It is the FedOnomics, Stupid!
Interest-Rates / US Bonds Aug 30, 2010 - 02:42 AMBy: Submissions
Seth Barani writes: It was 1913, year when US Federal Reserve Bank was established. Coincidently, the 16th amendment on income taxation was also passed in the same year. America was getting ready to wage wars. Fed was getting ready to print (aka "create") money and supply it in plenty. All done at your cost.
On an average the value of dollar has been going down 1% each year. A 1913 dollar is worth only $0.045 in 2010, a 95% drop in 97 years. Considering that it cost 4 cents to print a one-dollar bill in 1913 these two facts together show that in 2010 it is no longer cost effective for them to print one-dollar bills. With the cost of metals going through the roof, coins too could get abolished. In future, Government may issue a plastic debit card for your salary, conditional upon implanting a biometric RFID chip in your shoulder or elsewhere.
Honestly, why would anyone buy T-bills (and notes/bonds) at 3% interest rate? After all, the indirect devaluation of dollar implies the value of their investment at the maturity of T-bills would be far less than what they started with, meaning they are basically handing over free money to the government. And Uncle Scam will further tax any 'capital gains' you make out of it. Excusez moi, How dumb are these people? The Fed may keep on buying them because they create money like mad (Ref #1) and they manipulate interest rates. But what about YOU, with your hard-earned money?
The Fed sells paper+ink to the government and gets T-bills backed by "full faith and credit of the federal government" where the credit worthiness of the federal government is rated AAA by the same looting agencies. This newly created money once again returns to the same paper-pushing industry as "stimulus" at 0.20% so that they can lend it to you at some predatory rates. And any surplus they find goes back to T-bills....Hello??! Your own taxdollars (past and future) are being loaned back to you at double digit rates! If you aren't outraged by it, may be you should watch "The Matrix" again and figure out where you are portrayed in that movie. When insolvent banks can get billions at 0.20% from the government, you and I cannot get a dime from those banks if you go and tell them you are insolvent.
You must be a registered bank in order to be able to carry out this scam. Establish a bank, borrow from government at 0.20%, buy T-bills at 3.2%, pocket the difference quietly and vacation in Bali. It is plain daylight robbe...er...pure banking business! Here are the charts (data from FDIC) which show that the banks have increased their 'securities' holdings and decreased their consumer lending in the past few years. In short, they took your money at low rate, bought T-bills and happily pocketed the difference. They refused to follow through their gentleman agreement with the government that they will increase consumer lending. If the banks really wanted to increase the consumer lending they will increase your credit limits, lower the lending rates, defer your payments and be your friend when you need, but why would they when Uncle Scam helps them make profit the easy way? The banks aren't too big to fail. They are too big to be honest.
Deficit spending is the largest wealth transfer across the time-axis. The government is pirating wealth from future generations who are going to be economically enslaved for decades until repayment. What right does this generation have to spend money that doesn't belong to it? This financial rape of the unborn is being perpetrated through morally bankrupt avenues like the Federal Reserve. The US Constitution gave power to Congress to print money. It did not permit a private cartel to create money and lend it to the government under the unproven hypothesis that money must be wedded to credit. The concept of demand has been conveniently obfuscated with the notion of borrowing. Not to forget the fact that this wealth piracy is partly directed towards unproductive ends like making big nasty bombs and dropping them on some innocent villagers in poor countries, all because some "suspect" was hiding in that village. Sophisticated terrorism is being carried out to counter primitive terrorism. Sophisticated military terrorism drops a daisy cutter from a B52 bomber on Iraqis and Afghans. Sophisticated financial terrorism drops a QE2 from Helicopter B on Americans.
Face it, the problem has been simmering from 1913. It isn't Reaganomics, Voodoo, Clintonista, Bushonomics or Obamacare that is ruining US economy. It is Fedonomics. It is the central piece of the illuminati in its global domination agenda. Fedonomics is the multidimensional wealth transfer scheme (note: thievery) from the masses into the hands of an elite few to wage globalization crusade. Wars need easy money. It is easier for the government to devalue and get more money to wage the wars. It happened in 1913 It happened in 1934. Anytime dollar is deliberately devalued fast expect more wars.
Obama is no different from Reagan, Clinton or Bush. To call Obama a marxist in comparison to others, is political naivity. He is pursuing the same supply-side economics of his predecessors. He has no ideological, economical or political agenda of his own. He is a puppet just like his predecessors. And a hundred year criminal scheme cannot be easily tackled by any one sitting President.
People freely use the term "fiat money" because it isn't pegged to some "standard" like Gold. Really? Isn't Gold "fiat Gold" too since it is not backed by any other? The value is gold is strongly glued to the state of panic and paranoia. Gold-standard is no more a simple answer to the complex situation, even if it is far far superior to that of the paper-ink fraud. Perhaps a diversified basket of least correlated instruments (commodities, real estate, money market and other indices) may serve as a better baseline money-standard for the quantization of demand, since when one undergoes a bubble another will be deflating, thereby normalizing the money-standard. Of course, gold may remain as a good speculative trading commodity in near future, considering a whole array of destabilizing factors including Israel attacking Iran, hyperinflationary effects of quantitative easing, imbalances in commodity prices compared to irrationally exhuberant stock markets.
Now going back to your million dollar question - "Where to park my assets when things are going bad in global economy?" Before one goes about finding suitable vehicles for your investment, you must understand what you are trying to do. "I want to protect and enhance the value of my assets in spite of currency devaluation, economic depressions, market crashes or other risky events". Good beginning there, my friend, but you missed emphasizing the keyword value. What is value? It is purchasing power. But anytime you close your trade you are only moving your assets from one good performing vehicle to another not-so-good performing one! The game is played in such a way that you simply cannot avoid sitting in any vehicle. And there is always Uncle Scam who can throw all your calculations to the wind by raising the capital gains tax back to 28%...
Here is one simple asset protection formula: (Asset value in USD in 2020) = (Asset value in USD in 2010)+(Interest)-(Inflation adjustment)-(Upper Limit of present and future tax);
Do yourself a favor. Calculate if your net worth will be higher after executing the formula. I will wage $1 bet that it will never be. There is no fixed-income program in the world that can beat the inflation and taxes. Of course, it is common sense. If everyone wants to invest in fixed-income programs and retire, who will work? So, "parking the assets" is a meaningless pursuit. It is like this - Tylenol is not the answer to every kind of pain you get. T-bills are not the solution everytime you perceive fear. You cannot cross a body of water using its average depth as the crossing level. Your assets must ride the pricing tides of the economic ocean in order to survive its worth and possibly enhance it. You need a dynamic investment/trading program that anticipates and adjusts quickly to changing patterns, in addition to implementing some serious risk management control systems.
Author Seth Barani is a PhD in physics and is a freelance capital market researcher and trader. He can be reached at s.barani@gmail.com.
© 2010 Copyright Seth Barani - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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