By Russell D. Longcore
The Federal Reserve flushed the toilet Thursday…and by extension Washington and the US economy are beginning to pick up speed as they circle the drain.
Federal Reserve Chairman Ben Bernanke announced Thursday September 13th that the Fed would be buying $40 Billion per month in mortgage-backed securities indefinitely into the future. The reason he gave was to “see more progress (in job growth)”. He said “the program should increase downward pressure on interest rates,” supposedly to encourage more home sales and refinancing.
When challenged about low interest rates hurting savers, Bernanke said the low rates help the value of homes. What he does not say is that the entire housing market is built upon a balloon of debt, and that home values are only where they are today because of inflation.
The Federal Reserve is a private consortium of banks whose sole reason for existence is to maintain the solvency of the banks. Buying mortgage-backed securities won’t help you and it won’t help me. But it will strengthen the bottom line of the member banks. Also remember that banks that participate in the fractional reserve system (ALL BANKS) have basically only one product…loans. Abraham Maslow said, “When all you have is a hammer, everything looks like a nail.” Banks only see one thing…debt.
And hear me loud and clear. This is not all of QE3. The Fed will quietly continue to print TRILLIONS of dollars and flood the world with them. Today’s announcement is akin to a magician distracting you with his left hand while the magic trick is being done with his right hand.
I want you to understand how dreadfully serious QE3 is. QE1 and QE2 were stimulus packages that utterly failed. But 1 and 2 were limited in amounts. QE3 has no outer or upper limit. The Federal Reserve will print as much money as they desire or need to keep the charade going. That means that hyperinflation is both guaranteed and imminent.
John Williams, owner and editor of Shadowstats.com, predicts that hyperinflation will hit America in 2014. That is 15 months from now. That means that anything that is either greenback currency, or any investment tied to Federal Reserve currency, will very rapidly lose its value.
Let me lay out the scenario for you:
1. There is no fix for Washington’s runaway spending. Even if Washington confiscated ALL the income generated in the American economy, DC would still be insolvent. If DC cut out all government spending except Social Security and Medicare, they would still be insolvent. There is no way to bring the system back into fiscal correctness where DC only spent what it takes in.
2. The Federal Reserve cannot even acknowledge or discuss the truth about the spending problem. If the Fed admitted that QE 1 and 2 were failures, they could certainly not justify QE3. And if they admitted that they can do nothing else but continue to issue more fiat money, they would expose the entire world financial system as the counterfeiting scheme it truly is. If the Fed chairman confessed that everything he has done has failed, he would likely get fired. Remember what Paul Volker did 30 years ago. He allowed interest rates to rise until they were north of 20%, and it brought some needed correction into markets. What Volker did worked. What Bernanke has done has not worked. But he cannot now turn an about face and do what Volker did. Bernanke believes in regulating interest rates at nearly zero percent, which only enriches the banksters and punishes anyone who is an investor or saver. Investing and saving is where capital comes from. And there are trillions of dollars in cash in America’s business that the businesses refuse to invest because of the Fed.
3. There will be a worldwide debt selloff.Think about your own situation. If you had a wad of cash stashed under the mattress, and you knew that it would quickly become worthless, what would YOU do? You would try to spend it or trade it for something of value. Nations are no different. Nations are people…governments are people. When the rest of the nations of the world that hold US Securities understand that QE3 will flood the world with dollars that are worth less and less, those nations will begin accelerating their selling of US Bonds. But who will buy them? The rest of the world understands the scheme, because kings and governments have debauched their monies for millennia. The world financial system today relies upon inflation simply to keep going. And DC and The Fed know that they can pay their debts with Dollars, even though they are becoming worthless. But the inflation rate will now begin to accelerate until it is a fire that cannot be quenched.
4. The Fed is the buyer of last resort. They MUST buy the debt held by the world.Why? (A) To prevent anybody holding US securities from selling too many too fast. Dumping securities would cause a global bond collapse. A “collapse” is what happens when the prices of bonds fall precipitously (too many bonds for sale at once) at the same time demand dries up. That means that nobody wants US Securities at any price. And all the nations…all the massive institutional investors…ALL know this. But as in #3 above, bondholders are going to know that the money they get paid for the US securities will be worth less and less. (B) Eventually, when Washington holds its monthly bond auctions, there won’t be any buyers…that is, except the Federal Reserve.
5. Here comes hyperinflation. All our lives we have accepted an inflation rate of 3-4% a year as normal. As QE3 moves forward, inflation (which is actually now at about 8-9% per year) will quickly change to 8-9% per month. Shortly, 8-9% per week will jolt us. And THEN it will get worse. If you don’t know what happened to the money in Zimbabwe, do a Google search. A couple years ago, I bought 160 trillion of Zimbabwe money and it cost me $3.00. That will happen here in America.
Hyperinflation destroys the lower and middle classes. Think about it. If you are a middle class person, working and earning a living, you only have just so much discretionary income in your budget. You may even have no discretionary income in your budget, and your outgo exceeds your income. If prices double on the things you buy to survive, what will you do? But think about the upper class…the wealthy. They can more easily ride out a doubling of prices, since their living expenses are a smaller percentage of their income and assets. Inflation has always been the cruelest way for governments to steal from their citizens, and it has been done for millennia.
6. Then cometh the collapse of the West. Unless you get your assets out of anything that is tied to the US Dollar and into gold and silver and other hard assets, YOU. WILL. LOSE. EVERYTHING. At some point, anybody selling anything will stop accepting Federal Reserve notes in payment. But before that, America will descend into chaos, violence, crime and death on a level never before witnessed.
7. From the ashes of this historic cataclysm, groups of individuals will form that want to establish new nations of their own. And when DC has collapsed, and its counterfeiter The Federal Reserve loses control, there will be little to prevent secession and liberty.
If you do not believe that this scenario can happen or will happen, I invite you to tell me about a reasonable alternative scenario in which America digs its way out of this morass.
The year 2014 is only 15 months away. Washington and the Federal Reserve are your enemies. They only care about their own survival.
The only thing you should be concerned about right now is CAPITAL PRESERVATION. FORGET RETURN ON INVESTMENT. Get out of your 401K and IRAs. Take the penalties and get your cash. Get your money out of anything and everything that is tied to the US Dollar. I recommend that you buy a big safe for your home from Liberty Safes. I recommend that you take your cash and buy 50% gold, 30% silver and keep 20% in US Cash.You can afford to manage 20% of your savings as hyperinflation begins, but you cannot afford to lose 100% of your money. Put your hard assets in the safe. Get smart!
Secession is the only hope for individual liberty and property rights in North America.
DumpDC. Six Letters That Can Change History.
Copyright 2012 Russell D. Longcore. Permission to reprint in whole or in part is gladly given, provided full credit is given.