American Capitalism

October 12, 2012 § 1 Comment

The Federal Reserve is no more federal than Federal Express. It is a private bank operating for the profit of its shareholders under the guise of an “independent within the government.” Really, its not accountable to anyone or anything. This is no secret.

When government needs more money, it calls the fed. The fed agrees to issue more money to loan to the government at  interest. Government issues “treasury bonds,” AKA, IOU’s. The fed issues federal reserve notes, AKA, “dollars” to the government. Government then goes and spends said money on whatever it deems appropriate. War, bailouts, more social programs, servicing the debt, just to name a few of the biggies.

The fed then sells these US government issued bonds to China, Japan, or any entity willing to buy. This is what is meant by saying that China and Japan own us

Because the federal reserve notes (dollar) is tied to nothing of intrinsic value, the fed can keep issuing it freely. And it does. Secret bailouts, QE1, QE2, and the latest, indefinite QE3.  

When the government gets this newly created money, it lends it to the banks at very low rates. Sometimes close to zero, or 1% in the form of bailouts, TARP and Quantitative Easing. Those with access to the money first, have a huge advantage over the rest of society. Banks can simply borrow money at 1% and loan it out at 4% or 5% to you and me. Not a risky bet at all. Those receiving the money first tend to save it, or invest it themselves, thus, trickle down economics fails immediately. Nice idea Regan, but the crony’s got to it first.

Banks also use fractional reserve banking to maximize their profits with little concern for the risks. For example, Chase takes in a $100 deposit from my latest paycheck. It keeps 10% on hand as reserve, then loans out $90 to make money off its interest. The next bank receives that $90 dollar deposit, and that bank only needs to keep 10% on hand, so it loans out $81. And on and on it goes… fractional reserve banking. Maximize profits. Since they know they are too big to fail, and our government or even the fed itself will bail them out, there is no risk for these institutions. In light of this, a simple question comes to mind, what happens when everyone wants their money in case of economic insecurity? Will your money there?

 Banks keep huge profits when their bets pay off, as they often do, but any losses get socialized and dumped on the taxpayers, via government bailouts, or via federal reserve quantitative easing. We bail out the institutions that caused the problem in the first place. And who is on the hook for said bailout? You and me, and future generations. The national debt is upwards of 16 TRILLION, not including unfunded liabilities, i.e. Social Security, Medicare, Medicaid, etc. and it WILL keep rising.

In exchange for this cheap money, the banks are huge contributors to the campaigns of the politicians that allow this system to perpetuate.

So next time you hear the phrase “Corporate Whore” directed at one of our leaders, now you know. Or next time you hear the term “crony capitalism,” THIS is the definition of cronyism. The connected few, connected with government, get all the special privileges, bailouts, subsidies, tax breaks they want, at a VERY clear advantage over the rest of us. THIS is what is meant by the 99% vs the 1%. The 1% that have a clear, unfair, and immoral advantage over the rest of us. They keep getting richer, and we keep getting poorer. Crony capitalism defined.

 Furthermore, because the fed under the guise of our all knowing leaders in government, have managed to print ever more money, this has a very evil and silent consequence on our savings. It saturates the market with dollars, thus making the dollar worth less and less every time. Ever wonder why gas keeps going up? Oil priced in gold (as is the basis used for its value around the world) is still just as cheap as its been over the past 60 or 70 years! 2 grams of gold per barrel.  Gas is not more expensive, the dollar is just cheaper. It can buy less and less “stuff” every day.

 Thus, we spin our wheels for a paper dollar currency worth a fraction of what it used to be worth. We run the rat race, never enough time to spend with our loved ones, working two jobs, and commuting multiple hours a day… to service our debts, and put ever-more costly food on our tables. They rake in astronomical profits all the while being propped up by our crony-corporatist political system, and paid for by us. The working class. i.e. the non-bankster types.

This is America.

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