The Federal Reserve is printing monopoly money, in other words it is (basically) counterfeit money. The reason for this is that we are off the gold standard, and any standard for that matter, except that the Fed says it’s still worth what they say its worth; it is simply a piece of paper, an I.O.U., even though the Fed doesn’t agree, they think that they can still use the dollar for the world’s measure of worth. The two biggest problems with that are that the rest of the world does not agree with them and the Fed is giving out the money to their friends, the banks, the insurance companies and all the other conglomerates who are simply hoarding it while trying to make more of it, with the least risk possible, which translates into the money not reaching those that need it the most, the working class, the unemployed, those in need of medical aid and so on and on.
The Fed’s reach is universal, around the world, as well as in America. In other words they loan money to other central banks around the world, the European Central Bank, the Central bank in Ireland, Australia, New Zealand, South Africa or China but they get them to buy our junk bonds when they do; this is what, now, backs our dollar.
The trouble in China’s case is that they are not buying the fact that America now is backing it’s dollar by buying it’s own worthless debt, the mortgage-backed securities and all the derivative garbage that it claims is worthless, which, of course, it is but that Bernarke and Geithner say is still worth buying. They’re creating bonds that no investor will buy so Bernarke’s is buying them and the problem is now that he is buying long-term T-bills, with the emphasis on long-term, which is inflationary because when there is more money created, or even an equal amount as there is of goods and services, prices go up.
When the Fed buys its own T-bills the rates come down because when investors buy them they demand a higher interest rate.
The Fed’s careless disregard for America’s working class is obvious as over $165 million in bonuses was paid out by AIG to many of their employees just last week, even as Bernarke announced they were buying $300 billion dollars worth of long-term T-bills. If Bernarke continues to buy whatever Geithner wants him to then there will definitely be a depression, with a D, because this will demolish an already battered dollar and hyperinflation will enter into our lives and into our vocabularies and when this happens George Washington’s face on a green bill will barely be worth the buffalo on the back of a nickel.
May our friends respect, trouble neglect, angels protect, and heaven accept us all.