David Stockman’s website has some interesting articles describing how our government, the banks, and the Feds are manipulating our taxpayer dollars, increasing the income disparity in this country, and helping to feed the voracious, socialist banks in the EU – that’s right, we support the wastrels overseas and get nothing in return.
While I don’t agree with everything Stockman says, it’s hard to disagree with much of his logic.
An example of abuses we suffer at the hands of bank is in the outrageous taxpayer-funded “gifts” we give to foreign banks in a massive money redistribution scheme.
Foreign banks on Wall Street borrow from money market funds at a teeny, tiny 3-6 basis points and then immediately go to the Feds who pay them 25 basis points for the same monies. It’s called an “IOER payment for excess reserves.” It’s a UN-approved tax on American taxpayers who are on the hook for this.
This goes on day-after-day. The Feds are in charge. It has no connection to actual reality and to the real market.
One trillion dollars of it comes from the common folk who get 3-6 basis points in this redistribution of U.S. monies to foreigners. The money is used to prop up failing socialist financial entities throughout the EU with Brussels in charge.
The money is being passed from the productive to the non-productive, from savers to gamblers. Real market prices are replaced by Mafia-style casino operators.
This is what the Feds do. Remember no one elected them – it is taxation without representation and it’s done to help foreigners who gamble the money away.
We lived with the Quantitative Easing (QE) bond-buying, bank-bailout program, for more than five years, primarily under the Keynesian Ben Bernanke though it started under Greenspan. It’s over, but not really. The Feds have a $4.5 trillion balance sheet.
QE is based on the strange idea that central banks can produce economic growth by manipulating the money.
Money’s only purpose is to provide a stable measure of value to manage the efficient exchange of goods, services, and investments. QE, on the other hand, is a corruption of the stable means of exchange.
QE hasn’t done a thing for growth – nothing. QE works against investment which drives growth.
By the Feds paying interest on these reserves, it means they are holding back economic recovery because capital is going to bad ideas that were dying and deserved to die – it’s not letting the free market work. It’s the government and the banks deciding who wins and loses. The Feds are supporting the very entities that caused the problem.
Last week, because we couldn’t get loans, we printed another trillion dollars to cover debt. It’s a sick system.
We don’t actually print money. The Feds create fiat currency on a computer and it’s backed by nothing. They keystroked $4.5 trillion of it under Barack Obama to keep interest rates low.
We used to adjust interest rates with more nominal interference. QE was a steroidal version of anything we’ve done before.
It’s a big money giveaway to Wall Street banks to fill their coffers. The thinking is that the financial crisis was problematic largely because of the lack of bank reserves. Banks can gamble with invested money and they do it with money that represents a fraction of the value of the investment. It led to a bubble in 2008.
The lowering of mortgage interest rates that were promised to the American people turned out to be for the banks.
The bonds and mortgage-backed securities the Feds took on its balance sheet may never be sold as a result, leading the Feds to printing money and subsidizing banks with taxpayer money forever.
If anything is increasing the income disparity in this country, this would be it. The Feds know it but it’s the price for keeping it all going. They are privately-owned and they are an arm of the banks who own most of the Fed’s stock.
We now have an $18 trillion in debt nationally, not counting unfunded liabilities which bring it to somewhere around $100 trillion according to the Treasury. Ninety percent of our tax revenues go to entitlements. In other words, we can’t meet those obligations in the foreseeable future.
Frighteningly, the last trillion only took a little more than one year to accrue, Stockman reminds us. It took 205 years to get to one trillion in debt. The second trillion took less than five years. It is not hard to see where this is headed.
Do you know what happens when the interest rates start to rise (and they will rise)?
CBN’s Steven Moore tells us that for each one percentage point rise in rates, the U.S. deficit will rise by more than $1 trillion over 10 years. So a 300 basis point rise in rates – nothing more than a return to normalcy – would mean about $5 trillion in federal deficits.
“If that happens, the debt servicing costs grow astronomically and interest payments would become the biggest expense item in the budget. We start to pay more and more taxes just to finance past borrowing,” says Moore, a chief economist at the Heritage Foundation.
We will be Detroit.
Maybe this debt bubble won’t burst. Let’s pray that it doesn’t. If it does, the 2008-2009 real estate crash could look like a picnic by comparison.
According to David Stockman, it all goes back to the substitution of bank fiat credit for real savings from privately earned incomes in order to finance the public debt.
The loss of the gold standard didn’t seem to help.
There’s a lot of criticism of Reaganomics so why did they put it on steroids to build a welfare state?
We’re heading for a financial Armageddon though many still see it as very acceptable.
Mr. Obama has done his share of adding to the debt, extraordinarily so. He will not cut a thing and has spent lavishly since entering office. He will have added more than ten trillion in debt by the time he leaves office. Some believe he did it deliberately to crash the system. Does the motive matter? The effect is the same and frankly, it’s been going on under both parties.
It’s one nasty snowball rolling downhill and it’s hard to see how it can be stopped without even heavier taxation, though that couldn’t begin to cover the debt. No one wants to cut anything, except the military of course, a trend set by Barack Obama.
If you don’t want an army at pre-WW I levels in this dangerous world, you’re called a neo-con. Our robust welfare state keeps growing, however. We are becoming a non-military welfare state waiting for the next bubble, which may or may not happen. With all our new immigrants being given work visas and with never-ending regulations and other government controls, we shouldn’t see real prosperity any time soon.
We borrowed trillions (in today’s dollars) to win World War II – a necessity. We borrowed another $1.8 trillion during the Reagan years to finance winning the Cold War and rebuild the private economy with growth-inspiring tax cuts – well worth it. But most our debt of the last two decades has gone to grow a bigger, more expansive welfare state. Almost half of all American households, according to the U.S. Census Bureau, get a government check or direct benefit from government today. More than one-third of households get some kind of unearned welfare. Definitely not worth it to make American citizens non-productive.
Americans know we are on the wrong path. We all feel it but can we elect the people who will turn it around and will that even be enough?