Since 2008, the 5 largest banks in the United States are now larger and have a higher concentration of the banking assets than before the collapse. Everything that was too-big-to-fail in 2008 is even bigger today. Therefore, not only did President Obama fail to lead a fix to the disease, he doubled-down on the root causes responsible for its uncontrolled growth. If the problem was a bump on the skin before, its a full blown metastatic cancer now. This is all by Socialist/Democrat design of course. If the government (via the FED) can keep rates at zero, then the government can continue to borrow money with little-to-no interest. The banks and the government borrow from Americas central bank (the Federal Reserve) at zero-percent. Meanwhile, the general public is stuck paying retail interest rates plus paying the burdensome taxes to cover the governments neglectful borrowing binge. Therefore, it should be of no surprise that the degree to which the government sector enlarges and creates debt (borrows); is the degree to which the banks egregiously grow. As you know, Notes the Federal Reserve creates carry no interest payment and no maturity. Therefore, Federal Reserve Notes can be issued in unlimited quantities and remain outstanding indefinitely (without maturity). On the other hand, U.S. Treasury Notes issued by the United States Treasury do have maturity dates and pay interest to the note-holder. The game plan is for the FED to swap its non-interest bearing notes for the Treasurys interest bearing notes, and then rebate the interest earned back to the U.S. Treasury. (James Rickards explains this debt and deficit concept in his must-read book The Death of Money) In a nutshell, the government can continue to borrow/lend without impunity. This is why Communism/Socialism (which is what we have in America under President Obama) doesnt work. If creating the wealth stock of an entire nation was as simple as governments and their central bankers manipulating the currency, rationing goods and regulating prices; then to create prosperity, nations of the world would merely have to hire a genius mathematician to duplicate the formula. Unfortunately, history proves that such government control prevents and destroys the stock of wealth in society. And can even lead to war. President Obama shall learn this the hard way before his term expires. His policies have set the stage for a financial collapse of gigantic proportion. And as James Rickards reveals in this interview, next time the IMF will have to get involved. In the meantime, the entire United States stock market has ballooned because of the use of leverage (debt) made available to a few big players (who are willing to keep the pension/union investments propped-up). Dont forget that these big players are coerced into buying government bonds too...which conveniently appear as cash equivalents on their corporate balance sheets. The other major component of cash equivalents is the profits that major corporations hold outside of the United States (over-seas) because declaring such profits to pay dividends in America would result in a 50% tax on the capital (35% corporate income tax + 15% dividend tax paid by shareholder)...ouch. Therefore, these corporations are left with no alternative but to borrow money to for pay shareholder dividends or share buybacks. Im certain the banks arent complaining about this U.S. Government tax policy because it forces their biggest borrowers (Apple, Inc and etc.) to keep borrowing perpetually (at near zero percent for now). The U.S. stock market prices are not booming because the real wealth of society is increasing. Rather... Its because of leverage. Zero percent interest rates arent in place to help Joe the plumber. Ninety million people in America remain unemployed...we have a debt to GDP ratio which is at 100% and growing...yet the stock market is somehow reaching record highs. The good news for real estate is that the U.S government (via the FED) has proven that it will do all in its power to keep the stock market from reversing course for too long. I say good news because this guarantees future rounds of additional money printing (quantitative easing) by the government and FED. Therefore, if you have the ability to buy or invest in U.S. real estate with all-cash dollars; then preserving and growing your wealth with a quality real asset will prove wise. For now, learn about investment and geopolitical matters by listening to this provocative interview with James Rickards. If youre not sure why you should listen to James Rickards, then read my October 7, 2014 post below; which summarizes why I stay on the tip of his brain. If youre wise about wealth and investment, youll study both this and the October 7th interview... youtu.be/3vwxGxmDOZk
Posted on: Sun, 02 Nov 2014 16:28:02 +0000
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