to be trapped in their homes by massively rising interest rates. These high rates will be needed to stop the raging inflation that is most assuredly coming. America has not used these banana republic methods to spur economic "growth" in the past. This is a disturbing development.

I have been warning people not to buy houses because they are overpriced still, and now the added risk of higher interest rates in the future has become even more likely than before.

Warning, this effort to stimulate the housing market is a trap. It is no less of a trap than the trap of no doc liar and adjustable rate loans!! You have been warned!

Of course, if the stimulation of printing money doesn't work then we will be in even greater financial trouble sooner. The fed is at a crossroads. If they do not buy enough of the treasuries they will not be able to lower interest rates on 10 year bonds, the benchmark for fixed income mortgages. But if they now increase their purchases they will only temporarily be able to lower those rates, because inflation will rise as the ugly gorilla in the room.The fed is at a crossroads and I believe that they are boxed in.

Is Jim Rogers or Ben Bernanke right about the outcome of this currency devaluation madness?

  • Jim Rogers is right. We need to save, not borrow.
  • Ben Bernanke is right because Cramer says so.
  • I don't care yet.
See results without voting

Sobering Evaluation of Our Banana Republic Debt Explosion


My Seeking Alpha Economic Commentary

  • U.S. Weekly Jobless Claims: Why You Can't Trust Them

    Daryl, here is proof of manipulation of the retail sales figures. Did this myself with a little research: hubpages.com/hub/retai... - 31 hours ago

  • Monetary Inflation Index Scores New High

    If there is little demand at home, the wholesale folks will get creamed, unable to pass this higher cost onto a strapped consumer. Wages aren't going up so it won't happen that inflation hits our economy anytime soon. If it does people will stop buying, driving, and doing anything. Deflation is a raise, while inflation is going to kill the housing market. - 31 hours ago

  • Consumer-Driven Deflation? Not Even Close

    The deflation occurring in the housing industry has to do with fewer sales and less demand. Less demand is deflationary. The government is inflating but the populace is deflating. The jury is out on who will win. As an example, milk went to 5 dollars per gallon and people quit buying. When gas goes to 4 dollars per gallon people will quit driving. We are deleveraging. That is highly deflationary. So it is a race. I don't think the government can win this race. Housing is a key factor in making inflation work and housing is dead in the water. - 31 hours ago

  • The FSB's Big, Bad 30

    Citibank was not on the original list published by Reuters. - 2 days ago

  • The Debt Crisis Is Going Public

    This means nothing. So some have saved. It doesn't do away with the debt. And it doesn't do away with what Wells Fargo has said is a certain continuing real estate decline. So much rosy talk, so little time. On Nov 29 05:55 PM bbro wrote:> The Household debt service payments plus government debt service> payments - personal savings is 8.65% of GDP the lowest level since> > 1995. - 3 days ago

  • The Debt Crisis Is Going Public

    Household debt is solved? Who says author? Where is your link to this nonsense? - 3 days ago

Marc Faber on Economic Depressions


Why the Federal Reserve Is A Threat to Little Old Ladies in the News

  • Dollar up as Fed sees recovery gaining tractionWashington Post1 second ago

    NEW YORK -- The dollar was slightly higher Wednesday after the Federal Reserve said regional economic activity has generally improved and consumer spending is stronger, even as employment and commercial real estate remain weak.

  • Dollar Extends Gain Versus Euro After Beige BookMalaysiaNews.net1 second ago

    NEW YORK -- The dollar extended gains versus the euro on Wednesday after the Federal Reserve's Beige Book report said the U.S. economy "improved modestly" in late October and November, with moderate ...

  • Dollar mixed ahead of Beige Book, ECB meetingINO News1 second ago

    (AP:NEW YORK) The dollar was mostly higher Wednesday ahead of the release of the Federal Reserve's Beige Book and the European Central Bank's policy meeting on Thursday.

  • Dollar mixed ahead of Beige Book, ECB meetingSan Francisco Chronicle20 hours ago

    The dollar was mostly higher Wednesday ahead of the release of the Federal Reserve's Beige Book and the European Central Bank's policy meeting on Thursday. The 16-nation euro dipped to $1.5042 in afternoon trading in New York from $1.5096 late Tuesday, while... United States - Bank of Japan - New York - New York City - List of economic reports by U.S. government agencies

  • There are dire implications for U.S. if dollar loses status of reserve currencyReno Gazette-Journal2 days ago

    As a corollary to the "time bomb" of a devaluing dollar, which we covered in an Oct. 26 column, there are dire implications for the United States if the dollar loses its status as the world's reserve currency.

What do you think about our Banana Republic purchase of more bond debt?

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bgamall profile image

bgamall  says:
4 weeks ago

I have not decided whether the long term outcome will be deflation or inflation. But the Fed has the play either way. If it is inflation, then the Fed will continue to juice the stock market. But we aren't sure how long they can do that. There may be a swing to a disinflation, or even an outright deflation if unemployment remains high and if credit remains tight.

Either way the Fed wins. If assets go up, the Fed wins. If the assets go down, the Fed gets to sell their excess treasury bonds without raising interest rates.

And I sort of think that the outcome will be deflationary because the banks will need to have greater capital for the coming capital requirements. Likewise, I think that the demand for bonds will weaken as the Fed is now ceasing this purchasing of treasuries. We will see.

MikeNV profile image

MikeNV  says:
4 weeks ago

The Federal Reserve has got to go. In 2002 congressman Ron Paul gave a speech in the House of Representatives that asked for the Federal Reserve to be abolished.

Read the speech here: http://www.house.gov/paul/congrec/congrec2002/cr09

The inflationary debt model has always worked against the people. Enslaving a society through debt is a power play. People need to wake the hell up and see what is going on. The Fed is the very reason we are in this crisis. Our currency is made up, fabricated, and backed by nothing. This is a very simple principal yet people are too stupid or uneducated to recognize it?

Want to know who really owns the Federal Reserve (It's not you the people and it's not the Federal Government)

http://hubpages.com/hub/The-Most-Appalling-and-Pow

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