“When a government(or governments) forcefully over value one money and under value another, the under valued money will disappear, and the over valued money will flood the circulation.” – Gresham’s Law.
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.
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.
Follow me on Facebook! – Democrats and Republicans need to stop blocking each other. One of these 3 groups is going to have power: large government, big money, or the people..seems to be big money with the power and influencing the government to get bigger but do what they want..It needs to be the people’s time. It’s our money, let’s govern ourselves. Washington is a zoo.
By: Joshua Gayman
We can get back to the lifestyle we all want. But it will take REAL revolutionary change, and their will be massive sacrifice. But which is worse? To live as a slave or die as a free man? We have a compromise on our hands amongst freedom and slavery. We are all slaves to money. Fear is a distressing negative sensation induced by a perceived threat. We are living in a state of distressing negative sensation that continues to get worse each day as we work harder and longer while our quality of life diminishes. Every day that we compromise our time and labor for less and less is a day we must fight to get back.
Money is a man-made commodity – thus, we can easily wipe out our national debt by ending the dollar now. We must reclaim our own government so that to serve us. This would require a new federal government. we then need a new currency, banking system, and education system.
Do you want a good future and freedom for your children? If yes, then you must not be lazy. Too many people are choosing to labor for 10 hours per day rather than stop for 10 minutes and realize the full potential of their brain.
The global banking system has not only been the path to greater wealth for, but has at the same time been the vehicle through which the ultra rich have controlled and managed the enormous resources of our planet, and continue to do so. These resources are not limited to commodities. They include humans.
The rich love bubbles and they love depressions. When the rich desire for more man-made things, they allow more money to flow through the world. When they need to cash in on their *Dear Money, they simply constrict the money supply as to collect on all of the resources(collateral) that they “lent” to the people using their made up currency. At this time unemployment is no problem for the rich, but rather they find it to their benefit. The more unemployment, the more relief. The more relief, the more bonds. The more bonds, the more taxes. The more taxes, the more interest coupons they are able to clip on their bonds.” This means that the government becomes in more debt to them. When the government is in debt to them, WE are in debt to them. The government does not pay taxes, they are actually funded from taxes. Only WE pay taxes.
An international banker said in a letter to his son in 1932 in regards to control over man via money, “If young men like those in charge of our national finances can carry over the program as now laid out, we have the foundation of a great international hegemony of finance. The power given to the board to remove officers and directors anywhere in the country is a bold and masterful stroke of legislation. Of course, while these things will be done under the pretense of preventing bank failures, they will in fact, galvanize the central banking power down to the smallest village. Credit can then be so controlled that political uprising will be impossible and credit extension can be used strictly to hold class distinction tightly within bounds.… This is not so difficult as you might at first hand suppose. To properly do so, it is only necessary to control the letters which, on our modern times, simply means to control the press.”
How can you serve two masters – your Creator and your Government? The answer is that you cannot server two masters, therefore the Government had to create a system that tricks you into thinking you must serve them, where in fact, Governments must serve us, the people
By: Joshua Gamen
Could there be a one world currency?
As a citizen of the best country in the history of the world, the United States, I would have said no 5 years ago. I would have told you that’s a terrible idea. The United States is home of the US Dollar. And to the United States government, the Dollar represents a global license to print money. This is because the Dollar has stood as the Reserve currency of the world since 1944(google: Bretton Woods). No other country in the world has the same power to literally just print money with a printing press, because other countries have to convert their currency to Dollars before performing global trade.
But the times, they are a changin’!
Fast FWD 5 years to present day
All of those dollars printed since 1944 were leveraged further using debt and fractional reserve banking. We are all familiar with how debt increases the money supply. Fractional reserve banking is the process of expanding the money supply further by banks issuing new loans every time a deposit is made. This means when u put $100 in the bank, they turn it into $1000 in loans.
After decades of printing money into existence and operating in a system ran by debt, the house of cards crashed in 2007. A huge run on the system occurred from ’02 to ’07 when Debt flooded the world like never before. The country thrived as they lived on the money the banks loaned them. Loans that existed off of money which was printed into existence from nothing and charged interest on. Banks thrived as housing was used to further leverage the money supply by being used as collateral for more debt. But 2007 exposed the system. In 2007, the economy fell like Jenga when society could no longer make the minimum interest payment on it’s debts. Banks tried to patch the hole in the bubble by dropping interest rates to zero so that the system could stimulate debt to stay afloat, but it was too late. The debt was already too much to repay.
The banks then had to foreclose on the houses because they weren’t receiving payments. The banks want interest, not rent, so the houses are useless to them. This caused a flood of supply to the housing market and drove values down. The housing crash was absorbed to them because they got reimbursed by insurance companies like AIG. That is what then caused the stock market crash in 2008. Fannie and Freddie crashed first, then huge public insurance companies like AIG went bankrupt from reimbursing the banks for their foreclosure losses. Financial stocks tumbled and brought the other sectors down with them, causing the stock market to fall 50 percent.
The banks needed the insurance companies to keep bailing them out, so they got the government to issue that huge bailout. In addition to their beloved insurance companies receiving hundreds of billions of dollars, they got plenty for themselves thrown into the package. They then used their money to buy up the little banks, furthering their empire of banks.
Now the banks were posting record profits from the money they had received from the government and insurance companies, but the public was still in shambles. Even with the government dumping trillions of Dollars into the system, unemployment soared as housing continued to crash from the continually increasing supply of housing led by foreclosures, loans stopped and trade halted, both globally as well as on a local scale.
With the US economy on life support, the rest of the world stopped investing in it. This means foreign nations stopped purchasing our debt. To keep the economy going, more Dollars were printed and injected into the economy, which devalued the existing dollars. Now we are on the brink of another Jenga. This time the collapse would be much more devistating, as it would be caused by the exposure to the currency bubble that the Dollars has been in. The cause of the bubble: Too much currency in circulation. The problem is that there are significantly more Dollars in circulation than there is production of goods and services. This inevitably leads to the increase in prices to all goods. This also means, unless you are getting a pay increase to adjust for the increase in prices, you won’t be able to live the same as before. In addition, if you have money in savings, it will now buy you less than it would have in the past.
Foreign countries have took notice of our currency manipulation, and they don’t like it. Most notably China, who is fighting to have their currency, the Yuan, replace the Dollar as the reserve currency of the world. The reason they don’t like supply of Dollars flooding the world is because it means the interest they are collecting from investing in the US is being paid back to them in Dollars, which are lower in value than they were when these foreign nations invested in the US.
A currency crash, which is economically referred to as hyper-inflation, would result in a world depression.
I believe that we will see this happen very soon, as we are seeing the value of the dollar plummet, while at the same time more and more dollars being printed. This is why commodities such as oil, gold, and silver have been skyrocketing since this mess began in 2007.
So what will happen when this happens? I believe it will cause a global reliance on government, which will then cause one of two scenarios. The first scenario being a merge of the biggest nations in the world into a one world government, and the second being a world war for control of a world government. Either way, freedoms will be lost and quality of life diminished. But I will assure you, someone, somewhere, will be gaining power from the whole thing..
By: Joshua Gamen
While the politicians are doing everything they can to keep the attention of the crowd, the real game players are behind the curtain, sitting at a table, plotting out how they can keep control of the world.
Obama is still the president, for another 2 years. His popularity rating is falling, people are frustrated, they want jobs and they want the lifestyle back. But I assure you it is not up to the government to provide the life you want, it is up to you.
The election was tonight. The House of Representatives had the majority swing back to the Republicans, as the balance shifted to a count of 236 Republicans to 162 Democrats. Democrats still have majority of the Senate by a slim count of 51-47. There is a lot of talk about the “GOP”(Grand Old Party, Republicans), tea parties, etc, and what they will try and change. But while the same game continues to get played in Washington that has gone on for generations, the real players are in the backroom keeping their plan going to make the rich richer.
While Americans were heading to their polling places Tuesday to decide who will represent them in the halls of the Capitol, just two miles away the Federal Reserve’s Open Market Committee was having a two day meeting in its historic Board Room.
Odd that the election came the night before the Fed makes their big announcement. Or is it?
“While the talking heads will be focused on who won what seats in congress, the real power will be making an important decision whether to begin another round of quantitative easing, a.k.a printing money, to try and jump start the economy. The way they do this is by buying their own debt in the form of bonds. ” -Robert Kiyosaki.
The Federal Reserve was established in 1913, we are almost 100 years into it’s existence. The elections are held every 2 years. What does it tell you when the two meet at the same time. Think about this, the Federal Reserve is not part of government. The Federal Reserve is a private entity. It is not Federal, it is not a bank, it has no reserves. All they do is print paper. And yes, they feel the need to have a big meeting over the 2 days while the elections are going on and then come make their big announcement the day after the votes are in. Could they be getting their strategy ready for the next batch of elected officials and their plan to play off of them as well as possible?
They are going to buy back their own bonds. Bonds are IOU’s. So basically, they are just removing some of the IOU’s. Why would they do this? Well, if the interest that they have created based on all of the “loans” they have made in their existence, is greater than the production we can achieve, their only hope to keep the system going is to just pull back and say, “it’s ok, we’ll take some of this off so that you can continue to pay us.” It’s the ultimate “loan mod.” Seriously, their whole goal is that you keep working to give your money to them. You are creating stuff, and meanwhile they are keeping control of everything being created. If the people wake up and realize that we are paying them with dollars that don’t mean anything anyways, then they will quit paying them all together. If the people don’t think they “owe” anything, then they don’t “owe” anything. Could the Federal Reserve order the military to force people into going to work and then handing their money to them? No, not “yet” anyways. Remember, the Federal Reserve is a private entity. Scary that they have the power they do.
Leave your thoughts!