A recent book by Jim Marrs, entitled “The Trillion-Dollar Conspiracy”, serves as a well documented factual reference to the financial catastrophes (and much more) which led to the September / October 2008 systemic collapse.
Even more important however, “The Trillion-Dollar Conspiracty” quotes the founding fathers on the causes of the American Revolutionary War. Keep the following snippet from the book, which quotes Benjamin Franklin, in mind while reading the remainder of this newsletter:
And despite the popular myth, the American colonial revolt against England occurred more over concern for its own currency than a small tax on tea. Benjamin Franklin wrote, “…the inability of the colonists to get the power to issue their own money permanently out of the hands of George III and the international bankers was the prime reason for the Revolutionary War.” As previously discussed, wealth equals power. And the American revolutionists knew that to gain true freedom, they had to break the power of the Rothschild-dominated Bank of England, which had outlawed their money-colonial script.
Obama’s debt commission recently came out and, not surprisingly, simply stated the obvious:
Bowles said that unlike the current economic crisis, which was largely unforeseen before it hit in fall 2008, the coming fiscal calamity is staring the country in the face. “This one is as clear as a bell,” he said. “This debt is like a cancer.”
The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. “The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans — the whole rest of the discretionary budget is being financed by China and other countries,” Simpson said.
“We can’t grow our way out of this,” Bowles said. “We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can’t tax our way out. . . . The reality is we’ve got to do exactly what you all do every day as governors. We’ve got to cut spending or increase revenues or do some combination of that.”
What was much more of a surprise was that Dagong Global Credit Rating Co, China’s leading credit rating agency, has stripped America, Britain, Germany and France of their AAA ratings.
Dagong Global Credit Rating Co used its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to “wealth creating capacity” and foreign reserves than Fitch, Standard & Poor’s, or Moody’s.
The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia.
Dagong rates Norway, Denmark, Switzerland, and Singapore at AAA, along with the commodity twins Australia and New Zealand.
Chinese president Hu Jintao said in April that the world needs “an objective, fair, and reasonable standard” for rating sovereign debt. Dagong appears to have stepped into the role, saying its objective was to assess countries using methods that would “not be affected by ideology”
The agency, known in China for rating companies, said its goal is to “correct the defects” of the existing system and offer a counter-weight to Western agencies.
As both of these articles display, time may be running out for the US to get a handle on its fiscal situation. How much longer can this game go on?
In seemingly utter disregard, the Federal Reserve is proactively messaging that it may be forced to stimulate the economy once again as the economic outlook appears dismal. Of course the typical avenue of stimulation, lowering rates, isn’t an option as the Fed Funds rate currently sits at 0.25%.
With Congress tied in political knots over whether to take further action to boost the economy, Fed leaders are weighing modest steps that could offer more support for economic activity at a time when their target for short-term interest rates is already near zero. They are still resistant to calls to pull out their big guns — massive infusions of cash, such as those undertaken during the depths of the financial crisis — but would reconsider if conditions worsen.
“If the economic situation changes, policy should react,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in an interview Wednesday. “You shouldn’t sit on your hands. . . . I think there’s plenty more we could do if we had to.”
Some economists have encouraged the Fed to launch a new asset-purchase program, saying that with the unemployment rate at 9.5 percent and little apparent risk of inflation, the Fed should use every tool at its disposal to get the economy back on track.
All that said, Fed officials do not rule out launching a major new asset-purchase program. Rather, they say they would consider one only if their basic forecast — of continued steady expansion in the economy — proves to be wrong. A key factor that would build support for new asset purchases would be a rise in the risk of deflation, or a dangerous cycle of falling prices — which has become more of a concern as the world economy slows.
If there was any doubt in your mind that they are probing the market for acceptance on another Quantitative Beating (Easing) 2.0 program, the following official statement from the recently released Federal Reserve meeting minutes paint the same picture:
In sum, the changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place. However, members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.
As readers are aware, Quantitative Easing is just a professional and complicated sounding term for direct money injection and debt. The initial QE program consisted of the Fed buying ~1.7 Trillion in assets. Approximately 300 Billion of this was directed in US Treasuries – which is extremely inflationary. How much will the next package be? Some are speculating up to 5 Trillion…
What’s disgusting about this is that our central bank is simply lining up to once again do exactly opposite of what the market is dictating should be done, and furthermore, needs to be done. All of the problems of late 2008 have simply been swept under a rug – THEY ARE STILL THERE! The only way to get back to real economic growth is to deal with the true financial consequences which should have been allowed to play out from the start.
The road is bleak, but as the economy continues to melt, expect the Fed to throw out Quantitative Beatings until the global market forces a halt. This will mark the end of the beginning – a move into a new era with its own unique set of problems.