But getting back to the U.S. Treasuries and why Bernanke may be losing control of that market and as an extension of the global financial system, here are the points that need to be made:
- Up until now, the Fed had been able to pick up the slack as foreigners sold U.S. Treasuries. The $85 billion per month of purchases in U.S. Treasuries and mortgage-backed securities was sufficient to keep the prices of those Treasuries up and to keep interest rates at very low levels.
- The U.S. is continuing to run huge deficits to finance all manner of unaffordable military excursions overseas and socialism here at home. The political will to cut back on expenditures to levels that can be funded from global savings simply does not exist nor do our brilliant Ivy League educated politicians and economists believe that is what we should do. So Mr. Bernanke must continue to print money to buy U.S. debt since no one in their right mind wants to buy it at current interest rates. And obviously, if Bernanke left rates rise to their true market levels as Volcker did in 1980, we would enter a depression much more severe than that of the 1930s.
- The Fed is now like a mouse on a treadmill! While Mr. Bernanke recently said that the Fed would, depending on economic data, begin tapering down the purchases of U.S. Treasuries and mortgage-backed securities by the end of 2014, we can expect that he as well as his successor will buy even more than the current $85 billion at a faster and faster rate, in an effort to continue their failed policy. James Turk compared the Fed now to being like âmice on a treadmill.â
- The fraudulent U.S. Dollar CON GAME will become more and more difficult for Mr. Bernanke or his successor to sell, as the Fed chairman will be increasingly seen as the âNaked Emperor.â At the moment, with the markets in decline, the dollar has gotten stronger. But if the misguided Keynesian money printing and deficit spending policies continue, at some point there will be a huge run on the dollar, although we will need to see other currencies go first. The dollar will likely be the last fiat currency standing, at least in the Western world. And in fact, the Russians and Chinese, who already see the handwriting on the wall for the dollar, have been building huge gold reserves in anticipation of the dollarâs date with death.
Of course what we are seeing now in the markets is just the tip of a gigantic iceberg of way too much debt that cannot be paid by any stretch of the imagination. James Turk pointed out in an interview with King World News the following problems that are bubbling up under the surface that should make us all very fearful of what is to come:
- Thomas Hoenig, the vice chairman of the FDIC, described Deutsche Bank as âhorribly undercapitalized.â But he also named a slew of other major companies, like UBS, Morgan Stanley, Crédit Agricole, and Société Générale, as banks skating on thin ice.
- Mario Draghi, head of the ECB, is now saying they will do whatever is necessary, even though whatever the ECB does âmay have unintended consequences.â
Meanwhile, recent economics newsâeven using the governmentâs sugarcoated statsâwas abysmal. Real average hourly earnings for all employees fell 0.2% in May. Now we know that those are phony numbers because, based on the work of economist John Williams, the actual cost of staying alive is far above the 1.7% CPI numbers the government conveniently manufactures. The real cost of living increase for average Americans is more like 7% to 9%. If you factor those numbers into the equation, you can see why a chart of the real median household income using John Williamsâs inflation numbers looks a lot more like the consumer confidence chart than the inflated take-home numbers the government gives us.
The mainstream media, which is bought and paid for by the same people who own the Federal Reserve Bank and our government, will try to put a happy face on rising rates by saying it is a result of a stronger economy. Nothing could be further from the truth, but in order to continue the con game, the establishment has to act like they know what is going on.
It is interesting to note that a host of people believe the bull market in long-dated Treasury bull market that was set up by the last Federal Reserve chairman to respect the markets, namely, Paul Volcker, is coming to an end. Not only is it interesting but it also represents what could be the biggest turning point in American economic history since the Civil War. What is impressive is that both those on the hyperinflationary side as well on as the deflationary side believe we are at a turning point.
Jay Taylor
Jay Taylor Host of Turning Hard Times Into Good Times Jay Taylor is the host of Turning Hard Times Into Good Times on the VoiceAmerica Business Channel. The insights provided to Jay came from a history professor in 1967 who advised Jay that when countries go off a gold or silver standard, hard economic times are sure to follow because nations begin to think they do not need to work hard and save to enjoy a better life. Indeed there is no free lunch and a gold standard reminds people of that every day. Jay watched his professorâs prophetic words come true when in 1971, President Nixon completely detached the dollar from gold. Not surprising to Jay, the price of gold skyrocketed in the late 1970s as inflation wiped out vast amounts of wealth from average Americans. To protect his own wealth Jay began to invest in gold and gold mining shares and in 1981 he began sharing his success and insights in his newsletter. In 1981 Jay began writing a subscription newsletter that has earned his subscribers countless thousands of dollars over the years. Jayâs insights as to the real cause of our problems has enabled him to find investment strategies that work. Diagnose a problem correctly and you have a chance for success.
