At a student event at a local college, members of the San Francisco Federal Reserve spoke and participated in a mock FOMC meeting where students from surrounding colleges where able to present research and suggest ideas for what upcoming steps the Fed should take regarding the Fed fund rate and any further stimulus. The general consensus was that the past stimulus is waning and to continue to see future growth and positive numbers, future stimulus would be necessary. Also, the current 0-.25 percent on fed funds rate should be maintained to assist any further growth in the economy. Being that the rate is already essentially 0, there really is no room to run. We were not at all shocked to hear boat loads of Keynesian economics coming from Senior Economist Gary Zimmerman and the general viewpoints from all who were in the room as each laid out their proposals for the country. Something that stood out to CrushTheStreet.com was that U6 unemployment data (what we consider real unemployment) was actually discussed and wasn’t thrown under a rug. U6 is currently at about 16%. Something that didn’t surprise us was the glorified announcement of core inflation that is at 1%. Unfortunately, we can’t eat and drive our ipods. It was if they were saying the situation is a mess, but we are doing our job because the numbers look good.
As discussed in prior articles, rising commodities and securities prices are a direct product of inflation and the only people that are thriving in these times are the top 1 percent of who are heavily invested and Wallstreet, while the middle class gets crushed by energy costs, food, etc. We addressed this issue during a Q and A session and found Gary Zimmerman a bit baffled and caught off guard. Then he conceded that while the numbers on Wallstreet are positive, the numbers haven’t translated to the working class the way it has for the top 1 percent and Wallstreet.
Because of QE2, the Fed is now responsible for purchasing 70% of long term treasuries which has come out to almost 600 billion over the past 7 months. The whole idea of purchasing our own debt just seemed counterproductive and illogical, but it sure seemed to make sense to our Senior Economist at the San Francisco Federal Reserve. This fact seemed to go right over everyone’s head in the room and for many it sounded only reasonable and necessary to get the economy back on track. But keep in mind, the Fed buying these treasuries is a good thing because it shows up on their balance sheet as an ASSET. Unfortunately, the Fed acts and lives extremely presumptuous in that they assume whatever they do will be held up and accepted by the people and foreign governments.
As expected, what was not discussed was the lack of confidence that the U.S. government is experiencing from other nations due to wild and reckless actions of the Federal Reserve. All the solutions and back pocket interventions may show some “positive” blips in the numbers, but the macroeconomics remain the same. The only way to get out of its debt will be to inflate and continue to print. It was stated that after the Civil War, one third to half of all money in circulation was counterfeit. We found this ironic because since the creation of the Federal Reserve, the money in circulation is still worthless and we believe this to only be the beginning with severe consequences to come as the debt tsunami crashes on our shores. So, instead of private parties printing fake money, now it’s our own government.
The Fed funds rate is hovering close to 0 and is at the point where it will not be able to go any lower to provide any extra stimulus. As calculated by economists, the Fed funds rate would need to go to approximately -5 percent to provide the actual stimulus that would be sufficient to get the economy back on track by a Keynesian standpoint.
This explained why drastic programs were implemented such as QE, Cash-For-Clunkers, TARP, etc. Also something that was never discussed or factored in is the world’s confidence in the USD. Of course there was no chance of hearing their opinion on the dollar due to limitations on what they can discuss, but this is something that doesn’t seem to be factored in as a HUGE consequence that we will face as we continue to use our lifelines while we gasp for air using every ounce of our last bit of energy before sinking.
Abolishing the Federal Reserve and returning to Austrian economics is something that we believe in and advocate for. Ron Paul has been prophesying for years and says that we aren’t going to solve our problems with more spending and more stimulus. Of course here we are with the same problems.
See how right on Ron Paul has been by watching an old video that we have posted on our front page. CLICK HERE TO WATCH!!!
There is a serious opportunity we now see in the silver market with the metal under 35 dollars. Silver undoubtedly has gone up parabolically over the last year and is showing to be the investment of the decade. Many have been talking about the last week as if silver was in a bubble and it has now burst. However, CrushTheStreet.com feels that this forced take down of silver by the CME group is a buying opportunity for those who wish to accumulate silver.
Let’s be real, silver maybe the only thing in the world that is priced at a discount from its 1980 price. We are not just talking about investments, pick anything, dog food, bananas, cars, houses, and gas are all higher than their 1980 price. Yet, silver nearing $50 is supposed to be a bubble, absolutely ridiculous.
“1 trillion dollars isn’t worth what it used to be”
Opt-out of conventional wisdom!!!