“If they have him, and they can somehow piece the country together, get communications up, they’ll control everything; the Federal Reserve, the military.” – The Last Ship
Where does the Fed® hide its monetary mistakes? In debasement.
Pa Wilder was a banker, and when we communicated via a while back, I’d send him long-ish messages about most everything. One time, I broached the economy with him. As a small farm banker with more than 50 years of experience, he was familiar with the way the system worked.
When I first heard that the Federal Reserve™ wasn’t owned by the government, but by the member banks, I asked him. I figured he’d tell me, “Nah, John, it’s really owned by the government, aliens aren’t real, go back to sleep – we won the war.” Nope. He then went through how each member bank was required to buy stock in the regional Federal Reserve Banks (as I recall) with at least 6% of their deposits.
Whoa. His bank owned a tiny part of the Federal Reserve Bank®. Certainly not much, but part of it. The Federal Reserve Bank© is a private institution. It was the 1913 mechanism to get the politicians out of the economy. The Great Depression shows how well it worked.
What do you call a talkative Colombian? Hablo Escobar.
After World War II, there was a time of relative stability – Europe and Japan were shattered, and the United States had industry that was just waiting to stop making weapons and start making washers. The sudden influx of labor with the demobilizing G.I.s made a combination for economic growth. After they drank the bars dry and made a zillion babies.
Even with the added costs of Social Security, it worked. The economy was working so well that we could build an interstate highway system without breaking a sweat. The highway system even added to the economic boom by lowering the cost and time required to move goods, effectively shrinking the country.
However, every good party has to end. Johnson’s Great Society and financing for the Vietnam War out of “money we just made up” caused Nixon to end the last tether between gold and the dollar. Sure, the Fed® had been cheating about the amount of cash it had been printing, but when the bluff was called, Nixon had the option of sending all our gold to France or saying “just kidding”.
He chose the latter. I think it was a good idea, because it wasn’t like France was going to do anything about it, anyway. The result was the petrodollar – the idea that all international transactions in oil would take place in dollars. That also resulted in almost all transactions taking place in the dollar. The inflation of the 1970s was the result – it was before we figured out how to tax the world by printing dollars in a sorta responsible way.
If I had a dime for every time I didn’t know what was going on, I’d say, “Hey, where did all these dimes come from?”
So, people all over the world needed dollars, even though we were printing them like we were, well, the Fed™. As long as the Soviet Union existed, there was a counterbalance to the United States, so at least there was some check. But after they went tango uniform?
That’s when the responsibility completely ended, the cash was printed, and the instability really started.
The Dotcom Bubble was the first – fed by cash from the Fed® with no place to go. And then it tanked. So the Fed™ printed a few trillion bucks. That led directly to . . .
The Housing Bubble. You probably have heard of it.
But this was different – it actually lead to protests against the banks. A reprogramming was necessary – “put the bankers in jail” had to be stopped, because bankers like to use our money to buy themselves nice things like that tiny part of France where they don’t let Muslims in. Except the Saudis.
I read that photographers and art thieves both take pictures.
A reprogramming was needed – Occupy Wall Street™ had to turn to . . . something. That reprogramming of the Lefty rank and file was into “white people are awful” and it got the heat away from the bankers. And made movies suck.
Meanwhile, the money hijinks led to country after country having revolutions, from Libya to Egypt to Syria. Why? Because inflation in the United States (at that point) meant that people had to pay a nickel more for Cheetos®. In Egypt, that meant that one of the children had to be sold into medical experimentation.
The key to all of this was keeping the dollar as the key currency used in international transactions. To be clear, Russia was a big threat in this. Sure, Russia is ruled by corrupt folks who kill people who threaten them, but I can raise you a Jeff Epstein, a Hunter Biden, and Hillary.
The Russians certainly threatened all of this with Nordstream® and Nordstream II©. These pipelines pushed natural gas straight from Russia to Europe. Now, Russia could take . . . euros for gas. Dollar not required.
Watch a 10-hour movie? No. But have Netflix® break it up into 10 one-hour movies?
And scary. All the investment of the Left in Green Energy® led them to shut down nuclear power plants (Germany, I’m looking at you) and replace them with natural gas plants. And you see the results.
(hint: Ukraine and certain underwater explosions)
Now we find that we have a currency that’s becoming worth less every day, foreign folks are building ways to not take the dollar. So they need fewer of them. And want fewer of them in their pockets.
It doesn’t help that we’re in debt by (spins wheel) over $25 trillion bucks, the economy is distorted, and that Medicare® and Medicaid™ will soon cost more than Joe Biden’s hair plugs. And we’re going to double that in the next eight years, and double it again in the next eight. That’s $100 trillion dollars.
Does anyone reading this believe we can last that long?
Oops.
Pa Wilder said 20 years ago that he didn’t see how it could last. But many folks have gone broke by betting against the Fed™. That one day they can’t paper it all over?
Nah. Don’t worry. It’ll be fine.
My oldest grandson, a fine young man who played all the various sports from an early age and so is a big sports buff today, just graduated from college in computer science and started in a local defense job. Silly me, I think I should now teach him about the facts of life – no not THOSE facts of life, which he obviously has well under control.
So I have drafted over a period of weeks the following words to him, which I have not sent yet. The problem is I don’t know how to end it! A trite, it’s-all-gonna-be-OK ending doesn’t feel right and even worse I worry that if I eventually hit send I am gonna sink even deeper into the crazy-old-man image I already have in the family. What a dilemma…
Anyway, presented for your critical review:
Where Your Radiance Paycheck Comes From…With Lots Of Pictures
Jake, what I’ve written here is A LOT to absorb. No rush for you to do so, and no need to respond back to me. But I believe this is all a very important thing for you to know and understand. Learn about it here at your own pace, maybe share and talk about it with others.
PART 1 – WHERE YOUR RADIANCE PAYCHECK COMES FROM
Your paycheck at Radiance ultimately comes from a US Government contract. The money to pay for this contract – and your paycheck – comes from THREE DIFFERENT places.
A lot of your paycheck is paid via (1) INDIVIDUAL INCOME TAXES, paid mostly by “the rich”:
PIX 1 : https://www.dailysignal.com/wp-content/uploads/FBIP-SOCIAL-04.jpg
But a lot of your paycheck is also paid from FICA payroll social security/retirement/corporate and (2) OTHER TAXES:
PIX 2: https://www.pgpf.org/sites/default/files/Understanding-the-budget-revenue-chart-1.jpg
And most importantly, a good chunk of your paycheck comes from money borrowed (year after year after year) on the official US Government credit card. This credit card is not Visa or Mastercard; it is so-called US Treasury Bills, Notes and Bonds. (Remember those terms!) These get sold at weekly multi-billion-dollar auctions to banks / pension funds / countries like Japan and China that have extra cash they are willing to loan to the US Government.
So a good chunk of your paycheck depends on US Government (3) DEFICIT CASH obtained from Treasury auctions, too. An important thing to remember : “Deficit” refers to what is borrowed in a SINGLE YEAR; “Debt” is the GRAND TOTAL of all past annual Deficits.
PIX 3: https://www.oftwominds.com/photos2023/federal-budget2-23.png
PART 2 – THE UMPIRE
Nobody buys Treasury Bills, Notes and Bonds to fund the US Govt unless they get a decent profit reward for doing so. So who sets the all-important borrower interest rate / creditor reward rate at US Treasury auctions? Answer: The Federal Reserve Bank, commonly known as The Fed. This is not a government agency, even though their main office is a big government-style building in Washington DC. Instead, the Fed is a special kind of corporation whose stock shares are owned by big private banks. The Fed is currently led by Fed Chairman Jerome Powell. He is arguably the single most important man in America, even more important than President Biden.
PIX 4: https://www.federalreservehistory.org/people/jerome-h-powell
If you find it hard to believe the Fed Chairman could be more important than the President, consider that a few years ago Powell’s predecessor Ben Bernanke was named Time Magazine Man Of The Year and was praised for literally saving the world. Bernanke is also pictured on Powell’s biography page above in PIX 4, and note Yellen’s pix there too.
PIX 5: https://content.time.com/time/magazine/archive/covers/2009/1101091228_400.jpg
PIX 6: https://i.insider.com/4f608c2569bedd8e3700006a?width=2200&format=jpeg&auto=webp
The Fed Chairman / Powell has the power to set the current US Treasury interest borrowing rate / investor reward rate number – the so-called “Fed Funds Rate” number. The Fed Chairman can set this number to whatever he wants to, and The President and Congress have NO SAY in his decision. The Fed Chairman sets this number eight times per year at so-called “FOMC Meetings” to whatever he thinks is best for all of America – Wall Street money-makers, Main Street citizens and Washington DC politicians all combined. All the other loan rates – student loans, car loans, housing loans – are linked to this single number the Fed Chairman controls.
So the Fed Chairman / Jerome Powell is kinda like an umpire – he makes big tough calls setting the Fed Funds Rate at key points in the ongoing economic game, and a lot of people yell at him over his decisions.
PART 3: THE GREAT AMERICAN FINANCIAL GAME
The economic game in America changed in a big, big way fifteen years ago. Starting with 2007, “it was a whole new ballgame”. Since then we’ve played out three quarters of a four quarter ball game – starting with the Bernanke quarter, then the Yellen quarter. We are currently late in the Powell third quarter of this game. With the arrival of “high inflation” in our economy, the fourth and final quarter of the game is about to begin.
Here is what Fed Chairpersons Bernanke, Yellen and Powell have set the key Fed Funds Rate at since 2007. Think of this as a scorecard for The Great American Financial Game since 2007.
PIX 7: https://cdn.statcdn.com/Infographic/images/normal/21023.jpeg
Here’s the play-by-play for the scorecard PIX 7 chart above…
This game kicked off in 2007 with a TREMENDOUS financial crash because too many people bought too many expensive houses which they could not afford, and many, many people defaulted on their mortgages all at once. Including the guy who owned the house you are living in now – your mom and dad bought it from the bank as a “cheap” foreclosure property and got a great deal. So at the game kickoff, The Housing Bubble Popped And Everybody Was Broke. In the first play of the game, Bernanke “saved the day” by dropping US interest rates to zero, insanely fast. Zero level interest = FREE MONEY, which everybody loaded up on and kept spending and so kept the economy from collapsing. Overall, from 2008 thru 2016, the President/Congress/US Government borrowed TRILLIONS OF DOLLARS OF FREE MONEY at 0% interest courtesy of Bernanke and handed it out to everybody and their brother to spend and keep the ball rolling. Even Nini and I got in on the action – we got a “free $10K” from the US Government in 2009 to leave our old house and build a new one where we live now.
But the world can’t live on FREE MONEY forever. In the Second Quarter of this game, between 2016-2018, Yellen tried to raise the interest rates back up to “normal levels”, slowly slowly to minimize the economic shock on everybody . But she didn’t even get interest rates halfway back to a “normal level”. Along came COVID and the associated lockdowns etc, which was just as bad (or worse) for the economy as the housing crash in 2007.
So at the start of the Third Quarter, Powell slammed the interest rate back down to zero just like Bernanke did. FREE MONEY was back, so the US Government borrowed TRILLIONS MORE OF IT and started up again with extraordinary government COVID handouts – small biz loans, rent freezes, student loan payment freezes, paychecks in the mailboxes to millions of families (including yours and mine) for living expense payments because people couldn’t go to work, etc etc etc.
Mail out enough free money, and prices start to go up month after month after month. That’s inflation, and that’s where we are today. The most obvious places to see this is in your rent bill, gasoline prices, and the grocery bill from a trip to WalMart – all of which have skyrocketed. So instead of fighting COVID as the main enemy, we are now fighting inflation as the main enemy. To fight inflation, the Fed Chairman gotta raise interest rates, which he has started doing now late in the Third Quarter. So FREE MONEY is long gone, probably for good. But ya never know, it could come back later in the game as a Hail Mary pass…
PART 4: THE SCORE GOING INTO THE FOURTH QUARTER
One good way to score The Great American Financial Game is by the total amount of debt held by the US Government. Remember that the US Government “debt” is the total of all the annual “deficits” run year after year after year. In 2007 at “the start of a whole new ballgame”, the total US Government debt was 9 trillion dollars. As of today in 2023, at “the beginning of the fourth quarter”, the US Government debt is 31 trillion dollars. Current estimates are the US Government will have 50 trillion dollars in debt by 2033, and the current “raise the debt ceiling” debate now in Congress is just the first step in getting to this crazy number.
https://12ft.io/proxy?q=https%3A%2F%2Fdnyuz.com%2F2023%2F02%2F15%2Fu-s-on-track-to-add-19-trillion-in-new-debt-over-10-years%2F
But many people, myself included, think a “whistle is gonna blow” and “end the game” before that happens. Let’s look at why. Think about what the three “scores” listed above really mean. It’s simple arithmetic, just count up the years and the trillions. From 1776 to 2007, a period of 231 years, the US Government accumulated “only” 9 trillion dollars of debt. Over the past 16 years – just since your sister Allie was born! – an additional 31-9 = 22 trillion of debt was added at an average of 1.4 trillion per year. If current estimates hold true, in the next 10 years another 50-31 = 19 trillion will be added – an average of 1.9 trillion per year. You see the pattern – not only are we NOT PAYING OFF any debt, we are ADDING IT ON FASTER AND FASTER.
The easy thing to say is “this wasn’t a problem last year, it’s not a problem this year, it won’t be a problem next year, so let’s just raise the debt ceiling and keep the party going”. This is called “normalcy bias”, and it’s what gets people killed when they wander into survival situations where all the rules suddenly change. As you well know, you don’t win a game by focusing where the ball IS. You gotta focus on where the ball’s gonna be.
Remember PIX 3? Check it out again: there’s a pink line on the right hand side saying “Interest on Debt” that was “only” 0.5 trillion in 2022. Between now and when the whistle blows to end this game, that “Interest on Debt” line is gonna get thicker. A LOT THICKER. Here’s why. Most of the 22 trillion in debt accumulated since Allie was born was borrowed as FREE MONEY at 0% interest. So the 0.5 trillion of US Government interest paid in 2022 was paid “mostly/only” on the 9 trillion borrowed before 2007. Now the Fed is raising interest rates up from zero. The “short term” debt (Treasury Bills and Notes) borrowed dince 2007 that “matures” is going to have to be “rolled over” and “refinanced” not at the old zero-percent-interest FREE MONEY rates, but at the new higher Fed Funds rate set by the Fed Chairman.
https://imgur.com/a/VfxL1il
So the “blended” interest rate on the US Government debt is headed up. By a lot. Very soon.
As that pink “Interest on Debt ” line gets thicker, the other pink lines are gonna get thinner. Including the one that has the money for the US Government contract that pays your Radiance salary. Huntsville has gone through hard times before when NASA money dried up. I believe it will go through hard times again when US Army money dries up. You should be aware of and prepare as you can for this possibility.
The real worry is not that the thin pink lines get thinner. The real worry is that they all shrink until they disappear entirely. When your household finances get to a point where your entire income goes to paying the interest on your credit cards and you have nothing left over to use in buying groceries, you are bankrupt. America is headed that way.
https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F29d09ed3-4e88-4441-9c89-c3b3de999d2f_833x496.png
What a thoughtful, informative and actionable piece. Grandson is fortunate to have some one willing to tell it like it really is. You left out the cynical part, purposely perhaps, that stock prices for defense contractors are tied to actions like Ukraine and the GWOT. As a defense contracting consultant, I made some serious coin back in the day and time when it was very much needed to raise a family. It felt like a noble undertaking at the time, equipping our warfighters with the best in our battle against evil. Great reflection on events as they have transpired over the years has led to mixed emotions about it all. Were we really doing ‘a good thing?’ But never has the phrase, “follow the money” rang more true.
He’s gotta swallow the red pill first before I tell him just how far down the rabbit hole goes.
Ricky, as somebody that has worked in dev for gov, big banks, startups and everything in between your son could learn a lesson or two in a .gov contract.
The one thing that stood out to me was the notion that government entities had to spend there entire budget at year end and then some. I asked about this with an innocent but naive question that went something like, “If we don’t spend it all perhaps some of this money will go back to the tax payers?” They had a good laugh and told me that if they did not spend it all, their budget would be smaller next year. Takeaway: without a price feedback mechanism, gov will always be inefficient at best at any endeavor it takes up.
That is the pro for a gov job. Another pro is that if he gets a TS clearance no non-US citizen can take his job. Now for the cons: .gov jobs are not usually that challenging and the learning opportunities may not be there compared to a private company. Another con is the stigma of having only .gov jobs on the resume.
If he was starting out I might recommend taking a job at a tech company to gain experience. Additionally he could contract for awhile and gain wider exposure to different companies and technology every couple of years. Then maybe he considers the .gov job.
Last pro of the .gov job is that as we head into a recession, these thievery corporation .gov gigs might be a bit more recession proof vs others but still not enough of a reason to start a career here unless he finds the work challenging.
Brilliantly put Ricky. I think even my wife can understand this *ducks for cover*. I have a hard time explaining things like this to normies like her dad who’s a very capable man that works hard and made his own way in life. He just dumped a bunch of money that he inherited from his sister in stonks. I’ve been trying to think of a way to bring it up, but I can’t lay it out as plainly as you just did. He probably won’t believe me anyway. I got out and got into silver about 5 years too soon. Stonks skyrocketed (until COVID crash) and silver hasn’t done much.
Like you said though, we’re only in the 3rd quarter.
Love it! And something that every kid should read. I think it’s not an accident that they try to make this stuff boring.
We’re all in this together comrade.
Don’t be a shirker, invest your son in the Great War for Fortified Democracy.
The Ukraine is very important to the banksters who own this fading third world Chiquitastan turd.
All sides tell themselves that they are indispensable or on a mission from God.
We say a lot of things to keep morale up.
If called up, I’ll suggest they do a Nugent.
John – you got a word limit here? I just tried to post a BIG response and it vanished. Maybe it’s in an approval buffer?
Should be up now
OY Ricky and John have smashed the internet 🙂
No wonder Putin was just waiting around for the US to self-destruct with a little nudge here and there by the BRICS. Just stay away from the canned sunshine buttons.
Skills, food, water, trusted friends, tools-seeds and such and a fair bit “O Luck you’re not downwind from Biden’s next disasters like Palestine OH and you’re on the way to Kunstler’s “World made by hand” PLUS the Weimar Germany book” When money dies”
https://www.goodreads.com/book/show/8567383-when-money-dies
Going to get ugly soon. No wonder the sock puppets handlers want Ukraine to turn into the Mother of all Distractions.
Protect your family.
For a quick Walmart run food storage go to Busted Knuckles blog and search for Mercy Buckets. I did an extra set last weekend, prices have gone up but still cheaper than taking my beloved out to dinner.
If Ukraine doesn’t go the way the West wants? Game Over.
One of the most startling things when I started managing bank branches was how little currency was actually in the bank compared to the “deposits” we had on the books. When you expand that out to the broader banking and financial system you realize that most of our economy runs on smoke and mirrors, paying for stuff with magical fairy dust.
Equally startling Arthur, is how little funds the Eff Dee Eye See has on hand; less than 2% of funds insured. If one bank goes down, no sweat. If ten do, sweat. Always good to have a little wealth outside of the system.
What do you recommend for storing cash. I don’t trust a safety deposit box or the banks to have my $ when I need it. Convert 80% to G/S or store cash to buy assets when it all comes crashing down?
A good quality American made safe like American Security bolted down to a well concealed patch of concrete floor. A big, fat NO on “safe” deposit boxes.
My mother learned her bookkeeping skills in Zurich, Switzerland, then came here and worked in the Beverly Hills Stock Exchange in the late 1950’s-early 60’s.
My sister married a finance guy in the 80’s and he glowed with banking knowledge, my mother tried to explain to him the markets ran on hot air and of course, my mother was an idiot for contradicting real banking knowledge fresh out of college. And he turned out to be all hot air and golfing, never made any money in decades.
I’ve spent yrs trying to explain the Fed to people, same response too. Try offering someone a copy of “Creature from Jekyll Island”, it’s too scary to read.
I’m looking fwd to when this monetary scam collapses and all those ‘bulletproof’ IRA’s disappear into thin air. Most folks refuse to learn, when you base your life on ego, ponzi and credit, this time some of them will eat the bullet.
Then maybe we’ll get back to a real US dollar, 371 grains of silver.
Like a “Creature from Jekyll Island” cocktail, with an “Unintended Consequences” chaser.
Huh. Any pigs around here?
And it all disappears if charging interest is illegal. And we have sound money.
“Printing & Engraving”…
Food for thought – A $1 FRN is worthless. As long as there’s the USA, the dime is worth a dime, as long as it was minted pre-1966.
Yup. Until they say they own those and want them back . . .
Pre-1965…
In my prepper/red pill heyday, I remember explaining to my farmer neighbor about “fiat money”, “fractional reserve banking”, etc., You know, all the scary stuff you hear while main-lining Alex Jones and the like everyday. “So you mean my money in the bank is actually fake and worthless?” he asked. “Yes sir!” I said. A few days later he called me over to check out his brand new $178,000 John Deere tractor he paid cash for. “Guess they didn’t know about my money being worthless” he said.
Point being, while all of the things we know about our fake and rigged financial system may be true, until there is something else, it’s the only one we have and the more “worthless dollars” you have, the better off you are. From my experience the ones that scream the loudest about it don’t have much anyway. It’s kinda like an Incel telling you how horrible a vagina is.
Use the dollars to buy tractors/preps of all sorts/pay for classes worth learning.ect.
Sure,always have some on hand(cash)but invest most in solid goods and skills…..,oh,and if you have not already meet and get to know well like minded folks locally.
I hope your neighbors Deere is not so new tis locked out computer wise to do many repairs,if so,a lot of lockout breaks on net.
Ha! Love it, and a great point. But would you rather have more land, gold, or FRNs?
What a well laid out and easy to follow explanation John, thank you (And a Martin No-Prize for Ricky’s follow-on)!
Like many things, I suspect by the time people figure out “it is really bad”, it will be far too late for them to significantly act or change course. Perhaps my children’s generation will learn the same kind of lesson that The Depression Era learned.
Someone will. And the road will be very, very hard.
John, I think you and the excellent comment by Ricky and others are tending to too optimistic a view. It’s not going to be economic collapse of the US; it’s going to be the western world. If the US collapses, can’t pay debts, pay out on bonds, and everything, what about countries like Japan and the EU members that hold large portions of our debt? I can see a shattering of the world into a block of the US with some of the EU, and parts of south America aligned against another block with Russia, China, North Korea, Iran, and most of the middle east. I’ll be the first to admit that those things will be influenced or controlled by things I don’t know. I lean toward thinking India goes to the Russia/China side along with Brazil (the alternate economic base is BRICS, after all).
Combine the global economic collapse with the DEI movement, the war against competency DEI brings, and I can envision a new dark ages.
I agree with your thoughts Greybeard.
When England lost its world reserve currency status it went from an empire the sun never set upon and a world class navy to its current status where folks are rationing groceries, deciding if they eat or heat their home and their Socialized Healthcare means you wait for years (often dying first) before treatment.
Their navy shrank to ONE Aircraft Carrier with an American MARINE Air Wing for aircraft and two frigates constantly on patrol. There is probably a sub or two I missed but the point is MASSIVE shrinkage of Lifestyle AND Military capability.
As their air force is mostly hanger queens, I WONDER just how maintained their nuclear weapons are.
We’ve lived a lifestyle far above our means with credit cards (AKA Treasury Bills) both paying the way and offsetting the inflation to other countries.
All those T-bills are coming HOME.
Trusted friends are worth more than gold when trouble is near.
Protect your family. Mayor Pete and the Sock Puppet sure won’t.
You are correct. The entire world will be recalibrated. Either the borrower or the lender pays off the debt. There is no other calculus.