Wednesday, July 29, 2009
The Fed Steals Your Money
More rain in Cincinnati and my sunflowers continue to grow.
The main topic today is monetary policy, or the way monetary policy is run in the United States. Monetary policy is run by the Federal Reserve Bank (1913) our central bank that was created by Congress. It is my opinion, that the Fed has gotten involved in things that should be handled by the Congress, but since so few people have any idea what monetary policy is, or does, no one, and, especially the talking heads on TV, say anything about this.
Yesterday I read a short article in TIME magazine about the minimum wage. Can people live on a minimum wage is a real good question. But a better question is: why does the minimum wage need to be raised every few years? Inflation? Yes, inflation makes it necessary for the Federal Government to raise the minimum wage every few years. But, did you know that on an adjusted for inflation basis, the minimum wage was the highest in 1968? Back then, you could buy 5 gallons of gas where today you buy less.
This morning while watching Morning Joe on MSNBC, one of the talking heads said that not everyone is going to be able to own a home. That there will be some people who, because they earn a minimum wage will have to rent their whole lives. That means that if you rent your whole life, you can not lock in your rent the way a person who buys a home and locks in their mortgage payment for 30 years. (I know in some parts of the USA there is rent control, but for my purposes, let us leave this out.)
Monetary policy is run for the benefit of those that can borrow. If you can not borrow money, you are left on the sidelines. Borrowing money to buy a home gives you a certain measure of stability. And, if you buy a building with several apartments, or a 2-family (duplex), the rents help you pay the mortgage. In periods of inflation, rents go up and more money comes in, while at the same time, the mortgage payment is locked in for 30 years. Owning is better than renting under the way monetary policy is run in the USA. The idea that everyone who can afford to own a home should try to buy a home is still a good idea. The trouble came when it became perverted and people that had no business taking on such a huge mortgage tried to buy a home on a liar's loan.
So, where am I going with all this? Right back to the issue of consumer protection for home buyers and SEC protections for investors. If, we establish that monetary policy is going to be run for the benefit of those that can borrow, see why credit ratings are so important to both individuals and corporations, then inflation will follow, and as inflation follows, it becomes necessary for a whole group of institutions to invest funds for the future. If people and institutions must invest to maintain purchasing power because monetary policy is going to be run in such a way as it creates inflation, then does not it fall on Congress to at the very least protect both individual and institutional investors against unsavory practices by Wall Street?
The old saying, "the rich get richer and the poor get poorer" is not too far from the mark. When Congress lets Wall Street make "marks" of us all, the whole country pays. Look around, the mortgage-bond market meltdown, the financial crisis and the economic crisis that followed are directly related to the lack of creditable regulation, auditing, oversight, transparency and enforcement of the Securities Laws (1930s) and the Investment Acts (1940s) that were already on the books.
People will have to wake up to the man made financial and economic disaster that just occurred before change can take place. It is your hard earned money they are stealing, and only you can stop it.
P.S. You need to write your Senators and your Representative about your concerns for a more level playing field for investors both large and small. Wall Street has highly paid lobbyists to make their case, you need to counter too. We have the vote, now we need to use it. The revolution is just beginning!!!