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.