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Everyone should listen to this well done overview on the principals of the Federal Reserve and how the government is actually owned by a select few, and pull all the strings behind the scenes, and this is keeping all citizens in the dark for the most part. Time to step out from the dark, so take some time to watch or listen to this video. This is a real eye opener for most and reason enough not to have any of your investments tied up in U.S. dollars.
Here is another inside look at just WHO and WHY the market is in one big heap of a mess putting many on the verge....
Quote:
Who's To Blame For the Real Estate Meltdown?
by Dr. Mark Skousen.
Last week, AOL polled its readers to place the blame on the mortgage meltdown that has brought Wall Street to its knees. According to the poll, 55% of subscribers blamed the banks, 17% blamed the homeowners, 15% blamed investors, and only 13% blamed the Federal government.
To understand the real culprit for this "market failure," I am reminded of an old parable in the Bible…
In the parable of the wheat and the tares (Matthew 13:24-30), Jesus tells the story of a wheat farmer whose crop comes under attack by an unknown assailant. In the middle of the night this enemy sows tares (weeds) in his wheat fields.
Soon the farmer’s servants discover that the farmer’s crop appears to be twice the normal size. Yet the master realizes that half the crop is fake – weeds instead of wheat. But he warns his servants not to tear out the weeds for fear of uprooting the good shoots; they must wait and let the wheat and the tares grow up together until harvest time.
Months later, the wheat produces good grain, while the tares are merely weeds and provide no fruit. The servants pull out the weeds and burn them, and store the grain in the barn.
The parable is imminently applicable to the recent wild ride on Wall Street…
Real vs. Artificial Growth
In today’s robust global economy, the wheat represents genuine prosperity – the new products, technologies, and productivity generated by capitalists and entrepreneurs. It represents real economic growth, and when harvested, reflects a true higher standard of living for everyone. Under such conditions, stock prices are likely to rise.
On the other hand, the tares represent artificial prosperity that bears no fruit in the end and must be burned at harvest time. Where does this artificial growth come from? The central bank’s "easy money" policies! The Fed artificially lowers interest rates and creates new money out of thin air (through open-market operations).
This new money, like regular savings, is invested in the economy and stimulates more growth and higher stock prices – higher than sustainable over the long run.
Since the 9/11 terrorist attacks, investors put most of the new money in real estate, and the banks and financial institutions encouraged them with their easy terms.
Who is Today's Financial Devil?
Who is the enemy who sows artificial prosperity in real estate and stocks? Alan Greenspan. (Or, to be more accurate, the Fed and central bankers.)
Starting in 2002, Greenspan & Co. aggressively expanded the money supply and lowered interest rates far below the normal market. Greenspan himself admitted (wrongly, it turned out) that he feared that the U.S. would go the way of deflationary Japan. His Fed gradually cut rates to 1% by 2003.
Not surprisingly, the new money went into risky mortgages. The banks and investment companies found it extremely profitable to encourage profligate homebuyers to buy bigger and bigger homes with little down and less financial background checks.
Look at the following chart, courtesy of Jerry Bowyer.
As Greenspan & Co. lowered the Fed Funds Target Rate from 6% to 1%, banks borrowed cheaply from the Fed window, and invested in risky mortgages. The subprime mortgage market took off like a rocket, from 2% to 14% of all mortgages over a five-year period (2000-2005). In 2003, the year of the great money flood, when the Fed cut rates to only 1%, the subprime lending went from 4% of total lending to more than 10%. That’s in one year!
But there is no free lunch, as sound economists have warned repeatedly. At some point, the harvest time comes and the wheat must be separated from the tares. This is the crisis stage, where the boom turns into the bust. Now it’s harvest time, and we are weeping the effects of the Greenspan era.
The Greenspan Blunder
On August 7, The Wall Street Journal did a major front-page story on "How Credit Got So Easy And Why It's Tightening." The authors quoted Greenspan saying in 2003/04: "I don't know what it is, but we're doing some damage because this is not the way credit markets should operate."
Moreover, at the time, Greenspan brushed off an idea to boost scrutiny of subprime mortgage lenders. A former Fed governor told The Wall Street Journal that he proposed to Greenspan in or around 2000 that the Fed should start sending examiners into the offices of consumer-finance lenders that were units of Fed-regulated banks. But the Fed official said, "He [Greenspan] was opposed to it, so I didn't really pursue it."
The lesson is clear:
There is no market failure here. The collapse in the subprime lending market and the subsequent credit squeeze can be laid at the feet of our Fed officials, primarily Alan Greenspan, the so-called "maestro." And now we are paying the price.
Only the Fed can extricate out of this mess, and not surprisingly, it is working in concert with the other central banks to inject massive liquidity to bail out the banking system. But it hasn’t been enough to forestall a financial crisis. Last Friday, it wisely cut the Discount Rate by half a percentage point, but it will probably need to do more before the credit and stock markets show a solid recovery.
When will we learn?
Globalization and supply-side, free-market policies have justified genuine economic growth and higher stock prices over the past two decades. But "easy money" policies have at the same time created an artificial boom and "irrational exuberance" on Main Street and Wall Street.
Ignore this lesson at your own peril. Remember the parable of the wheat and the tares.
I find these posts very interesting. I have no direct knowelge of this, but I have been hearing from a few different people that the Fedral reserve is scheduled to close on the 19th of September and that we will going back to the gold standard. I do no know if this is true or it will even happen, but your posts are very interesting, if this rumor is true
Benzboy
Even if the Federal Reserve Board is legitimately trying to help the US economy, it is ridiculous to believe that a tiny group of people are smarter than a free market. The economy is way too complex for few egomaniac economists to make "educated" decisions about managing the US economy.
Furthermore, the idea of creating an independent Federal Reserve that answers to no one goes against the whole concept of a representative republic. The Fed should simply not exist.
Everyone should listen to this well done overview on the principals of the Federal Reserve and how the government is actually owned by a select few, and pull all the strings behind the scenes, and this is keeping all citizens in the dark for the most part. Time to step out from the dark, so take some time to watch or listen to this video. This is a real eye opener for most and reason enough not to have any of your investments tied up in U.S. dollars.
Awesome, scary, depressing, MUST LISTEN TO! Thanks Mike. I guess I have known all of this all along but you never want to really believe it. Now Bush has declared the national guard of Iran a Global Terrorist Organization giving the USA an excuse to bomb their training camps. I guess that if Iran as much as fires ONE shot in defence there will be another war. I am beginning to think that all Governments are rotten to the core including our Australian Government who BTW has an illegal Constitution. Thanks again Mike, very interesting indeed.
I find these posts very interesting. I have no direct knowelge of this, but I have been hearing from a few different people that the Fedral reserve is scheduled to close on the 19th of September and that we will going back to the gold standard. I do no know if this is true or it will even happen, but your posts are very interesting, if this rumor is true
Benzboy
The US gold reserve at Fort Knox is so depleted that it could not support a gold standard in any way, shape or form. It is interesting to note that in the old days with a gold standard, Fort Knox had 2/3 of the world's gold supply.
Everyone should listen to this well done overview on the principals of the Federal Reserve and how the government is actually owned by a select few, and pull all the strings behind the scenes, and this is keeping all citizens in the dark for the most part. Time to step out from the dark, so take some time to watch or listen to this video. This is a real eye opener for most and reason enough not to have any of your investments tied up in U.S. dollars.
As soon as I sell my remaining shares of stock in the NYSE/NASDAQ...I will be totally free of USD investments with the exception of my house and a bank account used to pay bills. All else is in Euros, Dinars and some Dong.
As soon as I sell my remaining shares of stock in the NYSE/NASDAQ...I will be totally free of USD investments with the exception of my house and a bank account used to pay bills. All else is in Euros, Dinars and some Dong.
Exactly,
No matter what one believes will happen with FED, one thing remains consistant, the FED is powerful, and who does it answer too? Not the average citizen, that is for sure.
As to FED being disolved, sounds good to me, and as to returning to gold standard, not in a million years, the scam is too far along and there is no turning back with trillions in funny money now in circulation. Does anyone know what the truth is about what is backing the dollar? No, it is all based on smoke and mirrors, and that is why we see the dollar dropping in value, because everyone is now seeing this. All it will take is China to pull out it's U.S. investments and it is all over. Now isn't that a comforting thought, the Chinese are holding Uncle Sam's you know what. lol
Interesting subject, that is all I am saying, and the more you know, the less you will blow when the dollar potentially crashes, along with all other U.S. dollar investments, including real estate. We are already hearing the R word, never mind the housing crash which has been the only reason for economic boom over the past 17 years. We are living in uncertain times, so no matter what you personal opinions are, it never hurts to learn more to protect your assets.
The US gold reserve at Fort Knox is so depleted that it could not support a gold standard in any way, shape or form. It is interesting to note that in the old days with a gold standard, Fort Knox had 2/3 of the world's gold supply.
The Gold at Ft Knox is "Owned" by the U.S.Treasury, not the Federal Reserve System. I believe the Gold at Ft. Knox is still valued on the "Books" at $200/oz and not at the Market Price of $665..
Last edited by Bubba Dinar; 27-08-2007 at 05:31 PM.
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Interesting History On Federal Reserve.
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