By: Joshua Gayman
seriously ya’ll this has nothing to do with politics, only finance…
in response to all of the comments posted about how a gallon of gas was $1.81 or whatever when Obama took office: How about a gallon of gas hit $4.00 in 2007 when Bush(a Republican) was in office.
Economics lesson: when currency falls, commodities rise.
Thus, if you want to blame any one party or person for the price of oil rising, blame the central bankers ie: the Fed and the ECB(european central bank). They run BOTH parties anyways!!!
Until we think rationally TOGETHER(ie: both parties thinking of ways to work together to achieve a common goal of a higher quality of life for our nation and future generations), we are going to continue to get run over by the ultra rich and social elite.
by: Joshua Gamen
Former Prime Minister of Greece said in an interview that he thinks the media and journalists are being too hard on Greece, and that Greek bonds are actually healthier than they seem. He also said that investors should buy Greek bonds. All of this amidst a $170 billion bailout package to Greek, where investors are taking a 70% real loss on Greek bonds! Conspiracy of the rich at it’s finest… For more on the conspiracy of the rich from Joshua Gamen, click here!
Written by: Joshua Gayman
Last week the World seemed to take a break from worrying about Europe and focused their attention back to the United States and the meeting of the Federal Reserve AKA the Fed. The proof? The Euro rised big against the Dollar.
Ironically, the United States’ problems far surpass the debt problems of the European Union. The difference? We have a Central Bank that can print our currency out of nothing!
The Fed introduced an “Inflation Target,” which they set at 2%. This is something that has never been done before! Last year’s inflation numbers were closer to 3.5-4%, but given that the outlook for coming months is to drop significantly, expectations point to a drop under 2%, at which time would be a perfect scenario for the Fed to come out and unveil a 3rd round of quantitative easing AKA QE3.
The Fed also said they will keep short term rates(“over-night rates”) at all time lows through 2014. The Federal Reserve has never stated a policy that would last 3 years! What’s more crazy, is that debt is the only product the Central Bank sells. Can you imagine if a large company came out and said, “We are going to sell our one and only product at all time lows for the next 3 years.”? I am thinking we’d question whether they could survive another 3 years. The same should be true for the Fed, but I doubt it will. People are still so blinded by the illusion that they actually produce something..
The monetary policy by the Fed to keep rates low KILLS savers. This included anyone who has money in checking, savings, any type of deposit account, IRA, 401k, mutual funds, pensions, etc. If you have your money in one of these places, don’t expect a return for…YEARS.
So where do you see the economy going in the next few years? Well, if the statement by the Fed is any indication, I would say a strong recovery is not on the horizon.
I really don’t see these long term low rates benefiting the masses. I do see it benefiting small business owners who rely on short term loans. I also see it benefiting those who have Adjustable Rate Mortgages AKA “ARMS.” And the group I see being benefiting most by this are those savvy entrepreneurs who will use this cheap money to buy cash flow producing assets.
So what’s the bottom line?
The bottom line is that nothing is free. Money is no exception. There is a “cost for capital.” This means that there is a cost for borrowing money. DUH! The problem is that the cost of capital would be much higher if it weren’t for the Federal Reserve who can set the interest rate anywhere they want. By the Fed placing interest rates under the cost for capital, mal investment is brought into our economy by people who are getting loans for things they shouldn’t. It is because of this that I think the Fed needs to back off and let the market find it’s true equilibrium. This would allow for the smart money to come back into the marketplace. The smart money will stand on the sidelines as long as the Fed holds interest rates low. Investors can’t compete with the Fed when the Fed gets it’s capital by printing it out of thin air! Because the Fed simply “prints” their “capital,” they can hold interest rates at all time lows as long as they need to. Of course this is terrible for the economy as it means we are at their mercy.
If stimulating more debt would help us recover, I think it’s safe to say we’d have recovered by now. The reality is that pushing more debt into the system will not make our problems go away. It won’t slow the foreclosures, it won’t add jobs, and it won’t make life cost less money.
Like any private company, the Federal Reserve exists for one main purpose….PROFIT. The Federal Reserve can’t profit if it doesn’t exits. And it wouldn’t exist if people realized they don’t create anything of real value.
An indebted society is not a healthy one. Look at Greece.. If it weren’t for the US being able to print money, we’d be no better off than them.
When I was a young boy, the path to retirement was simpler. For the most part, if you saved your money regularly, paid your mortgage off, and lived modestly, you could retire well. This was partly because inflation was low since the dollar was pegged to gold and also because most employees could expect a company pension and health benefits until the day they died. It did not take much intelligence to have a secure, financial future.
Today, we live in a world that requires an extremely high, financial intelligence to retire well.
It is no longer enough to save money, as higher inflation and taxes wipe out your earnings. You can’t rely on a company pension because most companies don’t offer one. Instead, it is expected that you contribute to a 401(k) plan that may or may not provide you a secure retirement and that is simply a glorified, tax-deferred savings account that benefits the rich, not you.
These changes are because of two actions by the U.S. government that I’ve written extensively about, most notably in my book Conspiracy of the Rich. In 1971, Nixon took the dollar off the gold standard, making the dollar a currency instead of money. And in 1974, the Employee Retirement Income Security Act was passed, paving the way for 401(k) plans, forcing uneducated workers into the stock market, and creating the financial services industry.
It’s taken about three decades, but we’re seeing the devastating effects of those actions today as individuals and countries are living on the edge of financial disaster.
On an individual level, take for instance a young friend of mine’s father whose dad worked his whole life in an old-world industrial plant. Every time my friend talked with his dad, his dad would mention how long it was until his retirement, where he’d collect a pension and health benefits and enjoy golf a few times a week and sports on TV. There were no savings to speak of, some stock options decimated by the economic downturn, much debt, and no other plan. Unfortunately, only a few months before my friend’s dad hit the minimum retirement age, the plant went for sale, found no buyers, and closed. Now he, along with hundreds of others at that plant, cannot find a new job, have no savings, and are looking at a very insecure, financial future. For him, it may be too late.
On a national level, look at the Euro Zone. According to The Wall Street Journal, “The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday.”
As IMF Managing Director Christine Lagarde remarked over the weekend, the Euro Zone’s efforts to stymie debt problems “is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand… A moment, ultimately, leading to a downward spiral that could engulf the entire world.” If Europe collapses, the world goes down with it — and the jury is still out on what will happen. But the world’s financial experts are sending out the warning cry.
As you read these stories above, they probably sound vaguely familiar, have little emotional impact on you, and you may have even skipped over them.
These stories echo stories that have been shared for many years now. The news is filled with stories of people living in countries on the edge of financial collapse, and then buffered by good news here and there to keep us all from falling into complete despair.
The reality is that we have become used to living on the edge, and we’re forgetting what it means to live comfortably inland. This is not all bad, if you have the right mindset.
Living on the Edge Requires a Financial Education
Living on the edge requires alertness and intelligence, you cannot give up or be lulled or else you will fall. Each step must be calculated and taken carefully, but confidently, to get to safety. The only other option is to do nothing and hope someone will save you —which is akin to suicide.
It’s for times like these that the Rich Dad Company was formed. This website, our books and DVDs, our coaching, and financial education all exist to help equip you for the perils of our modern economy so that you can be sure to have the knowledge and practical application required to survive and thrive while others fail and fall.
For many, there is no choice about living on the edge. The die has been cast for us by people much more powerful and influential than us. But we can control our actions on the edge. It’s my hope you’ll step forward confidently and smartly, equipped with as much financial knowledge and courage as you can gain and muster. It sure beats the alternative.
To increase your financial education now, click here to find out about our free resources and online community.
Last week, I wrote about the Fed’s recent criticism of the U.S. government’s handling of the housing crisis, a crisis that still persists and may only be getting worse (“Fed Cries Foul?“).
According to a number of news sources, the Fed is considering taking unprecedented action in the housing markets by buying back more housing bad debt. And they are pressuring the government to step up efforts to loosen lending restrictions for borrowers and doing loan write-downs for owners who owe more than their house is worth through Freddie and Fannie.
This week, some new revelations about the Fed’s outlook during the run up to the housing crisis in 2006 were released in the form of that year’s meeting transcripts—and the Fed looks foolish.
According to The New York Times, “Meeting every six weeks to discuss the health of the nation’s economy, [Fed officials] gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.”
Additionally, the Fed poked fun at the growing concern by builders to move housing inventory, “The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was ‘rising through the roof.'”
The implication of the transcripts are clear: the Fed had no clue that the floor was about to fall out from underneath them and the U.S. economy.
So, this begs the question, why do they think they’re now qualified to speak in the housing market?
In 2006, there were plenty of people with enough common sense to know that the housing crisis was going to be bad for the economy, but these were generally considered fringe economists or conspiracy theorists because they challenged the status quo.
Rather than listen, the Fed drank its own Kool-Aid on the fundamentals of the economic system, and the safety net that was supposed to be collateralized debt.
Today, many people, such as my friend and now Rich Dad blogger, Richard Duncan, author of The Dollar Crisis and The Corruption of Capitalism, are sounding the alarm about the coming collapse of the dollar that may result from the Fed’s continued call for printing more money and inflating the economy through debt.
Yet, today, the Fed continues to drink their Kool-Aid and move forward with blind faith — much like they did in 2006, when one Fed member stated upon Chairman Greenspan’s departure, “It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor [Chairman Bernanke] is a lot like a tennis racquet with a gigantic sweet spot.”
Those must have been some pretty cheap strings.
The point of all this? I simply want you to understand that the so-called experts can not only be wrong, but they can be dangerously wrong. My hope is that you don’t drink Kool-Aid, whether it’s served by the Fed, or even myself, but that you increase your own financial literacy.
The mission of the Rich Dad Company is to equip you to think for yourself. We provide financial education that helps you do your research, gather all the information, analyze that information, and make your own informed decision.
Think for yourself and get a financial education.
This is why I rarely tell people what to do, but instead simply explain what I’m doing. I never want you to follow my advice blindly. I want you to think for yourself. What works for me may not work for you.
This is also why we redesigned our website to be more useful to you by providing free financial news and resources to help you make informed decisions.
At the end of the day, only you can save yourself and your family financially. Make the decision today to think for yourself and to take charge of your financial future.
We’ll be here to help with our financial education resources.
The dollar is on a rally the past few weeks, due to the crisis going on in Europe’s economy. But, can it last? Or will that same very crisis in Europe end up leading to a reverse and help the dollar fall faster once the psychology factor levels off?? -Joshua Gamen
It is absolutely madness. Yesterday was a huge injection of dollars into the global financial system by central banks. It seems fiat currencies are swirling the drain now.. Look for precious metals to surge again and listen for new talk of a one world currency..It’s only a matter of time. However, as Robert says, “The people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis”
So increase your financial education which will lead to increase in cash flow. Rely on God and your faith, not the rich or the government, and thrive in these times of oppertunity! – Joshua Gamen
In my book, Conspiracy of the Rich: The 8 New Rules of Money, I write that bailouts are the name of the game. This means that the ultra rich will never suffer like the middle class and poor do in financial crisis. The institutions that are deemed “too big to fail” will always be bailed out. This also means that sometimes big institutions prefer financial crisis because they know they will be bailed out, and they also know they can make a lot of money from those bailouts.
This week, a bombshell hit on the lending practices of the Federal Reserve to the largest banks in the world during the peak of the financial crisis. As Bloomberg reports in an article entitled, “Secret Fed Loans Gave Banks Undisclosed $13B,”
“The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he ’wasn’t aware of the magnitude.’ It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.”
“The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.”
Big gets bigger.
Everyone knew that the name of the game is bailouts for institutions that are too big to fail, and while news agencies have been talking about the gargantuan $7.7 billion in commitments by the Fed to save the economy, the details released this week through the Freedom of Information Act show what we’ve known all along – the rich will say anything to protect their ass-ets and build their balance sheets.
For instance, in November of 2008, Bank of America’s CEO, Kenneth Lewis said that his bank was “one of the strongest and most stable banks in the world.” On that same day, Bank of America owed $86 billion to the Federal Reserve in emergency loan money.
Jamie Dimon, CEO of JP Morgan Chase, told his shareholders in 2010 that he only borrowed from the Fed to encourage others to borrow from the Fed. In reality, the bank borrowed twice its cash holdings from the Fed, and on one day in February 2009, borrowed a colossal $48 billion – one year after the creation of the Fed’s emergency lending program.
All in all, the big six banks comprised of JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley accounted for 63 percent of all daily average lending by the Fed to banks and financial institutions, receiving over $160 billion in TARP funds and borrowing around $460 billion from the Fed.
During that time, “Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.”
Additionally, the Fed helped prop up both Bear Sterns and Wachovia with emergency loans as they were being gobbled up by JPMorgan and Wells Fargo respectively. The Fed transferred $50 billion in secret loans to Wachovia to prevent financial collapse until Wells Fargo could seal the deal, and they sent $30 billion in secret loans to Bear Sterns so that JPMorgan could wrap up that deal—all while providing $29 billion in financing to JPMorgan to fund the deal.
Essentially, the Fed protected the bigger banks and helped them grow even bigger by keeping brain-dead banks on financial life support long enough to graft them into the bodies of bigger financial institutions like a financial Frankenstein.
This was all done in secret, and without the knowledge of the American people and the Congress.
The safety net.
This type of behavior is reckless because it creates a false safety net. The big banks and the ultra rich know they will be bailed out and so they take even greater risks, putting the economy at even greater risk, and playing games with your money.
As Professor Oliver Williamson says, “The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process. The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Of course, this should come as no surprise, as the Fed doesn’t exist to protect the middle class and the poor. Rather, it exists to protect banks and the ultra rich. Something they’ve shown they can do well, efficiently, and without government knowledge or intervention.
Learn the rules of the rich with a financial education
All this is to show what I’ve been saying for many years, you can’t rely on the government to save you, and your definitely can’t rely on the Fed. The government doesn’t even know what’s going on in our financial policy and the Fed hides those details in order to help their friends on Wall Street…after all, the people who run the Fed used to work there, and probably will again someday. You don’t bite the hand that feeds.
If you want to avoid getting wiped out by the next financial crisis, you must understand the rules of the rich and play by those rules. With a new presidential election heating up this year, I’m sure you’ll hear many calls for hope and change on both sides. Many people will believe that their candidate will make a difference and that this will be the time things will change.
The reality is that nothing has changed in decades. The rich take care of the rich and grow richer. The poor and the middle class grow poorer. And the people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis.
Take charge of your financial future so that you can live large when hard times come.