Did you really think it was worth your time to vote last Tuesday? Oh, Republican partisans will of course say an unequivocal “yes” as their party “shellacked” the Democrats and in the process picked up several Senate seats, governors’ mansions, and control of the House of Representatives. But in actuality, within 24 hours of the Republicans’ coup d’état, all those Tea party voters and others who crave small government had their votes negated and their victory smashed.
How? To begin with, South Carolina Senator and Tea party kingmaker Jim DeMint admitted on John King’s State of the Nation on CNN that Republicans will support raising the debt ceiling currently at $14.3 trillion, but only if massive cuts are included with the vote. Ah, Senator, there is plenty to cut in the budget that will make raising the debt ceiling unnecessary. How about ending our quest for world empire by ending foreign occupations, closing down bases, and bringing our troops home? How about abolishing the Energy, Commerce, and Education departments for starters? How about rescinding the balance of Obama’s stimulus program and ending corporate welfare as we know it? Just these moves alone would save over a trillion dollars. If there ever was a time for Republicans to be gutsy it is now. They are riding a wave of voter anger unprecedented in our history. They have a mandate from those same voters to cut, eliminate, and abolish anything and everything in the way of a balanced budget. But within 24 hours of their mandate, DeMint is already cutting deals on federal spending.
Jim DeMint aside, the biggest negation of the voters’ wishes on Tuesday came on Wednesday. The Federal Open Market Committee (FOMC) of the Federal Reserve Bank announced that it would begin a new buying spree of between $600 and $900 billion of U.S. Treasury bonds over the next 10 months. This so-called quantitative easing is necessary according to the FOMC because, “…the pace of recovery in output and employment continues to be slow.” Thus the Fed must step in, purchase Treasury bonds from banks so the banks in turn can loan that liquidity to businesses to get the economy moving again.
You see, Congress and the president are not the only big spenders in Washington. The Federal Reserve also exercises the power to essentially spend our money through monetizing government debt. Thus, on the very day voters across the country were saying no more reckless spending and voting spendthrifts out of Congress, the unelected Fed usurped the people’s power by deciding to spend hundreds of billions of dollars to purchase Treasury bills from member banks.
Based on past experience, here is how the Fed’s spending spree will work. The Fed will create between $600 and $900 billion of liquidity (dollars) out of thin air. It will then use that liquidity to buy up massive amounts of Treasury bonds from the big banks. The banks are supposed to use the proceeds from the sales to make new loans and to get the economy moving again. Keep in mind that the Fed is about to do what it has already done in the not so distant past. Beginning in March of 2009, the Fed injected about $2 trillion into banks to buy up toxic assets. Precisely at that time, the S&P 500 stock index bottomed out after falling by 57 percent from its historic high. Since the Fed began that round of “quantitative easing” in March of 2009, the S&P has rebounded a remarkable 80 percent. With the economy still stuck in a deep sewer there is no reasonable explanation for the sudden, renewed health of the stock market except that Wall Street invested their Fed funds in themselves instead of in Main Street.
And that is what banks are going to do this time as well. It is bad enough that an unelected central bank has the power to print our money like crazy with no Congressional restrictions placed on it, but to give it to the big banks without any stipulations such as they must make loans or face penalties, is just plain criminal.
Look, our political and financial systems are corrupt and rigged. They make a Mafia bookmaker look honest. Think of it as a happy love triangle between Congress, the Fed, and Wall Street. To protect itself politically, Congress has contracted out management of our money supply to the Federal Reserve. In return, the Fed prints money out of thin air to support Congress’ deficit spending which ensures its high reelection rate. The Fed supports big banks by loaning them our money at very low rates. It bails them out when they don’t have enough reserves to meet obligations. It allows fractional reserve banking wherein banks are guaranteed solvency by the Fed even though they loan out up to 90 percent of deposits on their books. The final link in the cycle is the contributions given by Wall Street banks to members of Congress. We’ve heard DeMint, McConnell, Cantor, Boehner and other Republicans decry the deficit spending of Democrats but when have we ever heard them decry the Federal Reserve? Never. There is a good reason for this: the Fed is their meal ticket to reelection through the financing of deficit spending and campaign kickbacks from Wall Street.
This whole rigged system has been destroying our standard of living for decades. By adding more dollars to a low producing economy, the value of our currency will continue to deteriorate and prices will spike. Previous stimulus spending by Congress and quantitative easing by the Fed has already caused commodity prices to rise hugely in the last year: Agricultural raw materials up 24%, Industrial Inputs Index up 25%, Metals Price Index up 26%, coffee up 45%, barley up 32%, oranges up 35%, beef up 23%, pork up 68%, salmon up 30%, sugar up 24%, wool up 20%, cotton up 40%, and rubber: 62%. You get the idea. Imagine price increases after this next round of easing. But don’t worry, because the Fed’s member banks will know when to pull out of the stock market before it busts.
At the end of the day, if you voted for smaller, less expensive government last Tuesday, your vote was negated by the unelected economic central planners at the Federal Reserve. It took the FOMC just 48 hours in closed door meetings to undo what candidates across the country spent billions of dollars in the last year to achieve on election day. What a pity since you thought your vote was really worth your time.