Danger Signs in the EconomyNovember 9, 2010
UPDATE: I am serious. Read these after:
I will keep saying this until I start to see it repeated over and over in other blogs and news media outlets. Most of our nation’s financial problems are internally contrived and this bothers me on several levels: 1. Because I am not a conspiracy theorist or a conservative, if I can see it, it must be obvious; 2. I have to wonder why people with more brains than I are allowing this; 3. What will happen to the average person if this continues?; 4. What, if anything, can we do about it?
Let’s review the facts; again. The Federal Reserve prints all American money. Since we are not on the Gold Standard, the Federal Reserve has more subjective criteria it uses when it prints money. First, it determines if there is any inflation. If there is, then it prints less money to bring down inflation (those who have taken Economics will say I have oversimplified the role of inflation, but let it be for now…you can explain further in a comment if you like). Second, the Federal Reserve looks at how much money the main banks want to borrow so they can lend it out to their customers. The Federal Reserve lends money to banks daily and then charges them interest to pay it back. The higher the Central Bank lending rate, the less money the banks will borrow and the less money is printed. But, when less money is printed, that means that each dollar in circulation is worth more and therefore banks and other institutions will pay you to lend your money to them in the form of savings accounts and Certificates of Deposit.
Third, the Federal Reserve is also supposed to take into account the growth of two items: The Trade Deficit (TD) and the Gross Domestic Product (GDP). If the Trade Deficit (the measurement of how much money we owe to other countries for their goods and services) goes way up, we are supposed to print LESS money to make up for our debt to other countries. In other words, the more the trade deficit, the less our money is worth and the less money we are supposed to print in response. To counter that, if our economy grows at a substantial rate – measured by the GDP – the Fed is to print more money since more goods and services are being produced.
Here are the danger signals the Fed is sending us by their actions:
1. They have set the bank rate at Zero. This means that the banks do not have to pay anything to borrow money. But instead of lending that money to consumers like you and me, they are investing in other ways and making money. But the American Economy is not seeing any of it.
2. Even though our trade deficit is up and the economy is down, the Fed is printing more money than ever. That means each dollar being printed is worth so much less than it was last year. Therefore, if you have money in savings, its power to buy something is diminished. Remember that the bank rate is zero and the banks don’t need anyone’s money in deposits. Therefore, they don’t have to pay us any interest. This has never happened before in our history as a nation; we cannot earn interest with our savings.
3. But, the Fed counters, there is no inflation so we have to print more money in order to get the economy going. But they are playing a shell game with us. In the past 10 years, Energy costs have gone up 240%. But they do not include energy costs in the core inflation rate. Food costs have gone up 260%. But they don’t include food in the core inflation rate. Medical costs have gone up almost 500%. But they don’t include medical costs in the core inflation rate. Housing costs skyrocketed (they have since retreated for homeowners, but not for renters), but the cost of housing is not included in the core inflation rate. The Federal Reserve tells us we have no inflation, but they do that by excluding energy, food, housing and medical from that rate. Yet, those are all going up – primarily because the Fed is printing more money!!
4. Congress allows this for one reason: The Fed is paying off their debt. They call it “quantitative easing”. The Federal Reserve prints money to buy up Treasury Bills. The T-bills are what the government uses to pay off its debt. So the Fed is printing money to pay off the Government’s debt. And the government is the only entity that can stop them from doing this. And Congress will not stop the Fed from doing this because it means they can spend more money and they know the Fed will pay it off.
5. People in other countries are now selling their American dollars…in record numbers. Why? Because they can see the writing on the wall. Over the next couple of years, the American Dollar is going to plummet in value. Why? A currency is based on the value of that country’s economy divided by how many dollars they have printed. If the value of the economy is not going up, but the currency is being printed in record amounts, each dollar is going down in value. No one wants to own something that is going down in value. So they will sell. This means that items we buy from other countries will skyrocket in price. But, someone will say, this means we will buy domestic items. Does it? We don’t have manufacturing in this country any more. Who will produce these goods? We don’t have raw materials any more for those goods…buying the raw materials will be more expensive. So at the very time our money is worth less, the cost of all our goods will be out of reach.
That will make us a developing nation again. And we are not ready for it.
What can you do? Pray that enough people in Congress on both sides of the aisle will see this and change. One or two Ron Pauls will not accomplish this. We also need to stop printing so much money. If we don’t go on the Gold Standard, at least make the M1, M2, and M3 public ( these are measurements of how much money we are printing) so that the rest of the world will see we are being held accountable.
Personally, if your money is in savings, invest part of it instead in other currencies, or Gold, as a hedge against inflation. Ask God what you should do. Invest in Missions which will give you treasures in heaven. Perhaps this coming collapse is necessary for the End of Days to come upon us. But for the meantime, I am going to be wise. How about you?