One must deal with reality because reality is not an option. Not doing so is dangerous and foolish. Especially if you are government.
Government’s role, whatever it truly is, should recognize reality. The causal relationship is not Government to Reality. It is the reverse. Reality controls them!
For a time, government can fool itself and its citizens but reality always inconveniently intervenes. We have reached that point in terms of massive economic malpractice. It is easy to blame the Federal Reserve (which should be eliminated), but recognize that they are ruled indirectly by the political class. Any institution inside the beltway cannot escape the domination and corruption of politics. Those who try are easily steamrolled.
The Fed is no exception. Some would claim that its creation, despite assurances otherwise, was so that politicians could exploit the economy. These views were expressed as early as 1913, the year the “Creature from Jekyll Island” was created.
After more than a century of its economic manipulation for political masters, it is time to disband the Fed. While this move would be the proper one (and there are several ways it could be done), none of us alive today are likely to witness any meaningful attempt to remedy this monster. Instead, we will continue to see stories like this one from Zerohedge:
By Graham Summers, MBA
Let’s cut through the BS.
The Fed claims it wants to end inflation… but it can’t. Sure it can talk tough, but we all know the Fed is going to “take a knee” sooner rather than later.
The U.S. has over $31 TRILLION in debt. At these debt levels, every 1% increase in rates means an additional $310 BILLION in interest payments.
We were already paying $305 billion in interest payments per year when rates were at ZERO. They’re now at 1% and the Fed claims it’s going to raise them to 3%.
This would mean the U.S. spending nearly $1 TRILLION in interest payments… without reducing our debt by even a penny.
In fact, according to the Congressional Budget Office, we’re going to run a $2 trillion deficit this year… which means our total debt amount will rise to $33 TRILLION… which means every 1% increase in rates will lead to $330 billion more in debt payments.
You get the general idea.
Simply put, the Fed is out of its mind if it thinks it can stop inflation without blowing up the entire bond markets.
Which means… the Fed will have to let inflation rage. The alternative is a debt crisis that makes 2008 look like a joke.
The picture is actually a whole-lot worse than Phoenix Capital portrayed. There are at least another $100 trillion of unfunded liabilities owed by the US government. The two biggest are Social Security and Medicare promises. These obligations are just as important (and perhaps more so) than the debt discussed above. These obligations will not be honored because it is impossible to do so.
Please note that inflation, especially the extremely high kind, is a de jure way to honor these obligations. However, in fact, obligations paid off with money that is worth pennies of when these obligations were entered into is known as “counterfeiting.” Is this inflation deliberate? Is this the way that government intends to dishonor all of its obligations.
Funny how this ineptness always benefits them and harms you.