Federal Reserve Chairman Ben Bernanke’s term ends early next year. He has done his best to take the wealth of the poor and elderly and subsidize those “greedy” bankers. Taxpayers now own $5 trillion of mostly toxic debt. I have been an investor for almost 20 years, and I would never buy foreclosed or defunct debt for 100 cents on the dollar. The banks may increase lending now that they have fewer “nonperforming assets,” but the 2009 bailout resulted in a massive consolidation and not much lending.
We are forced to give the government our hard-earned resources through government taxes/fees, and borrowing and printing money. There are fortunately enough in government who believe that we have been “Taxed Enough Already” – although they are in the crosshairs of the American Gestapo, the Internal Revenue Service. The world has grown cold to buying U.S. debt. The Fed now buys the majority.
Debasing the currency has been used since the United States became a debtor nation. What cost $1 in 1913 when the Federal Reserve Act was passed now costs $23.49. I have a $100 trillion note from Zimbabwe demonstrating the extreme result of debasing a currency. I also have a 5,000-peso coin from Mexico. President Clinton had to bail out our neighbor during his first term.
We have had two large bubbles burst already this century – the tech bubble and the housing bubble. There are four others set to burst – the dollar bubble, the government debt bubble, the student loan bubble and the personal credit bubble. Many nations want to replace the dollar as the reserve currency with a “basket of currencies” – the dollar, euro, pound, yen and yuan. This would be like special drawing rights from the International Monetary Fund.
The national debt is about $17 trillion. Interest is about $400 billion each year with a two-year Treasury note at 0.3 percent. If the interest rate goes to 3 percent, then the interest will be $4 trillion. The default rate on student loans is often more than 20 percent. Interest rates will be tied to the 10-year rate plus 3.4 percent. This is currently 5.38 percent.
As home prices recover, Americans will again use the “equity value” in their homes as an ATM. It would be a great time to remember that the debtor is a slave to the lender!