How is this all heading to get rid of? Can the Federal Reserve just keep “QE-ing” the government out of its personal debt problems? And what is going to eventually the Fed when all those toxic assets they are buying up don’t pay up? Won’t it too go bankrupt? And if it can, exactly what will happen? Thankfully, regardless of the complicated character of central banking, it’s something we can all understand.
First we should look at the Fed for what it is. A separate entity that’s not part of the authorities technically Neither is it a private corporation owned by the “Rothchilds” and Illuminati. It is best described as an NGO that is chartered by congress to be the country’s central bank or investment company. Second, we must go through the role it offers most recently performed that is OUTSIDE its traditional role of central banking.
Blasphemous as which may be, it’s 100% true. The Federal Reserve has served as “Jesus Christ” like entity to wash away all the financial problems that were (and continue to be) created by various entities in your overall economy. Specifically, all the terrible loans made during the financial crisis As well as the Federal government’s crazy deficit spending. I apologize in advance for the small font of the graph above, but I’ve highlighted the key figures that show the Fed’s “Jesus” activity.
In the RED are US authorities bonds that no one else in their right brain would buy. Remember, under Obama especially, the US Federal government has ran the country’s most severe peacetime deficits. 2 trillion to the government. But prior to going hating on Obama and the Democrats, go through the GREEN.
The GREEN didn’t even exist in 2007. However, recklessly financing money so they could make a commission payment on increasingly unprofitable home loans just, bankers and Wall Street drove the US economy, head first into the worst downturn since the Great Depression. And given that they were at the effective “cardio vasculatory system” of the economy (the economic climate is very much indeed as vital for an economy just like your heart), they needed to be bailed out. We could on go, but if you go through the BLUE square the thing is that the nature of the Federal Reserve has fundamentally changed. Third, so how exactly does the Federal Reserve afford all this?
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Of course, it generally does not literally print it off as they do in the Weimar Republic. That would be too obvious, brash, and Zimbabwean. They use the flashy euphemistic technique called “Quantitative Easing” wherein they merely digitally add additional money to financial institutions’ deposit accounts in trade for his or her worthless mortgage supported securities no one else wants.
But if the money is digital recordings on bank or investment company accounts or actual bits of paper in flow, the effect is the same. Here is the point where normal people Now, and even economists get a twinge in the rear of their head saying, “Hey, something’s not right here.” Because whereas “Jesus Christ” presumably washed away everybody’s sins, that is clearly a religion.
Not the real world. And just like physics has the conservation of mass legislation, economics adhere to similar such numerical laws also. Quite simply, we know there’s no such thing as a free of charge lunch. A cost needs to be paid, and somebody has to pay it, that leads us to your fourth point. Logic would suggest that it might be the Federal Reserve that will pay the best price.