Originally Published September 8, 2011 When most people hear the term QE2, they think of the ship: The Queen Elizabeth 2. But to economists and those who follow the economy, QE2 sails far deeper then any ocean liner. Quantitative Easing is … Continue reading
Several people have asked me to explain my economic philosophy.
I am a –NON-Keynesian. I don’t believe the B.S. that Ben Bernanke, Tim Geithner, or Paul Krugman, espouse. Simply, you must view money creation in the U.S. as debt. So if people are NOT borrowing, the economy is NOT expanding. This is why the Federal Reserve (about as Federal as Federal Express! A privately held institution, run by and for, bankers) has kept the prime rate artificially low. Trying to entice people into borrowing money, so the economy will grow. So far in 4 years, this hasn’t worked. In the meantime, those of us who save money, are being punished with historically low rate of returns and interest rates. This is why most corporations are sitting on trillions in cash. It makes sense to keep it in the bank, rather then invest and get virtually nothing in return. Chris Martenson said it best: “You have an economy which MUST grow, versus natural resources which CAN’T grow.”
Bonds work the opposite of the stock market. As demand goes up, the interest rate (also discount rate) goes down. As demand for bonds soften, the interest rate goes up. 10 year treasury bonds are trading at about 1.82 %. That means, that you have to loan the government, $10,000 dollars, for 10 years, to get $1820 back. A $10,000 investment tied up for 10 years, for $182/year? No! That is reality in today’s economy.
Ever hear of Quantitative Easing? That amounts to the Fed, running the printing presses, printing more money, then using that money to buy back it’s own debt. What that does is inflate the money supply, (devalues the currency). I don’t have any debt. Something breaks? It pretty much stays broken, until I save up the cash to buy a new one. I have an older car, simply because there are no car payments, and I am happy with what I have. I do not have all I want, but God promised me, all that I would need.
I am what I call an armchair economist. Simply that means that “people respond to incentives.” (Steven Landsburg coined the phrase in 1993). For example: I have a friend, who with a banquet of food spread before him, would starve if he did NOT have a coupon. Makes you think.
That’s my economic philosophy in 4 paragraphs.
I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.
~ President Woodrow Wilson, AFTER signing the Federal Reserve Act