When the banking cartel succeeded in creating the Federal Reserve Bank in 1913, control of money in the United States was put into the hands of bankers whose sole purpose is to enrich themselves at the expense of the citizens of the country. Their relentless printing of money has resulted in the dollar losing 96% of its value since 1913. The printing of dollars has allowed politicians to spend money today and make unfunded commitments decades into the future. The systematic inflation created by the Federal Reserve is immoral as it impoverishes the middle class and senior citizens for the benefit of bankers, the elite rich and entrenched politicians. Much of the moral decay in our nation can be traced to the manipulation of money in the last 8 decades. During the 1950's, 1960's and into the 1970's, a family of five could be supported with a father working and a mother staying at home with the children. Today, due to relentless inflation, the average family of four needs to have both parents working to maintain a similar lifestyle. Inflation adjusted median household income has been stagnant since 1970. The social pressures caused by the Federal Reserve induced inflation such as increased divorce, children raising themselves, and focus on material possessions has resulted in a society whose fabric is tearing.
The Federal Reserve's mandate to keep short term interest rates steady and conducive to long-term growth has been a farce. The interest rate policies of the Federal Reserve have caused every financial crisis since 1913. The Great Depression from 1929 to 1940 is debated endlessly regarding FDR's social programs and whether they helped or hurt. What is rarely discussed is the fact that the Federal Reserve's loose monetary policies in the 1920's created the disastrous stock market crash and the depression that followed. Milton Friedman explained the decadent relationship between banks and the Federal Reserve:
"Banking is a major sector of the economy in which no enterprise ever fails, no one ever goes broke. The banking industry has been a highly protected, sheltered industry. That's because the banks have been the constituency of the Federal Reserve."
Alan Greenspan's interest rate decisions and belief that financial institutions did not need to be regulated during his reign as Federal Reserve Chairman from 1987 to 2006 were by far the most significant cause for the worldwide financial system collapse. Greenie trained Wall Street to expect the Federal Reserve to bail them out whenever their horrific financial bets went south. He created the moral hazard that eventually led to the recent collapse. He did it in 1987 after the stock market crash, in 1990 when Citicorp was rescued for the 1st time, during the Reagan initiated S&L crisis, the Mexican peso rescue, the Asian currency bailout, when Myron Scholes and his models brought down Long Term Capital Management, prior to the Y2K fake crisis, after 9/11, and lastly during the 2003 false deflation scare. These bailouts encouraged the extreme risk taking and 40 to 1 leveraging that occurred between 2003 and 2008. Allowing financial institutions to not have to accept the consequences of their irresponsible actions was and is wrong. Ben Bernanke has continued this immoral policy of bailing out corrupt bankers at the expense of prudent bankers and prudent citizens.
The reduction of interest rates to 1% in 2003 by Greenspan encouraged consumers, investors, banks, hedge funds, and investment banks to go on the greatest debt financed buying binge the world has ever seen. By "saving" the idiots who lost their shirts in the internet bubble, Greenspan created a debt bubble of epic proportions. Lessons about margin debt and excessive leverage that should have been learned during the 2000 – 2002 stock market crash were forgotten by 2004, with margin debt reaching $381 billion in 2007, 40% higher than the NASDAQ peak in 2000. Investment banks increased their leverage from 10 to 1 to as high as 40 to 1. Consumers used home equity and credit cards to live way above their means. All of these choices were bad decisions. Very simply, these decisions made freely by millions of people were wrong.
The chart below is the clearest visual representation of why those proclaiming green shoots sprouting are either, liars, knaves, or fools. The green shoots are actually poison ivy. Real disposable income has only risen fourfold since 1960. Real household debt rose at virtually the same rate as disposable income from 1960 to 1980. By 2009, real household debt had increased by twelvefold. The miraculous Reagan Revolution was nothing but a debt induced fraud. All of the apparent wealth in America has been a gigantic sham. The McMansions, fancy cars, HDTVs, jewelry, and other "essential" gadgets were not bought with earned income. The Federal Reserve and their banking brotherhood leant billions to delusional Americans, convincing them to live for today and not worry about tomorrow. But now tomorrow has arrived. Housing "wealth" continues to plummet, stock "wealth" is down 40% in 18 months, and our old friend household debt remains stubbornly in place. This debt must be paid down before any green shoots can take permanent root. Any policy that encourages the expansion of consumer debt would be immoral, wrong and foolish. This is the policy that the Obama administration has chosen.
Something Wicked This Way Comes
"No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby."
H.L. Mencken
Americans are still infatuated with President Barrack Obama. He is a dynamic speaker and shrewd manipulator of public opinion. After eight years of George Bush's narrow minded demagoguery, Obama's appearance of intelligence and moderate rhetoric have been refreshing to many. His words may be comforting but his policies, if fully implemented, will lead to an irreversible decline of the American Empire. The chances of reversing our current misguided course get slimmer by the day. The Keynesians who have taken control of our government pick and choose the wisdom of this renowned economist. His assessment of how aging populations act describes a major roadblock to fixing our broken society.
"Most men love money and security more, and creation and construction less, as they get older."
The government has promised to protect us from terrorists, protect us from swine flu, protect us from Wall Street, protect us from foreign corporations, protect our car industry, protect our union jobs, protect our retirements, and protect us from having to take responsibility for our actions. We have sacrificed liberties, rights, responsibilities, and entrepreneurial spirit for a false sense of security provided by a corrupt, inefficient, morally bankrupt government. Our rapidly aging population has chosen security over creative destruction and renewal of the American Dream.
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