Thursday, September 20, 2012

Our Current Problem 101

Recently my wife asked me for a brief explanation for our current economic troubles that could be understood by normal people. The essay below is what I came up with. I’m posting it here because for all I know there may be some normal people reading my blog.

The root of all our current problems is the Federal Reserve, a monopoly of private banks controlled by five banking companies: JP MorganChase, Citibank, Bank of America, Goldman Sachs and Morgan Stanley. This cartel creates our money (with little to no real government oversight) and lends it back to us at interest rates it sets. That’s its job, and we are not allowed to know very many details about how and why it does it. In 2008, the time of the financial crisis, these five companies collectively owed over $800 trillion dollars when their super-complex and grossly illegal pyramid scheme of making trillions of dollars on home mortgages for poor, uneducated people crashed. That amount was more than 300% of the entire value of the world’s economy! Such an amount could never be paid back. What should have happened is the same thing that happens when a house that is valued at $300,000 falls to $100,000, it goes underwater, and either the mortgage-holder or bank eventually eats the loss.  In this case, the creditors should have eaten their losses (taken a haircut), the banks should have gone into government receivership, the government should have prosecuted them for fraud to recover for taxpayers some amount that was stolen, and the monumental amounts owed should have been forgiven (for the creditors who took on these risks knew what they were getting into).

But that’s not what happened.  Instead, the banks demanded to be made whole for their losses and received the following:
  •           0% interest-rate loans so they can make even more money loaning it out at higher rates (thus screwing non-cartel investors and savers)
  •           The collateral they held (which gives them the right to print money) was allowed to be valued not at the dismal market price but at the original price (and US taxpayers backed this bogus price)
  •           The banks’ “toxic sludge,” the worst of the worthless debt the banks held, was bought up at face value by the U.S. taxpayers (a debt that is not counted in the deficit projections)
The problem with all of this is that none of these actions can really change anything. The amount of debt is so huge it just sucks up all the life of the overall economy to keep these banks on life support (so they can pay their executives huge bonuses). One can rightly ask how the President, Congress and the American people agreed to all of this, but the fact is that none of this was done by the U.S. Congress. It was all done by the banks themselves, acting as the Federal Reserve. They did not even have to report that they borrowed over $29 trillion dollars from the US taxpayers, because most of the Fed’s actions are secret by law. To give one an idea of how much money we are talking about here, one blip on the radar screen was the Fed agreeing in 2009 to have the US taxpayers take over toxic debt from WAMU so JP Morgan could buy it. The cost of this was not even 1% of the total giving to banks that year, but it was more than all the Medicare and Social Security checks sent out for the entire year combined.

How did the Federal Reserve get to be so powerful? Simple, it has been using its right to print US money since 1913 to make a lot of money, and has used a tiny amount of that money to buy off politicians, media, foundations, universities, you name it. How does it make money? By creating money out of thin air to lend it back to us the American taxpayers at interest.  Its goal has been to create a debt-based economy so these banks can profit from our debt (with periodic planned crashes so they can buy up property at fire sale prices). That’s why we have wars, welfare, Medicare, oil subsidies, food stamps, farm subsidies, corporate welfare, etc. (BIG GOVERNMENT). It’s all part of a plan to enslave Americans in debt, and it’s worked so well most Americans don’t even know that individually they owe more than $100,000 a person in this system. Bear in mind, by way of contrast, that the U.S. didn’t even have income tax at all before the Federal Reserve came into being. If we didn’t need it then, we don’t need it now.

Without the Federal Reserve (which is about as Federal as Federal Express), the government could print its own money, and do so to PAY OFF debt instead of create it. If the money the Fed created for its member banks had instead been distributed to American business and people, there would be no talk of unemployment or economic stagnation or China, because the economy would be humming, and people would have LOTS of cash in their pocket. Instead it has gone into the black hole created by the greed of a few banks (the Federal Reserve), from which only the most infinitesimal percentage of the population profits. It’s socialism to protect the monstrously rich from their own mistakes, and we will be paying the price for centuries to come if we don’t wake up.


Jack said...

I didn't become aware of this till 2008. As a writing theme, I've used it--vaguely--a few times. Your site's continuing attack on these developments is hugely admirable.

the walking man said...

I used to preach regularly about debt as cash and the foisting of American consumer debt as the engine of the World's Economy starting about '06/'07.

Tried to tell people to get the hell out of the market get liquid. Few listened then and few understand what happened still.

You pretty much explained the Fed's part, but you have to also include AIG, Fannie, and Freddie as well as te bond rating agencies Moody's and Standard and Poors because they were the quasi agents that insured so much of the banks toxic debt and rated it as AAA which sucked in the heavy hitting pension funds which is also another number not included in the total expressed 16T US debt, loss of pension funds through upward transfer of debt.

You know what tipped me off Bill? When a real estate agent knocked on my door in '04 and offered me 80k for my house which is in Detroit proper, a 1000 sq ft house ina violent but not the most violent at the time neighborhood in Detroit.

I didn't sell but I did research and couldn't understand how my ex neighbors were getting into $200,000 houses on non union wages low skill wages. I asked them and they told me "just had to sign some papers, you can stay here but my kids are finally going to a better school and blah blah blah..."

I started by learning what happened in '29 when only 155 of the American people had money in the market and by '06-'07 I started seeing the same things happening AND knowing what they were. Bubbles. Once I could knew what the "dot com bubble" was, I started to pay attention to the markets.

There was only one way my house increased 400% in value...a bubble was being blown. I made myself as liquid as possible, paid off all my debts, loaned each of my kids enough to pay off all of their credit debt (couldn't afford the student loans) and we all weathered the storm fairly well.

People understand just a touch now but still not enough to know they're lowing another bubble right now...commodities looks like it to me but it could be on the NASDAQ too. either way they will again crash the market, take their puts and shorts and then cash in the insurance again and this time I do believe they are prepared for violence.

3 brigades of the third army permanently stationed in Alabama under North American Command (norcom) for use in case of national emergency and in case of civil unrest in America.

Now i am sure you know what posse Commitatus is and how the above would be a violation of that portion of the constitution. Well they did a couple small town test deployments when the "sheriff asked them for help."

The ACLU took it to trial and the judge threw it out as a merit-less case. The legal authority requested military assistance and no objection came from the governor so it was allowed to stand as a legal action.

So yes the same thing applies, get as liquid as possible right now because we are near the bubble bursting point and with Obama being re-elected they just might burst the bubble in December/January as payback and the final upward transfer of wealth, which is really what our economy has been about since TR regulated the shit out of the monopolies and Trusts.

Using consumer money to move wealth continually upwards into the hands of a few. It is exactly like sexual rape. It is not a sexual heinous act (though it is) but rather a grab for power...the banks 5 are going to rape us again and I think sooner rather than later,

William A. Sigler said...

Well said, Walking Man. As Mitt Romney recently said "fuck the doomed." You are obviously not the intended audience of this piece. Most people we've talked to are spoonfed a diet of fear and lies by the 3-5 media companies that control all we see and hear and don't have the time or capacity to resolve the cognitive dissonance, but human intuition being what it is, everyone knows there is something deeply wrong. It's hard for me to tell this story without reference to a Satanic Bible worth of details, like, say, derivatives (eg AIG facilitating insurance on a house for a neighbor so he can burn it to the ground, or JP Morgan muscling investors to buy "protection" from higher rates while they make sure rates stay at zero "to infinity and beyond.") Not to mention the complete evisceration of our legal tradition so these criminals can make their crimes pay more. I could go on and on, and probably will despite my best intentions not to do so.