Monday, May 21, 2012

Using one credit card to pay the interest on another

Prudent people know that's dumb, but the Federal Reserve Bank doesn't get it. They're buying Treasury Department debt to prop up the economy until after the fall elections. This creates a false appearance of demand for U.S. obligations and removes any sense of urgency to reduce the awful budget deficits. Watch congress raise the credit limit again, too!

Many foreign investors fled and have been looking elsewhere until we make some attempt to curb spending, reduce our borrowing and narrow our terrible deficits. Without these foreign buyers, the Treasury has resorted to the Federal Reserve to make the purchases. That's like taking it out of one pocket and putting it in the other.

Meanwhile government is growing more dependent on borrowing from itself to finance itself. Treasury securities have reached nearly 9% of GDP which is more than double the level before the so-called 2008 money crisis. The Fed keeps interest rates abnormally low which punishes people who live on fixed incomes and try to save money.

The Fed hides the true size of the budget deficit, prints money and hides true inflation figures to conceal this outright theft from frugal citizens. True inflation and sub-standard interest rates are stealing from prudent people who live within their means to pay for the large percentage of people who have no fiscal responsibility, just like the government.

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