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Saturday, 23 January 2010

Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009 -

Reading - Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009 -

The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009No, the headline is not a misprint. According to CNBC, the Federal Reserve bought approximately 80 percent of the U.S. Treasury securities issued in 2009. In other words, the Federal Reserve has been gobbling up the massive tsunami of U.S. government debt that has been created over the past year. This is absolutely unprecedented, and it is yet another clear indication that the U.S. financial system is on the verge of a major economic collapse.

You see, the Federal Reserve is not part of the federal government. In fact, the Federal Reserve is about as "federal" as Federal Express is.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

It is this private central bank that controls the money supply and the issuance of currency in the United States.

When the U.S. government need to borrow more money (which happens a lot) they go over to the Federal Reserve and they ask them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds.

Now normally the Federal Reserve takes these U.S. Treasury bonds and they sell them all to other buyers.

But in 2009 there were not nearly enough buyers.

So in 2009 the Federal Reserve sold itself about 80 percent of this debt.

This is even being admitted on CNBC. The video below is from January 8th, and at the 1:45 mark CNBC anchor Erin Burnett drops this bombshell along with a comment about how it is a Ponzi scheme....

So why is it a Ponzi scheme?

Well, basically the Federal Reserve is creating money out of nothing, loaning it to the U.S. government and then collecting interest on the loan.

That is nice work if you can get it.

But also, this intervention by the Federal Reserve is keeping interest rates on U.S. Treasury bonds artificially low.

In a true "free market" situation, the interest rates on U.S. treasuries would rise to reflect the rapidly declining economic situation in this nation.

Due to the massive explosion in the size of the U.S. government debt and due to the very weak U.S. economy, interest rates on U.S. treasuries should have shot through the roof by now. Rational investors would normally require an increased return for the increased risk that U.S. treasuries now represent.

But that is not happening.

Instead when there are no buyers for U.S. treasuries at current interest rates, the Federal Reserve just steps in and buys up all the excess bonds that need to be purchased.

But in a normal free market situation, interest rates would rise on U.S. treasuries until they would be attractive enough for investors to buy them all.

However, that would create some huge problems.

If the U.S. government was not able to borrow all of the money it wanted to at artificially low interest rates, the results would be absolutely disastrous.

Much higher interest rates on U.S. government debt would cause the U.S. federal budget deficit to absolutely explode. Interest rates on everything else throughout the economy would also skyrocket. As mortgage rates climbed dramatically, the housing market would completely collapse. The U.S. economy would be totally in flames.

But for now (and this situation cannot last forever) the Federal Reserve is keeping interest rates artificially low by lending the U.S. government as much money as it wants at extremely low interest rates. Of course the Federal Reserve is making an insane amount of money out of the arrangement, so it is working out quite nicely for them as well.

But by essentially "printing" a flood of cheap money for the U.S. government to borrow, the Federal Reserve is ultimately going to end up destroying the value of the U.S. dollar.

Every fiat currency throughout history has always ended up losing its value, and that is exactly what is going to happen this time too. The only way to protect the buying power of your money is to put it into something that will hold value (like gold or silver). Your dollars are never going to be worth more than they are today.

The actions taken by the U.S. government and the Federal Reserve have guaranteed the demise of the U.S. dollar. At this point it is unavoidable. It is only a matter of how soon it will happen and how bad it will be as things play out.

You better get ready.

Read more - http://theeconomiccollapseblog.com/archives/ponzi-scheme-the-federal-reserve-bought-approximately-80-percent-of-u-s-treasury-securities-issued-in-2009

20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover -

Reading - 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover -

Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.

The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.

And it is going to be painful.

The following are 20 reasons why the U.S. economy is dying and is simply not going to recover....

#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages. The chart below reveals just how bad the second wave of adjustable rate mortgages is likely to be over the next several years....

#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowersand to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.

#3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones. Just check out the chart below....

#4) In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.

#5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.

#6) For decades, our leaders in Washington pushed us towards "a global economy" and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.

#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.

#8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.

#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.

#10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008.

#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia’s central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.

#12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States - surpassing the 1994 filing by Southern California's Orange County.

#13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine. So what was the total? 3.2 trillion dollars.

#14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.

#15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades. To get an idea of where we are now, just add at least 3 trillion dollars on to the top of the chart....

#16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.

#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.

#18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.

#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply. Pay particular attention to the very end of the chart which shows what has been happening lately. What do you think this is going to do to the value of the U.S. dollar?....

#20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.

Read more - http://theeconomiccollapseblog.com/archives/economic-black-hole-20-reasons-why-the-u-s-economy-is-dying-and-is-simply-not-going-to-recover

Jim Cramer says "Fed Chair Ben Bernanke’s reconfirmation failure could cause 1,000 pt correction - Time to Sell! -

Reading - Jim Cramer says "Fed Chair Ben Bernanke’s reconfirmation failure could cause 1,000 pt correction - Time to Sell! -

Cramer’s Game Plans most often use earnings, analyst meetings and industry conferences as key catalyst, but President Obama’s crackdown on the banks has changed all that. Now investors have to take into account a new factor – politics – when deciding whether to buy or sell a stock. Case in point: Friday’s 217-point loss in the Dow and the S&P 500’s 2% decline following the president’s continued talk of increased regulation.

And it’s more than just Obama. There’s speculation that Treasury Secretary Timothy Geithner could be replaced, and Federal Reserve Chairman Ben Bernanke’s reconfirmation is by no means a sure thing. The loss of either man could cause the first serious correction since the bottom in March, Cramer said – “a thousand points, minimum.”

“We lose one, let alone both,” Cramer said, “and the horrible action we've seen so far this week will look like a picnic.”

For that reason, Cramer cautioned investors not to buy any stocks until the question of Bernanke’s second term is resolved.

What about earnings? In addition to the volatile political climate, Cramer said, there will be so many reports on Tuesday, Wednesday and Thursday that trading could be dangerous. He urged viewers to forego any buying and selling until they had passed. But here’s a list of the company’s announcing numbers and what to look for:

Apple [AAPL 197.75 -10.322 (-4.96%) ] reports on Monday and unveils the much-anticipated tablet on Wednesday. The pattern with AAPL has been to sell into a product introduction and buy it back after. He thinks the pattern will repeats itself.

On Tuesday, Cramer is looking at Corning [GLW 18.56 -1.05 (-5.35%) ] andEMC [EMC 16.76 -0.77 (-4.39%) ] to give us an idea of demand for technology worldwide. Nucor [NUE 44.19 -1.50 (-3.28%) ] and US Steel [X 55.00 -2.67 (-4.63%) ] will tell us whether there's any infrastructure spending on the horizon and if China's dumping steel. And one of Cramer’s favorites, Johnson & Johnson [JNJ 63.20 -0.77 (-1.2%) ], reports, too.

Wednesday is heavy-industry day. Cramer will be watching Boeing [BA 57.77 -1.43 (-2.42%) ] to see if the company is ready to ship the Dreamliner en masse. Cramer is also keeping an eye on Caterpillar [CAT 54.25 -2.60 (-4.57%) ] to see if there has been any pickup in U.S. machinery sales or any slowdown in Asia.

For Thursday, 3M [MMM 81.48 -1.22 (-1.48%) ] also will teach us about Asian demand, since it gets so much of its business from that part of the world.AT&T [T 25.39 -0.28 (-1.09%) ] will be reporting, providing an update on its price war with Verizon Communications [VZ 30.34 -0.29 (-0.95%) ]. AndColgate-Palmolive [CL 80.71 1.64 (+2.07%) ] and Procter & Gamble [PG 60.31 0.47 (+0.79%) ] will tell us who is doing better selling toothpaste and deodorant (Cramer thinks it’s PG).

Finally, after the close Thursday, Amazon.com [AMZN 121.43 -5.19 (-4.1%) ]will report. Cramer said to remember that this is a market has been unkind to winners, and AMZN is up 150% going into next week. Anyone who owns the stock should prepare for some turbulence. If you don’t, buy Friday afternoon after the sellers will have cleared out. You might get Amazon as a nice discount.

The bottom line: Remember, new game plan, new rules, Cramer said. The Bear in Chief Obama now resides in the White House, and he seems to favor lower stock prices.

“So let’s wait for hibernation, Bernanke's confirmation and the fog of earnings to clear,” Cramer said, “before we pull any machine-gun buy [triggers,] let alone a single shot.”