Bloomberg gives us some numbers today about the way the FED has been handling the recession in the last two years. You know, the FED is “trying to keep the economy from plunging into depression”; the same old nonsense that no one believes anymore. Nothing new in the propaganda. What is staggering, though, is the numbers.
Take a seat and hold fast. Try not to faint when you hear it.
The FED loaned the big banks $1.2 trillion as “a measure against depression.” Which is about the same amount Americans owe on 6.5 million delinquent and foreclosed mortgages.
Let’s see. Banks make money on lending money at interest. There is risk involved. That’s why the banks, if they want to survive, need to screen the applicants for a loan. They reject the risky applicants, and they accept the reliable applicants. That’s if the banks have to rely on the market and on their own ability to predict it.
There are no banks like this anymore. There is one bank that changed everything: The Federal Reserve. It was established with the sole idea of underwriting unlimited insurance for banks no matter what they do. They can now give loans promiscuously, no matter the risk involved. Risky applicants are now accepted. Every one can get a loan; not everyone will pay it. The banks know it; they know that most of the applicants can’t pay. The banks give the loans, houses are mortgaged, and business is as usual.
Except that the risk is higher. Which means that, statistically, more people default on their loans. The banks that gave the loans end up with lots of houses and no money in the accounts. That’s because they did not screen the applicants.
That’s when the Federal Reserve steps in and makes new money – out of thin air – and loans it to the banks. The banks are now “solvent.” The also own the houses. Business as usual; the banks win.
Except that there are $1.2 trillion in the economy that were created out of thin air. Which means inflation. Which means everyone suffers – from the subprime homeowners evicted from their houses, to those who never took any loans, to the companies who built the houses. Everyone is left with dollars in their hands that are getting more and more worthless because the value of the dollar is falling. If one found a way to flood the market with abundant gold, gold price will drop to almost zero. The FED can’t produce gold but they can produce computer blips: $1.2 trillion of them. And lend them to the market. The banks win. Everyone else loses.
Could the FED do something else? No. That was why it was created: to cheat everyone out of their money while protecting the banks and the federal government against default and failure, no matter what.
Can we do something? Yes, we can. Help Ron Paul END THE FED.