- A man is just about as happy as he makes up his mind to be.
- Abraham Lincoln
Called It Wrong
Unlike the Federal Reserve and most of our leaders, we admit when we are wrong. We believed the Fed would blink. We called only a half-point rate increase. As you know, we received a three-quarter rate increase. However, we did follow-up on that call by saying that we see only a quarter-point rate increase in December. Now, we would like to add that Jerome Powell stated that the Federal Reserve may temper their future rate increases. We can call our call as not being totally wrong. At least, we were in the ball game. Nevertheless, the machinations of the Fed has caused a liquidity problem. Anyone, and we mean generally banks who purchased the "old" lower yielding notes from the government are losing money in two ways. Their reserve values have fallen since these bonds have dropped precipitously. With inflation roaring, these bonds could fall even more. This is why the Federal Reserve is quietly buying these notes. This is their real purpose. To protect the wealthy. Everything else attributed to them is BS.
Question?
You have $5,000 to invest. Two men are of equal value present you with a bond. One offers you a yield of 4.25% (30-year) and the other offers you 9.62% (I-Bond). Now, if idiots out there keep choosing the former, they are losing to inflation and the real value of their bond. This is the current problem for banks. However, like we have stated in the past, by lowering interest rates, you create a danger. We are in that danger. It is inflation. We also stated that there is another more dangerous economic state. It is called stagflation. It means that you have high inflation and low economic output. We are in it now!
Don't Forget
The real inherit danger of low interest rates is that it encourages debt. This is how many companies exist. They are called "zombie" firms. They would be out of business if interest rates were normal. However, with the stimulus of low rates, they can continue. This is another way how the connected receive benefits. The government picks and chooses winners and losers. They always pick the elite and only do things to buy votes from the rest of us.
New Problem
If the Fed maintains their policy of raising rates and the new magic number is 5% (up from 4.25%) many companies will enter bankruptcy. With that said, who is the biggest debtor in the world? Who has abused the privilege of being the reserve currency in the world? Who has consistantly run a deficit budget? You all know the answer. This is the next crisis.
When you borrow money, you have to pay interest on the amount. The drug of low money by the idiots at the Federal Reserve acted like a drug dealer supplying our nation. Our stupid, short-sighted government leaders only know how to address a problem by throwing money at it. They never save for a rainy day. They have abused the privilege that is bestowed on our nation, as the world's currency reserve. Now, the day of reckening is approaching. In fact, it is already here. With our national debt being off the charts, the interest that our nation owes on that debt is now, flying off the charts. We will owe as much interest debt on our budget as we spend for the military. Consider, that at present, this amounts to $425 billion. At 5%, it climbs to $500 billion and it compounds and it will grow worse until our budget is all interest debt. Where will we get money for medicare, for social security, for anything? This is another reason why we say, End the Fed! If you think that is troubling, consider...
Another Problem
Many nations in the world are angry about the dollars rise because their currency is worth less. This is exporting currency inflation on top of consumer inflation. Now, the lying, Red Chinese under Xi understand the situation. They always look long-term. In 2020, they had their central bank introduce digital money in select regions. The population number is larger than the population of the US at 350 million Chinese people. Last month, they enacted their first cross-border digital transaction. In addition, they informed the BRICS alliance of nations that they would back any new currency that this group would introduce into the market. While doing this, China also is forcing some of its trading partners to do their exchange only with the Chinese yuan. The Red Communist Chinese party seeks to detrone the world from Kind Dollar to King Yuan. Xi knows that China is now the world's leader in exports. It is the #1 manufacturer. It is the #1 nation for foreign investment. They are the "locomotive" for global growth. Xi seeks to be the number one nation in finances. If they achieve that, then they only have to control space with satillites to become number one in communications. Then, their true colors will show. They seek world domination.
Whoever wins the mid-term elections had better start putting tariffs on anything and everything coming from China. By the way, the IMF also has a currency waiting to take the crown away from the US. If we ever lose our position as King Dollar, we will fall quickly to third world status as our debt is the cancer and the Federal Reserve is the cause. Peace.
