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THE
TEMPLE OF PAPER
MONEY IS UNDER SEIGE
In
2008, America
suffered a massive economic heart attack. Its doctors, thought to be the
world’s best, believed the US
to be in good health, having recovered from a similar though smaller crisis
in 2000.
But
America
hadn’t recovered. In fact, the Fed’s palliative for the 2000
crisis, i.e. lower interest rates, soon created an even larger crisis, i.e.
the 2002-2006 US housing bubble whose collapse caused global credit markets
to contract and investment banks to fall, necessitating government
intervention on such a massive scale it led to today’s sovereign debt
crisis as private losses were absorbed onto public balance sheets; and, now,
in 2010, the crisis continues to fester and spread.
Fed
Chairman Ben Bernanke’s solution for our current problems is but a more
extreme version of the Fed’s near fatal prescription in 2001, i.e.
lower interest rates, but this time combined with a new iteration of voodoo
economics, a witch’s brew called QE II, a monetary gesture as futile
and impotent as a Hail Mary pass thrown by an atheist as time runs out.
IN
TIMES OF EXPANSION WATCH STOCKS
IN
TIMES OF CONTRACTION WATCH BONDS
BUT
ALWAYS, ALWAYS, ALWAYS, WATCH THE FED
When
central banks became the primary driver of economic prosperity, the free
market supply and demand of goods and services became subsumed by the supply
of credit from central banks.
This
is because the supply and demand dynamic is distorted by the availability of
banker’s credit—the more credit, the greater the distortion, the
greater the distortion, the greater the consequent recession or depression.
In case you didn’t get it the first time, here it is
again:
The
free market’s fundamental supply and demand dynamic is distorted by the
banker’s credit—the more credit, the greater the distortion,
and the greater the distortion, the greater the consequent recession or
depression.
This
is how economic cycles of expansion and contraction became commonplace, boom
and bust cycles are but lagging indicators of credit growth; and recessions
and depressions are the lagging indicators of credit contractions, the
inevitable consequence of economies dependent on central bank credit.
The
current historic credit boom began in the 1980s when a combination of US
government borrowing and easy credit from the Fed ignited what was thought to
be the greatest economic expansion in the history of capitalism.
But
the expansion, however, was only an asset bubble in disguise, a stock market
bubble that took the Dow from 777 in 1982 to 11,722 in 2000 before collapsing
then reflating to 14,100 and falling and rising again to 11,440.
Today,
the historic 25 year credit boom is ending and the massive debts accumulated
on the way up are starting to default; and the US Fed, the primary source of
global credit, is directly responsible for what is now happening.
Of
course, the Fed denies any responsibility at all, instead blaming others for
the crisis it caused. In 2005, then Fed Governor Ben Bernanke identified the
problem as a “savings glut”, i.e. Asia
being the primary culprit/saver; and in a distorted self-serving way,
Bernanke was right.
..over
the past decade a combination of diverse forces has created a significant
increase in the global supply of saving--a global saving glut--which helps to
explain both the increase in the U.S. current account deficit and the
relatively low level of long-term real interest rates in the world today.
http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/
Bernanke’s
convoluted logic stems from Asia’s traditional emphasis on frugality
and savings, a tradition that unexpectedly slowed the flow of leveraged
credit between the east and west, creating a so-called “savings
glut”; akin, if Bernanke is to believed, to a monetary embolism
affecting the on-going flow of credit and debt necessary in debt-based
economies
But
despite Bernanke’s self-serving observation, Asia has the absolute
right to save all it has earned—just as the US
has the right to spend all it can possible borrow and spend it on Asian
goods; whether or not it is prudent to do so is another question.
TEA
STAINS AND THE FED
Today,
the Republican Party must be ruing the day it first courted disaffected
Dixiecrats, i.e. southern Democrats, then looking for a haven from an
increasingly socially liberal Democratic party. This alliance beginning in
the 1970s fueled 40 years of Republican dominance but the price for doing so
is now being extracted.
Sarah
Palin is causing William Buckley to roll over in his grave.
Traditionally
the bastion of Wall Street money and power, the Republican Party’s
price to pay for 40 years of political power may be the continued existence
of the Federal Reserve. Since the 1970s, the Republican Party gave increasing
voice to disaffected Dixiecrats in return for their support and only now are
realizing the cost.
Note:
Traditionally, the sworn enemies of northern power and money, i.e. Yankee
bankers, southern Dixiecrats swallowed their pride for an increasing role in
Republican affairs, trading their opposition to Wall Street bankers in return
for an increasingly conservative social agenda.
The
collapse of the US
economy, however, is putting pressure on this politically motivated alliance.
As the Republican Party hierarchy retreats to its traditional base, i.e.
banking, corporate and wealthy special interests, much to their chagrin, its
indebted and increasingly unemployed socially conservative newly acquired
base is blaming not only women, hippies, gays, abortionists and Mexicans for
their myriad problems, they’re now blaming the Federal Reserve as well.
This
resurgent populist movement known as the Tea Party may be the critical driver
in ending the economic dominance of the Federal Reserve Bank in America;
and, ironically, the Democratic Party, the traditional opponent of corporate
and banking interests in America,
now finds itself the unexpected ally of the Fed.
The
Faustian pact between banking and the Democrats was forged in the 1990s when
the Democrats, desperate for an answer to the new Republican coalition
welcomed Wall Street bankers, Goldman Sachs, into their ranks much as
Republicans welcomed the Dixiecrats.
The
alliance would be a great success for both Wall Street and the Democrats. The
loser would be America.
No longer having any significant opposition in Washington
DC, Wall Street immediately began
assembling a banker’s wish list which was approved during Clinton’s
two terms with now bipartisan support.
Beginning
with dismantling any significant oversight of markets, the bankers proceeded
to protect the extraordinarily dangerous but lucrative derivatives markets
from government regulation and ended the decade by successfully repealing the
Glass-Steagall Act.
This
allowed Wall Street to bet the savings of America
as they did prior to the Great Depression, which they again proceeded to
lose; and, by 2000, the stage would be set for what would soon follow, the
collapse of the American economy in concert with record riches for the
bankers on Wall Street.
The
only hope of America
now lies in the electorate’s collective disgust with both the
Republican and Democratic parties—and the Federal Reserve itself. On
December 9th Bloomberg New reported: A majority of
Americans are dissatisfied with the nation’s independent central bank,
saying the U.S. Federal Reserve should either be brought under tighter
political control or abolished outright, a poll shows.
Although
the same special interest groups control both the Republican and Democratic
parties, the Tea Party’s challenge to the Republican hierarchy is an
opening wedge in this collusive tyranny masquerading as electoral democracy.
Newly
elected Tea Party candidate, Rand Paul, is also the son of tenured
Congressman Ron Paul, yesterday’s gadfly and today’s chief
gladiator in America’s
fight to free itself from the tyranny of the Federal Reserve.
Although strongly opposed by the
Republicans party hierarchy, Congressman Ron Paul will soon chair the House
Subcommittee on Domestic Monetary Policy. Regarding that appointment, CNN
reported:
Ben Bernanke has had his hands full
since his first day on the job as Federal Reserve chairman nearly five years
ago. It's about to get even tougher…His harshest critic on Capitol
Hill, Rep. Ron Paul of Texas,
is about to become one of his overseers.
Ron
Paul’s appointment to oversee the Federal Reserve is tantamount to King
George III appointing George Washington to oversee England’s
colonial affairs in 1775. Today, perhaps another great shift in history is
about to take place; and, again, as before, nothing less than America’s
future is at stake.
THE
END OF THE FED
The
end of central banking in the US
will come in one of two ways: (1) Through a constitutional amendment that
bypasses the US Congress, or (2) through the complete collapse of the
monetary system that leaves the Federal Reserve and all central banks
bankrupt.
The
latter is perhaps the most probable as fiat money systems have an average
lifespan of 40 years. It was in 1971 that President Nixon removed the gold
backing from the US dollar and all currencies became fiat. Do the math: 1971
+ 40 = 2011.
If
the historical mean is any reassurance, the collapse of paper money and
central banking is imminent. The following chart shows just how exposed the
Fed is to the increasingly precarious state of the US
economy.
The
Federal Reserve is now the largest holder of US
debt. Not only are China
and Japan vulnerable to a
US
default, so, too, is the Federal Reserve. It would indeed be justice if the
Federal Reserve collapsed because those they indebted were unable to pay them
back.
A
less drastic alternative, however, is a constitutional amendment that
bypasses the US Congress. This is necessary because powerful interests would
prevent the US House or Senate from ever repealing the Federal Reserve Act.
Only by using state legislatures could
the US Congress and powerful banking interests be circumvented: …The
second method prescribed is for a Constitutional Convention to be called by
two-thirds of the legislatures of the States, and for that Convention to
propose one or more amendments. These amendments are then sent to the states
to be approved by three-fourths of the legislatures or conventions. This
route has never been taken, and there is discussion in political science
circles about just how such a convention would be convened, and what kind of
changes it would bring about. http://www.usconstitution.net/constam.html
But for this to happen, conservatives
and liberals would first have to join forces in order to overcome the
powerful elites that will seek to maintain the status quo. Special interests
in both parties have a vested interest in the present monetary system and
will do everything possible to save the Federal Reserve, no matter how
destructive it is to America.
If Americans want to end the Fed, they
will either have to cooperate in what would be the greatest political
undertaking since the American Revolution—or wait for a cataclysmic
economic collapse to make that choice for them.
PONZI-SCHEMES
AND THE ENDGAME
I
had joked with friends that “someday this [investment with Madoff] will turn
out to be a Ponzi scheme, but I’ll have my money out by then.”
Michael
Klein, former investor with Bernard Madoff, NY Times, December 11, 2010
While
the Federal Reserve central bank substitution of debt for money is a more
subtle ponzi-scheme than Bernard Madoff’s, it is nonetheless still a
ponzi-scheme. Ponzi-schemes are dependent on the constant influx of more
participants, i.e. in the case of Madoff, more investors and, in the case of
the Fed, more debtors.
When
the influx slows, ponzi-schemes become increasingly unstable until they
eventually collapse. This is where we are today, in the endgame, where the
collapse of the Fed’s 97 year ponzi-scheme is imminent.
Today,
the vast majority of investors still have their money fully invested in the
banker’s paper assets. Like Mr. Klein, they believe they will get their
money out in time. Like Mr. Klein, they won’t.
THE
US
GOLD AND SILVER COIN MARKET
While
the US makes it difficult
for Americans to protect themselves in a time of monetary disarray, there is
nonetheless a thriving secondary market in the US
for gold and silver coins.
Ralph
Foster, a coin dealer in Berkeley,
California and author of Fiat
Money, the History and Evolution of our Currency, gives some tips and
insights in the buying of gold and silver coins. To view my interview with
Mr. Foster on youtube, see http://www.youtube.com/user/SchoonWorks#p/a/u/0/VX0SRuRCZjI and http://www.youtube.com/user/SchoonWorks#p/a/u/1/NqrplVgTWxo
Additionally,
I will be hosting a call-in show, Dollars & Sense with Darryl Robert
Schoon, on local Tucson TV, Saturday, December 18th, at 8 pm
MST. I will be answering questions about the economic crisis. The program can
be viewed live on the internet at www.accesstucson.org.
We
are moving towards a financial rendering of epic proportions. Prepare and center
yourselves for what will be an historic shift towards a far better world;
and, remember, despite how things appear to be, we are all in this together.
End
the Fed.
Buy
gold, buy silver, have faith.
Darryl Robert
Schoon
www.survivethecrisis.com
www.drschoon.com
Check his Blog
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