Its time to get rid of it…..

Posted on March 2, 2012

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I am going to try my hand at writing a political blog post. All my posts to this point have generally fallen into one of two categories, Family and therefore an attempt to be somewhat humorous more than anything and spiritual/biblical/doctrinal. When writing about family or being funny nobody ever disagrees, you either laugh or don’t, say whatever and move on. I am fine with that. When writing on biblical issues you may agree or disagree, while there has been no disagreement on my blog that I can recall, and I am to lazy to go back and actually verify. That being the case however, I can defend my positions if need be when it comes to the bible. Probably more so now that ever before. I am a member of a group on Facebook that is basically a theological debate group. On there, if you make a statement you had better be able to defend it. And you had better be able to defend your defense. And you had better be able to defend your defense of your defense of your original point. I choose to call that having the capability of being able to go more than ‘one level deep’ in a discussion or debate. With the bible, more times than not I can go as many levels as the average person wants to go. Do I change a lot of people’s mind with my vast intellectual capability, nope, probably not. But it not from lack of accurate and true arguments.

Any how, I say all of that, to say this. I am probably not equipped to do the same on political subjects. I am by no means a political junky…somethings just really make me mad about our political system and associated areas. So, If you do disagree, that’s fine, I’m not liable to argue very much….probably, who knows, I may. I’ll debate bible versions with you though. My point is basically this, don’t get to happy if you ‘destroy’ any of my points or arguments about any of this.

To my point now….

It is time to get rid of it. This entity is unnecessary. We only had this ‘institution’ from 1791–1811, 1816–1836, 1846–Present. Now I realize that those time frames take up much of American History, but the entity that I am referring to has only been in existence, in its current form, since 1913. And THAT is where the problem is.

The institution is the Federal Reserve System. I am for completely abolishing it. That means I agree with current gubernatorial candidate Ron Paul. I don’t care for much of Ron Paul’s politics, but I am pretty much in a ‘anybody but Obama’ mode right now, so I would hold my nose and vote for Congressman Paul if he by some miracle actually wins the Republican Nomination. This is one of the areas that we actually agree on though.

First, let us look at what the purpose of the FED system. To reduce its purpose and mandate to two very basic and simple purposes the reason for the Fed is this. 1) Protect the value of our currency.  In other words, they are supposed to keep inflation under control. 2) Keep unemployment low. We will return to these to basic function in a minute to look at some numbers to determine whether or not the Fed is being effective. Under these two very broad and basic headings there are a number of other functions that the Fed is in charge of related to the area of Finance, allow me to briefly list and summarize some of them, in order to give a basic education as to the purpose and function of this Federal agency that has become accustomed to operating in the shadows. Simply put the Federal Reserve System was designed to prevent the following such types of banking issues and problems.

Bank runs and associated ‘fractional banking.’ Let me illustrate to principle of fractional banking using an example. I bank at the TDECU (Texas Dow Employees Credit Union) as do many of the people who live in this area. A bank run would consist of, for whatever reason, all members going on the same day/week to withdraw all of their money, in other words, if for some reason everyone decided to liquidate their assets and hide all their money in their bed mattress. That would be considered a bank run. Think “Its A Wonderful Life” and the mad withdrawal from the “Building and Loan.” The principle of fractional banking is that the TDECU, to go back to our initial example, does not, nor is it required to be able to cash out all of its members. They, in fact, only keep a fraction of what everyone has in the bank, thus the name ‘fractional banking.’ Theoretically, the way a bank makes money is by taking my deposit, and lending it to you. Really its pretty much a fairly tenuous system if you think about it. So the purpose of the Fed in this instance would basically be to loan a bank money in the even of a run to prevent further problems.

A couple other banking principles quickly here. Elastic banking, defined as, “Currency that can, by the actions of the central monetary authority, expand or contract in amount warranted by economic conditions.” A check clearing system, defined as, “By creating the Federal Reserve System, Congress intended to eliminate the severe financial crises that had periodically swept the nation, especially the sort of financial panic that occurred in 1907. During that episode, payments were disrupted throughout the country because many banks and clearinghouses refused to clear checks drawn on certain other banks, a practice that contributed to the failure of otherwise solvent banks. To address these problems, Congress gave the Federal Reserve System the authority to establish a nationwide check-clearing system. The System, then, was to provide not only an elastic currency—that is, a currency that would expand or shrink in amount as economic conditions warranted—but also an efficient and equitable check-collection system.” (Definitions provided by the Federal Reserve) The Federal Reserve is as well-considered a ‘Lender of last resort’ to control things such as banking emergencies and fluctuations.

Are you still with me? I felt it necessary to give a very slight background for the purpose of the Federal Reserve. Most people have heard of it, but few know what ‘it’ does. And I personally have come to believe that this entity has far more control over the economic well-being of the US economy that most give it credit for.

So let us consider if the Federal Reserve is fulfilling its purpose. Lets go back to its first half of its dual mandate. 1)Protect the value of our currency. Since 1913, and the current organization and purpose of the Fed, the U.S. dollar has lost 96.2 percent of its value since 1900, and almost 100 percent of that decline has come during the Federal Reserve era. Sooooo, I’m going to give it a grade of ‘F’ on this. What about the second half of the Fed’s mandate? Keep unemployment low? How are they doing at this? It doesn’t take a rocket scientist, just a little bit of news watching to determine that unemployment is a chronic and worsening problem here. In the United States today, there are fewer jobs than there were a decade ago even though we have added more than 30 million more people to the population since then. The average duration of unemployment in the U.S. is about 40 weeks, and if you gathered together all of the unemployed people in America in one place, they would be citizens of the 68th largest country in the world. So, once again, in my opinion, their grade here is, ‘F’

But some may protest, the Fed is responsible for keeping ‘financial panics’ from happening. Is it being successful? Our current Federal Reserve Chairman Ben Bernanke has openly admitted that the Federal Reserve helped cause the Great Depression of the 1930s. Once could argue that there have been 10 separate economic recessions since 1950. What kind of track record is this? In addition, it seems very clear that the ignorantly low-interest rate policies of the Fed fueled the massive housing bubble that plunged the U.S. economy into the greatest economic downturn since the Great Depression when it finally crashed. So congratulations on this? I guess!

Lets be honest, the real purpose of the Fed is to create money out of thin air? We aren’t even talking about printing money or minting coins. I’m speaking of adding numbers into a computer. The Fed has turned into a Perpetual Debt Machine. Not an opinion, it’s a fact. In 1913, the creation year of this fiasco, the national debt was, $2,916,913.66. Thats just under 3 Billion dollars. What about today? $15,416,323,644,046.76. Does anybody other than me see a problem here? To make matters worse, at our current spending rate, and all the ‘great’ social spending our fearless leader want to continue, we are adding to that at a rate of 150 million dollars and hour. Somebody out to be in jail, it seem like to me.

Heres what it comes down to. Our entire economic system is based upon debt.

Its getting worse, I don’t care if the DOW did close over 13,000 for the first time since 2008. Numbers can lie. So, lets look at some economic numbers.

1 The United States has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

2 The European Commission has formally declared that Europe has now entered another recession.  German banks are leveraged 32 to 1 and the European financial system is rapidly approaching a nightmare.  Lehman Brothers was only leveraged 30 to 1 when it finally collapsed.

3 There are clear signs that economic activity is also significantly slowing down in the United States.  For example, new orders for goods manufactured in the United States experienced the biggest drop in three years in January.

4 U.S. consumers are busy racking up staggering amounts of debt once again.  Total consumer debt rose at an annual rate of 9.3 percent in December.  It is now sitting at a grand total of 2.498 trillion dollars.

5 The U.S. Postal Service has announced plans to eliminate 35,000 more jobs.

6 There are more unemployed Americans than there are people living in the entire nation of Greece.

7 The percentage of American men that have jobs is near an all-time record low.

8 Right now, there are 88 million working age Americans that do not have jobs and that the government says are not looking for jobs.

9 The average duration of unemployment in the United States is nearly three times as long as it was back in the year 2000.

10 In January 2009, there were 2.6 million “long-term unemployed workers” according to the federal government.  Today, there are 5.6 million.

11 The average price of a gallon of gasoline in the United States has risen by 14 cents in just the past week, and the average price of a gallon of gasoline in the state of California is now an astounding $4.29.  Sadly, the price of gas is expected to continue rising over the next few months.

12 The U.S. housing market continues to struggle deeply.  Home prices in the 4th quarter of 2011 were four percent lower than they were during the 4th quarter of 2010.  Overall, U.S. home prices are 34 percent lower than they were back at the peak of the housing bubble.

13 Large numbers of Americans are putting off basic health procedures due to the declining economy.  Just consider the following example from a recent Huffington Post article….

Americans between the ages of 50 to 64 got 500,000 fewer colonoscopies, or screenings aimed at detecting colon cancer, during the recession, compared to the two years before, according to a recent study from researchers at the University of North Carolina’s medical school.

14 The number of Americans on food stamps has increased by almost 50 percent since Barack Obama first took office.

15 Right now, 48 percent of all Americans are considered to be either “low income” or “living in poverty”.

16 The U.S. government is stealing about 150 million dollars from our children and our grandchildren every single hour of every single day.

17 If Bill Gates gave all of his money to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

18 Since the Federal Reserve was created, the U.S. dollar has declined in value by more than 95 percent and the U.S. national debt has gotten more than 5000 times larger.

19 Approximately 25 million American adults are living with their parents.  Most of them are doing it for economic reasons.

20 According to a new Politico poll, only 30 percent of all Americans believe that the next generation will be “better off economically” than the previous generation.

So, not only is it time to get rid of the Federal Reserve System because it is not working. It’s time to change presidents….because he’s not working either.


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