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Tag Archives: Federal Reserve

Debt-Based Monetary System Demands Ever More Debt—Part II—Ponzi Schemes?


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Is our Debt-Based Monetary System a Ponzi Scheme?  [Courtesy Google Images]

Recently, in Part I of this series, I promised that in Part II, I’d explain “why” the survival of our debt-based monetary system (DBMS) depends on the creation of ever more debt. I argued that our massive National Debt is not an accident or evidence of political malfeasance, but rather an intentional and necessary consequence of accepting our debt-based monetary system (DBMS). I argued that our DBMS can’t survive without going ever deeper into debt.

I compared “payments” (which are tangible, real assets like gold or silver coins) to “promises to pay” (which are intangible, paper debt-instruments like paper dollars). I warned that, given the choice between receiving a tangible “payment” and an intangible “promise to pay,” only a fool would take the paper “promises to pay”.

I illustrated my argument about “promises to pay” by reminding readers of how many times they had made or received promises that had failed. My point was that promises are easily made and routinely broken.

So, I suppose it should come as no surprise that my promise to use this week’s article to explain the “why” behind the debt-based monetary scheme will also be broken. I began to write this second article with some background on “Ponzi Schemes” (which is how I and others frequently describe our DBMS).  But, when I looked into “Ponzi Schemes,” I discovered that maybe that’s not the most accurate way to describe our DBMS. I also realized that maybe I should try to discern and describe the nature of our DBMS before I got into the “why”.

Result? Here, in Part II of this series of articles we’re going to explore whether our DBMS is really a “Ponzi Scheme” or if it’s something else. Then, in Part III (coming soon) I’ll present my notions concerning the fundamental “why”.

I promise.

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“Helicopter Money”


Helicopter Money [courtesy Google Images]

Helicopter Money
[courtesy Google Images]

Control of the economy is based on two sets of powers:

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1) The Federal Reserve wields the monetary powers which include control over interest rate and over the supply of currency.

2) The U.S. government wields the fiscal powers which include raising or lowering taxes, raising or lowering borrowing, and increasing or decreasing government spending on benefits, subsidies and wars.

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For the past year, we’ve heard the Federal Reserve say repeatedly that:

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1) The Federal Reserve has exhausted its monetary powers and is no longer capable of using previous, “conventional” monetary strategies like QE (Quantitative Easing; printing and injecting more currency into the economy) and ZIRP (near-Zero Interest Rate Policy) to stimulate the economy back to a “recovery”.

I believe the Federal Reserve’s claims that it’s currently helpless to do much more to “stimulate” the economy with monetary policy are true.

If the Fed’s not fibbing, then only the U.S. government remains to engineer an economic “recovery” by means of its fiscal policy. However,

2) The U.S. government is unwilling or unable use its fiscal powers to raise taxes and/or borrow more currency to provide enough additional “stimulation” to cause an economic recovery.

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Fed delayed rate hike but claimed to “keep its options open”


Maybe We Won't Have to "End The Fed"--Maybe it Will End On It's Own, Under the Weight of its Own Lies, Fraud and Declining Power. [courtesy Google Images]

Maybe We Won’t Have to “End The Fed”–Maybe it Will End On It’s Own, Under the Weight of its Own Lies, Fraud and Declining Power.
[courtesy Google Images]

I wrote the following article in June just after the Federal Reserve announced that it would not raise interest rates.  It wouldn’t been more timely, if I’d published then.  But, it was lost in the piles.  However, even though the article is late, there’s still an insight to be gained from reading it.

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In June, the Federal Reserve declined to raise interest rates.  In response, Yahoo Finance reported:

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The Federal Reserve pushed back its plans to raise its benchmark short-term interest rate, a widely expected move following a series of mixed US economic reports.

After a two-day policy meeting, the Federal Open Market Committee unanimously voted to hold the federal funds rate between 0.25% and 0.50%, citing weakness in recent employment data.”

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That “weakness” was a surprising jobs report that, although economists had generally expected about 162,000 new jobs to be created in May, only 38,000 jobs were actually created—”the lowest level in six years.”

Although the unemployment rate has declined, job gains have diminished,” the central bank wrote in its statement.

Say whut?

Does it make sense that the “unemployment rate declined” at the same time that the number of “jobs gains diminished” from an expected 162,000 to just 38,000? I won’t say that’s impossible, but it seems odd that, even though expected “job gains” fell by 76% (from 162,000 to an actual 38,000), the unemployment rate nevertheless continued to decline.

If the unemployment rate really declined, it sounds more like 124,000 people (who were expected to get new jobs but didn’t) simply “disappeared” from the unemployment rolls. They didn’t get jobs. Instead, they were simply deleted from unemployment calculations.

Result? Unemployment rates fell mathematically, but not actually.

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Posted by on July 12, 2016 in Employment, Federal Reserve, Unemployment

 

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“Political” Limits on the Fed’s Ability to Print More Fiat Currency?


Printing "Monopoly Money" to Stimulate the Economy [courtesy Google Images]

Printing “Monopoly Money” to Stimulate the Economy
[courtesy Google Images]

Most people believe that the Federal Reserve has an unlimited capacity to print more fiat dollars and disperse them into the US and global economies.  Most people believe that the Fed will soon start another round of Quantitative Easing (“QE”; fiat currency printing) to support our sagging economy.

I have my doubts.  

Over the past several months, I’ve written more than once that I suspect that there’s a limit to the amount of fiat currency that the Fed can print.  More, I suspect the Fed is already encountering that limit and has lost its capacity and/or will to mass-produce more fiat dollars for another round of QE.

I can’t prove it and wouldn’t necessarily bet on it, but I’m unconvinced that we’re going to see another round of QE in the next few years.  

Some of the people who read this blog have posted comments that disagreed with my speculation about “limits” on the Fed’s ability to print more fiat currency.  I started to reply briefly to one of their comments but my reply grew in size until I realized that I was writing an “article” rather than a “comment” and might as well post it for all as an article on this blog:

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Posted by on May 28, 2016 in Federal Reserve, Fiat Currency, Fraud

 

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“Worth A Shot” Economics


Janet Yellen: the Fed's "It's Worth A Shot" Gunslinger [courtesy Google Images]

Janet Yellen: the Fed’s “It’s Worth A Shot” Gunslinger
[courtesy Google Images]

Casey Research recently published an article entitled “Let’s Try Giving out Free Cash”. Well, that certainly sounds like an idea that could catch on with the general public. But what’s it all about?

It’s about government trying to stimulate the economy by handing out free “helicopter money” directly to all the people rather than to the “too big to fail banks”.

Casey Research explained:

 

“Economist Milton Friedman coined the term “helicopter money” in the 1960s. He said that in the event of an economic contraction, the government could drop free cash from helicopters to stimulate the economy. People would spend the free money, causing the economy to grow. Friedman likely never took the cartoonish idea seriously. However, last week, former Fed chairman Ben Bernanke said helicopter money could be worth a shot.”

Gee, there’s a slogan sure to inspire public confidence: “Helicopter money—it’s ‘worth a shot!”

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They Pretend to Pay Us; We Pretend to Work


Central Planning = Communism "From each according to his bank balance; to each according to his political connections." [courtesy Google Images]

Central Planning = Communism
“From each according to his bank balance; to each according to his political connections.”
[courtesy Google Images]

During the Soviet Union’s final 15 or 20 years, there was a “joke” that was both cynical and popular among Communist workers:  “They pretend to pay us; we pretend to work.”

I believe the attitude expressed in that “joke” was a fundamental cause for the “evil empire’s” demise.  The government wasn’t really paying the people for their work.  The people weren’t really working for their “pay”. 

Everyone was lying.  The Communist government lied about paying people.  The people lied about working.

The resultant breakdown in the relationship between the government-employer and the worker-employees destroyed what was once the second most powerful nation the earth had ever seen.

There’s a lesson in the USSR’s demise about the need to really “pay” people for their work and stop all the lying.  

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The Trouble with NIRP


ZIRP (Zero Interest Rate Policy) gives way to NIRP (Negative Interest Rate Policy) [courtesy Google Images]

ZIRP (Zero Interest Rate Policy) gives way to NIRP (Negative Interest Rate Policy)
[courtesy Google Images]

Speaking of NIRP (Negative Interest Rate Policy) Andy Hoffman recently wrote,

 

“I now believe negative interest rates for the entire world is inevitable; and with them, the imposition of increasingly draconian capital controls—from FATCA and FBAR-like reporting requirements; to limitations on withdrawals and capital exportation; and ultimately, “cashless societies” in which investors are forced to hold savings as digital deposits at insolvent banks—In which, arbitrary government decrees like negative interest rates—will be used to not only confiscate wealth, but destroy all remaining remnants of capitalism.”

 

A dire warning, indeed—but what, exactly, is “NIRP”?

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