THURSDAY, MARCH 19, 2009
Act 3 of the Government Created Financial Disaster
Today’s headlines: “The FOMC's Plan to Buy $1.1+ Trillion of T-bonds, Mortgage Debt, and "Other Financial Assets." The dollar dropped and gold jumped on this announcement: Why? The World knows this is the precursor to major inflation in the United States.
Here are some excerpts from the FOMC meeting, along with thoughts about them:
FOMC Minutes: In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued.
They are talking price inflation not monetary inflation – and they are talking short term. You can bet the extra $1.1+ Trillion they create out of thin air (fiat money) will lead to extensive price inflation.
FOMC Minutes: Moreover, the Committee sees some risk that inflation could persist for a time BELOW rates that best foster economic growth and price stability in the longer term.
Can they be serious? Inflation creates economic growth? Then why isn’t Zimbabwe, with its 2500% inflation rate, the most prosperous nation on Earth?
FOMC Minutes: In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability.
This is my favorite: Economic recovery AND price stability are equivalent to Price inflation. This is a non-sequitur.
FOMC Minutes: To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.
There will be an additional $750 billion added to the monetary base via an entry on the Federal Reserve’s books. This is high-powered money (money which creates price inflation). It will prop up prices that should have fallen: think housing, commercial real estate, bank stocks, etc.
So there it is. The Federal Reserve on its own, needing neither a vote of Congress nor any other approval, will again create over $1Trillion dollars in new money (counterfeit). This money when turned loose in the fractional reserve banking system will create up to $10 Trillion in new money. No one has ever sailed in these waters before.
What does this mean to us? The following link allows you to compute how inflation has ravaged our purchasing power up to this year. Just enter a beginning year and dollar amount (suggest $1), and an ending year; it computes today’s dollars and percentage change. Do you remember how the Government constantly tells us there is very low inflation? Well enter the years 2001 to 2009 and check the rate! Tell me 19% inflation isn’t a concern! Go back to when you were 15 years old and enter that date. See the difference between what a dollar bought then and now. If you want a real eye opener go back to 1913 and enter your one dollar and see what it would take today! This is criminal but it is why the Government and the fractional reserve banking system are joined at the hip. The Government needs the banks to float its debts. The Government protects the bank’s monopoly to print money.
HYPERLINK "http://www.usinflationcalculator.com" \n Inflation_Calculator
If these figure trouble you, the worst is yet to come. The fiat money being created by Government and the Federal Reserve has not yet reached the markets. When it does the inflation figures will get much worse.