With the money supply, federal debt and unemployment all on the increase it seems the Federal Reserve is all out of bullets. After trillions of dollars of bailouts to all kinds of well-connected corporate and banking entities, not to mention the US government, what’s next? The Federal Reserve has “stepped aside” and supposedly will not be purchasing any more Treasuries, which begs the question, who will be purchasing them and why? Why would anyone loan money to the US government, at least at current yields. Right now, the official inflation estimate from the government is 3.4%, with yields on the Ten year note offering 3.1%. That’s a negative interest rate, you will literally be losing money. Of course, the government’s official inflation rate is generally “massaged” downward and doesn’t include food or energy as they are considered “too volatile.” A more realistic view of inflation over at Shadowstats has it running at over 10%. So who and why are people still loaning money to the US government?
First, the who. China is still a major purchaser of US government debt, followed by Japan. Although China has gradually decreased its purchasing of US government debt, which must mean they actually realise the US has no means or desire to actually pay them back and that there are better investments out there. Personally, I believe there is some sort of underhanded quid pro quo going on between China and the west. Over the last few decades, western corporations and governments have flooded Asia (particularly China) with their funny money, now it is time for the Chinese to pay the west back. The so-called “Asian miracle” has reached many areas of the continent. While there can be no doubt that prosperity is on the rise in many parts of Asia, there are still major problems to be worked out. One of the largest problems is the importation of inflation from countries like the United States. By buying US dollars and now also propping up Europe as well, China is allowing the west to continue to live beyond its means at the expense of Chinese citizens. Why China seems to choose helping the west over it’s own citizens is odd to say the least, but it’s likely to continue into the near future at least.
I have to believe that the Federal Reserve is lying when it said it will no longer purchase US government debt outright. They either have back room agreements in place to ensure the continued funding of the US government or they are hoping on a wing and a prayer that confidence in the greatest Ponzi scheme in history will remain. If they don’t purchase it, then who will? Well-connected banks who received trillions in handouts are sitting on quite a bit of cash, so they could become larger buyers, but not at current rates. These bankers may be an important part of a totally corrupt system, but they are not stupid. Which leads to the only logical conclusion; interest rates will have to rise to bring in enough investors. Evidence of this is within the financial media, where the puppets have been given their marching orders and are now beginning to celebrate the idea of a small uptick in interest rates. Yesterday, low interest rates were the only way to prosperity. Today, it is higher interest rates. If there were any sense left in the world, these “journalists” would be cast out on the street.
At the end of the day, the government will use every trick in the book in order to keep spending and buying votes. Like the mafia, they have a protection racket to run. Not too mention they are the middle men for most of the economy. Every law and regulation they create distorts the economy and makes it harder for consumers to actually receive the goods and services they want, be it education, health care, a future.
The depression, like all depressions, falls mainly on the tax-paying citizen. The current depression is truly a cruel one, where one sees the real value of their assets fall, while having to deal with price inflation as well. So not only are you poorer today, but you will be poorer tomorrow too. There is no correction allowed to take place, no lowering of prices, no realistic prices at all! The economy is so distorted that no one knows what is real and what isn’t. The correction that should have come in 2008, was not allowed to. All that means is that it will come in 2011, or 2012 or 2013, but it will be much worse. What can be assured is that central banks and their cronies in government and on Wall Street will continue to do just fine. For them, there is no depression.
Corporatism and central banking are all barbarous relics of the past. They grind the general population underfoot for the benefit of well-connected elites. They steal the purchasing power of most of the population with their incessant money printing, thereby creating massive inflation. Perhaps their greatest evil is that it allows governments to live well beyond their means. In the case of the United States, it allows for never-ending warfare. Slowly, but surely, the US is starting more wars (5 and counting at the moment?). Who knows what the end goal is, or if there is a goal at all. What is known is that without the ability to create money out of thin air, via central banking, it would be much more difficult to keep the war machine going. That is reason enough to bring the sad era of central banking to an end sooner rather than later.