The Boat Is Sinking Fast
November 15, 2010 by Bob Livingston
The United States financial system is a rickety, leaking boat, and rather than bailing it out, Federal Reserve Chairman Ben Bernanke is pouring more water in.
The signs of the sinking system are coming on furiously now. The price of gold tells the story. The state of the “too big to fail” banks is another sign.
Saved from the fate it deserved by former Treasury Secretary Hank Paulson’s infusion of $45 billion from the Troubled Asset Relief Program, Bank of America sucked up the criminal enterprise Countrywide Financial and claimed all was well. Just over a year later it paid back the loan. That was last December.
But since mid-April the bank’s stock price has dropped more than 40 percent. And the value of its outstanding stock is currently at around half of what it should be based on its “book value” — what the company says its holdings are worth, according to the website AlterNet.
Bloomberg columnist Jonathan Weil writes that mortgage-bond investors are demanding untold billions of dollars in refunds, the foreclosure fiasco is metastasizing and a member of the TARP oversight panel is openly worried that BoA may need another bailout.
In other words, the bank is on the brink of another collapse. And it may not be alone.
At 1 a.m. on Nov. 8, ATMs across the country shut down. The problems affected the larger financial institutions like BoA, BBVA Compass, Wells Fargo, US Bank, SunTrust, American Express, BB&T and others. While the excuse given blamed the change from Daylight Savings Time, many in the blogosphere wondered if it wasn’t a prelude to a rumored coming banking holiday to allow for a devaluation of the dollar.
Coming just days after Helicopter Ben announced he wanted to dump another $600 billion into the system in order to spur inflation, the bank holiday/devaluation threat is not farfetched.
In fact, there are reports that a person was told by a bank manager that banks would close for an undetermined amount of time, and that when the banks reopened withdrawals by checks would be limited to $500 per week regardless of the balance in the account.
The last bank holiday in the U.S. occurred on March 9, 1933. President Franklin Delano Roosevelt closed the banks and Congress passed the Emergency Banking Act of 1933 under the guise of reorganizing insolvent banks and reopening those strong enough to survive. FDR used the holiday to confiscate gold from the citizenry and devalue the dollar. The Federal Reserve committed unlimited amounts of currency to reopened banks.
The Act gave the Treasury Secretary the authority to order any individual or organization in the U.S. to deliver any gold they possessed to the U.S. Treasury. Also the Fed was authorized to steal 10 percent of any “check, draft, banker acceptance, etc.” by converting them into cash at 90 percent of their value.
It was out-and-out theft. Today the theft continues.
The dollar is crashing and inflation is ramping up. Anyone buying groceries knows this. Even former Alaska Governor Sarah Palin knows it. But the ruling elite — including Helicopter Ben — want to hide it from you. And they try to do it by lying to you.
Sarah Palin on Monday [Nov. 8] made a speech at a trade-association convention in Phoenix urging Federal Reserve Chairman Ben Bernanke to “cease and desist” his “pump priming”. Palin said the United States, “shouldn’t be playing around with inflation.” She went on to say, "All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher."
After obtaining a copy of her speech, the Wall Street Journal’s Sudeep Reddy wrote an article criticizing Palin’s comments about food inflation, saying that, "Grocery prices haven’t risen all that significantly, in fact. The consumer price index’s measure of food and beverages for the first nine months of this year showed average annual inflation of less than 0.6%, the slowest pace on record." NIA [National Inflation Association] finds it unfortunate that Reddy has been brainwashed into believing the government’s phony consumer price index (CPI) numbers.
The U.S. Bureau of Labor Statistics (BLS)’s CPI is not a reliable indicator of U.S. food inflation or any type of price inflation. NIA estimates the real rate of annual food inflation in the U.S. to already be 5% and projects that this rate will rise above 10% in early 2011. NIA believes the BLS has been using both geometric weighting and hedonics to artificially manipulate the CPI downward. The U.S. government has a strong motivation to keep CPI increases as low as possible because since the year 1975, retired Americans receive annual Social Security payment increases that are tied to the CPI. NIA calculates that based on the way the BLS’s CPI has understated the real rate of price inflation, Americans on Social Security should be receiving payments that are more than double what they receive today. Unfortunately, the government just announced last month that Americans on Social Security will receive no payment increase in 2011, despite the fact that food inflation will likely become the biggest crisis of the year, much larger than the mortgage crisis we have today.
When calculating food inflation, the government uses deceptive geometric weighting, which gives a lower weighting to goods that are rising in price and a higher weighting to goods that are falling in price. If the price of steak is rising while the price of hamburgers is falling, the CPI will give a lower weighting to steak and a higher weighting to hamburgers. The government justifies this by saying that expensive steak prices mean Americans are more likely to eat hamburgers. Therefore, the CPI no longer accounts for the price to maintain the same standard of living. The CPI is now calculated based on the realization that America’s standard of living has been in decline and the expectation that it will continue to decline in the future. — National Inflation Association.
The NIA is predicting massive inflation very soon as a result of Helicopter Ben’s latest escapade. It says that grocery stores will soon charge $11.43 for an ear of corn, $23.05 for a 24-ounce loaf of wheat bread, $62.21 for a 32-ounce package of Domino Granulated Sugar, $24.31 for a 32-ounce container of soy milk, $77.71 for a 11.30-ounce container of Folgers Classic Roast Coffee, $45.71 for a 64-ounce container of Minute Maid Orange Juice and $15.50 for a Hershey’s Milk Chocolate 1.55-ounce candy bar. NIA also projects that by the end of this decade, a plain white men’s cotton t-shirt at Wal-Mart will cost $55.57.
The dollar is on its way out as the world’s sole reserve currency. According to the Financial Times, “Almost everyone involved in the international financial system agrees long-term change is inevitable: the rise of China will surely mean that the dollar cannot continue to be the world’s sole reserve currency.”
The elites are doing all they can to prop up the current failed system. It won’t work.
The American middle class is being impoverished by U.S. dollar depreciation. Will they realize it before Treasury Secretary Timothy Geithner begins adding zeros to the currency, or will it be after?