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Tuesday, April 1, 2014

Explaining Fed Reserve BS as simply as to a child

Yesterday,  the ugly evil ferret-like creature known as the current Fed Chair Janet Yellen stated that the US will need Fed stimulus "for some time" and that eased investor fears that their 5 year gravy train would be derailed in any way..

According to Bloomberg, "Yellen said today the Fed hasn’t done enough to combat unemployment even after holding interest rates near zero for more than five years and pumping up its balance sheet to $4.23 trillion with bond purchases."

We know we write often on this but there's still much confusion among people we communicate with, even loyal readers so we repeat once again some things and we hope to do it in a way most will easily understand..
1)  The Fed cares about unemployment the same way you would care whether a neighbor you've never spoken to a stranger shopping for food in the same supermarket aisle is employed or not..

That is to say, you wouldn't care and neither do they.

The previous Fed Chair.. He said when unemployment reached 6.5%, the Fed would start to shut down the money spigots..

Of course when that number was created out of thin air, unemployment was over 9% and even they had no notion they could artificially drop the numbers so low so quickly..

Its all about getting as much taxpayer money into the hands of the professional Investor and financial elite as possible under the guise that their expanding portfolios benefits the peons who really aren't paying too much attention anyways..
2)  We still speak with people who naively believe the super-low interest rates manipulatively pushed down by the Fed is for their benefit.  They think it means low interest on buying homes and cars and paying down credit cards with variable APRs...

No..  you are mistaken.

The interest rate the Fed sets, whatever that number may be is the interest amount that banks can lend to other banks.

So the interest rate is maybe half a percent but is your mortgage?

And speaking of mortgages, did you notice over the last year how rates went up and Yet the Fed's interest rate stayed exactly the same?
That means if a lender wants to charge you more and can legally do so, the lender will and the Fed has nothing to do with it one way or another.    So don't be cheering them..

 Besides you and we are the ones taking a killing in our savings accounts.

In 2000, the interest rate banks paid on savings was 5%  which also looks like 0.05    Today it pays a half of one percent which looks like 0.005

Simple math time:  $20k in savings back in 2000 vs today..

$20,000 x .05 = $1000 interest;   $20,000 x .001 = $100

$1000 minus $100 equal $900 in lost interest annually...

That is real money taken out of your pocket to buy food, pay bills, etc..  And where do people usually go to make up the difference of what was lost?  Yep..credit cards..
~ 'Ferrets for Trayvon'

3)  The total balance sheet of Fed debt is $4.23 Trillion..  Please understand this is the same type of debt that China and Japan and other nations are holding but in the case of China, our #1 creditor nation, they are holding around $1.25 Trillion of our debt..

In other words the Federal Reserve is holding almost 3x as much US debt as China..

This is why default is never an option.

And the insidious part..  How did the Fed come up with the $$ in the first place to purchase those bonds at those artificially low repayment rates that would turn off most Investors?

Answer:  It created the money out of thin air which gets then put into circulation as new debt..
So its really like a candle burning at both ends..  The US taxpayer is on the hook to repay what the Fed creates to buy up the debt and the money necessary to repay those debts at interest.

Speaking of debt..  Do you know what the Total consumer debt is for US citizens - mortgages, credit cards, student loans, etc...??

As of Sept 2013 it was $3.03 Trillion

If you took all the money the evil-to-the-core Federal Reserve has spent in buying debt, propping the banks and artificially inflating the stock market by over 165% since March 2009..

If you took that $$ and paid off the personal debts of every living breathing American citizen so they owed nothing no anyone...

$4.23 Trillion - $3.03 Trillion =   $1.2 Trillion left over
Here is another way to look at it, and don't let the big numbers intimidate because we promise this is all very simple calculator math..

The Fed as we said before pretends to give a damn about unemployment..

So let's say in reality 15% of the nation is truly unemployed without doctoring any stats for political motivations, and the population is 315 million..

315,000,000 x .15 = 47,250,000 unemployed
If you took that $4.23 Trillion and evenly distributed it to every person truly out of work for one reason or another, each individual would receive $89,523

Now let's take this a step further..

If the Federal Reserve truly cared about unemployment and was set up so it would reimburse every employer who took in a current unemployed person by a mere $5,000..

In other words, if the Fed chose to be on the hook for $5k of every person's salary thus saving a business that much per worker to encourage them to hire..

The $4.23T would cover each and every one of the 47.25 million true unemployed for a period of just over 17 years...
We don't know what's worse.. how often people are lied to or how willing and eager the media is to conspire to misinform everyone so they remain docile..

The US economy added 175k jobs in February..  It needs to add 225k minimum to keep up with population growth..

Did you know the US economy has created 275k or more jobs in only one month between when the Great recession-depression began and currently.. a span of 40+ months and counting..

And they keep calling it a recovery..

And people keep allowing them to get away with it.