Disgruntled Federal Reserve Customer
Lee Rogers
For those who don't believe that our currency could go to zero value, look at what is happening in Zimbabwe today. The country is on the brink of a complete financial collapse because of run away inflation. Zimbabwe is home to several millionaires. The only problem is that since the Zimbabwe Dollar has almost no purchasing value, their millions of Zimbabwe Dollars can't purchase anything tangible. There is really no difference between our Federal Reserve Notes and Zimbabwe Dollars in terms of intrinsic value. The only difference is the level of confidence people have in the currency. People have confidence in our currency primarily because of our military might. Our military is used to enforce a so called strong currency policy, ensuring that all oil transactions are conducted with our currency. Saddam Hussein wanted to price oil in Euros and our military ended up invading Iraq. The Iranian and Venezuelan governments have also expressed interest in doing the same which provides an explanation as to why the U.S. mainstream media has specifically targeted them as rogue nations. Either way, our military simply can't invade every country that wants to conduct oil transactions in a different currency. It just isn't practical for us to do so. This game is coming to an end and when it finally does we can expect to see a great deal of pressure come down on our Federal Reserve Notes. The value of our currency is nothing but an illusion built around a game of perception and confidence. If people lose confidence in our currency it will eventually result in the Federal Reserve Note being worth as much as the Zimbabwe Dollar.
Below is an excerpt taken from a Reuters article detailing China's continued move away from our currency.
China's reserve plans keep FOREX market on edge
Traders unloaded the greenback as soon as People's Bank of China Governor Zhou Xiaochuan said Thursday the bank will keep diversifying its dollar-heavy portfolio, a catalyst that may spark a sustained dollar decline.
Though Zhou said this was consistent with long-standing Chinese policy, his comments came shortly after central banks in Russia and Switzerland announced similar reserve shifts, bringing diversification away from dollars into sharper focus.
This is another bearish sign for Federal Reserve Notes. As China and other nations diversify into hard assets and currencies besides our own, it will put additional pressure on the value of Federal Reserve Notes. This story shows that foreigners are continuing to lose confidence in our currency and are looking for ways to bail out of it.
Former World Bank Vice President and Nobel Prize winner Joseph Stiglitz is negative on what is happening in the world economy. Below is an excerpt from an article that highlights a recent interview he conducted with radio talk show host Alex Jones.
Former World Bank Chief Economist Predicts Global Crash
Former World Bank Vice President, Chief Economist and Nobel Prize winner Joseph Stiglitz has predicted a global economic crash within 24 months - unless the current downturn is successfully managed. Asked if the situation was being properly handled Stiglitz emphatically responded "no," and also drew ominous parallels to the development of the NAFTA Superhighway and the North American Union.
From a domestic standpoint, there is no question that we are seeing an unacceptable level of inflation. A few days ago I bought a steak and cheese sandwich at Subway with chips and a drink and it almost cost me $9. I remember about five years ago, the same meal cost me around $6. That is approximately a 50% increase in nominal cost. I don't care what sort of fuzzy numbers the Federal Reserve comes up with to tell me I'm crazy. I know that the money I'm making is not providing me with the same purchasing power that it once did. Last I checked the money I've made hasn't increased in nominal value by 50% over the past five years. Most companies only provide a 3% standard of living salary increase each year which does not equate to a 50% increase over five years. The fact of the matter is that the money people earn coupled with annual wage increases is not keeping up with the rising cost of goods and services.
More proof of this can be seen with the financial war that has been waged on America's middle class over the past 50 years. In the 1950's a male blue collar worker by himself could make enough money to support a family. Now in the early 21st century both the father and mother have to work in order to sustain the same standard of living. The combination of currency devaluation and the rush towards globalization has left America's middle class the big loser.
Even more ridiculous is that the Federal Reserve and the U.S. Treasury continue to be engaged in all sorts of crazy monkey business to keep our currency from plunging. A New York Post article examined how the U.S. Treasury has been using repurchase agreements to quickly move money into financial institutions that they use to loan. The Federal Reserve has engaged in these practices for quite sometime, but according to the New York Post the U.S. Treasury appears to be involved in the same activity. Below is an excerpt from the article.
U.S. Treasury Is Quietly Doing the Feds Work
For the past few years the U.S. Treasury has been quietly involved in what the financial markets call "repo" agreements, and this near-secret operation could explain why the nation's money supply seems to be confoundingly large.
It might also explain why Washington decided earlier this year to stop publishing M3 money supply figures, the broadest and most popular measure of money in circulation.
Repurchase agreements -- or repos -- have long been used by the Federal Reserve to get money quickly into the hands of financial institutions, which in turn can put the money into circulation in the form of loans.
Last Thursday, for example, the Fed executed $2.5 billion in overnight repos and $8 billion in 14-day repurchase agreements. These were reported on the financial wires.
The Treasury completed a $5.5 billion repo operation on the same day under what it calls the Term Investment Option. There was no mention of the Treasury operation on the wires. In the Fed's repo deals, the banks temporarily turn over securities to the central bank in exchange for cash.
With this type of thing happening, how can anyone know what's going on with overall money supply? Or perhaps that's the whole point.
Yet another bearish sign for Federal Reserve Notes is the Democratic take over of the U.S. Congress. I fear that this new Congress coupled with the Bush administration will cause spending to go through the roof and plunge this country further into bankruptcy. Despite a debt already in the trillions, we've already seen the U.S. government expand further in size under the Bush administration. A Democrat controlled Congress coupled with the Bush administration is a recipe for even larger government and more spending. I have absolutely no confidence in either of these political parties. You would think that our so called elected officials would show some sort of fiscal sanity and realize that our debt is at unsustainable levels and that we need to stop spending money. The fact that this has still not happened yet is beyond insane.
With all of these things to consider, I hope it is easy to see why I am a disgruntled customer of the Federal Reserve. They have bankrupted our government and they offer a lousy product that continues to lose value. This is why I am converting as many of my Federal Reserve Notes into gold and silver. With so much fiscal instability in our economic system, tangible assets are the only game in town.
I'm looking at a short term target of $700 an ounce gold and $15 an ounce silver. If you are planning on buying physical gold or silver bullion don't bother waiting for pull backs. This bull market has a long way to go, so if you buy consistently and hold for the long term, you'll be rewarded greatly.
November 11, 2006
Lee Rogers
Funny Money Report
www.funnymoneyreport.com
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