THE PENSION FUND CRISIS in the United States extends into the public and private sectors of the economy to an extent unprecedented in the history of mankind.  It’s instructive to compare two of the most notorious individuals involved in the mass destruction and destabilization of pension funds invested in debt instruments.  The two individuals in my cross-hairs are Michael Milken and Benjamin Bernanke, a pair of Wall Street types specializing in contrasting methods of financial mass destruction.

Michael Milken’s career began in the 1970s when he noticed that many corporations had over-funded their employee pension plans with high quality securities.  He reasoned (correctly) that such corporations would jump at the chance to refinance these plans with cheaper high yield junk bonds.  The high quality securities could be sold off and replaced with cheaper junk. The corporation could then pocket the difference, in effect looting the pension fund and using the proceeds for corporate expansion, executive bonuses, etc.  Major corporations swallowed the bait and things went swimmingly until an economic downturn caused major defaults in the junk bond universe.  The resulting pension fund failures caused thousands of employees and retirees to lose their pensions, often their entire life savings.  Michael ended up with a ten year prison sentence and banishment from the finance industry, a trivial punishment considering the heartbreak and misery he caused.

Ben Bernanke as head of the Federal Reserve Board used his position to slash interest rates through massive bond-buying schemes called “quantitative easing” (QE). For years this has caused the yield on most debt paper to remain at historic lows, in effect strangling the income stream of pension funds.  The capital requirements of pension funds are calculated on an income assumption based on available interest rates.  Funds based on an income assumption of 9% suddenly found themselves looking at available rates of 3% or less. To maintain the stability of such a fund it would either have to triple its capitalization or cut its benefits by 66.7% ! Many funds did not reduce their payout to adjust to the reduced income, causing them to expend capital to maintain monthly benefit rates.  Worse yet, the injection of thousands of billions into the economy has had an inflationary effect, eroding the purchasing power of the shrinking remainder.

The pensions destroyed by Milken were restricted to a limited number in the private (corporate) sector. He specialized in destroying capitalization through high risk junk bond default.  At the height of his popularity he was known as the “Junk Bond King.” Once convicted and imprisoned he was called other less friendly names.

The pensions destroyed by Bernanke dwarf in number and extent the damage caused by Milken.  Bernanke will be remembered as the greatest pension fund killer of all time. The current ultra-low interest rates are causing the failure of public, private, corporate, municipal, state, and federal pensions.  At the height of his popularity he was known as “Helicopter Ben” because he at one time proclaimed that he would dump money from helicopters like confetti, if necessary, to “juice up” the economy.  Now that he is destroying the retirement plans of millions of Americans, new, less complimentary, names are being heard.

Unsustainable pension plans have already caused the bankruptcy of various cities in California, the bankruptcy of General Motors, and the insolvency of the US Postal Service.  Money market, short term treasury, savings account, checking account. and bank CD yields are near zero — while food and fuel prices spiral upward, indicating a shredding of the US dollar.

Government policies are also stimulating the influx of excess labor into our country, causing collapsing wages, high unemployment, welfare overload, home foreclosures, and personal and business bankruptcies — and all of these effects massively reduce the contributions to pension funds from wages.  As in the case of Michael Milken, serious prison time is needed for the drunken-spending politicians and Fed personalities responsible for this disaster.

AS THE ECONOMY STUMBLES the American standard of living recedes. Forty-four million people are using food stamps and in one year that figure will be 60 million. Washington and Wall Street say “what, me worry?” Of course not; they are the “masters of the universe.”

We are 24 months into an inflationary depression and it still goes undiscovered. Who cares that the issuance of food stamps is up 80%, as long as the bonuses on Wall Street and in banking continue to flow and bureaucrats get higher and higher salaries and benefits? The high cost of health insurance, no longer affordable to most have increased and Medicaid users are up 17%, as the program costs increased 36%. Those on welfare rose 18%, as costs rose 24%. It is now evident to many that the choice of early retirement in the late 1990s at 52 and 59 years old was a big mistake. Many must now work into their 70s, or starve. Many retirees are forced to reenter the workforce. Recently there were 2,000 job openings and 75,000 people applied. How is that for recovery? The birth/death ratio is bogus and real unemployment is 22%. The economy needs 2 million new jobs a year and that is impossible. Good paying jobs are still being offshored and outsourced. How about the millions without jobs now for years? While all this transpires the Fed bails out Wall Street, banking and government and leaves crumbs for the dispossessed.

It always gets us when these acceptable writers use soft or euphuistic phrases to describe creeping national state socialism. The big picture is dreadful, but government, Wall Street and the media won’t tell you that. Truth has nothing to do with business. They all spin one lie after another, just as you have recently seen with a certificate of live birth and the death of Mr. bin Laden. It reminds one of the old song, “Anything Goes.”

Those running Washington from behind the scenes know America can never pay off and liquidate its debt. That is why there is little effort to do so. The real idea is to destroy the system. It reminds one of Argentina in 1999, before they defaulted on 2/3’s of their debt only in a much bigger way. The dollar, because it is the world reserve currency, and that nations hold about 60% of foreign reserves in US dollars affects the entire world. America’s Wall Street, banking and government has had a 66-year party and everyone gets to pay for it. The next step, rather than austerity, will be confiscation of all, or part, of pensions, that $12 trillion pool of government and individual retirement funds. Needless to say, such irresponsible actions only delay the inevitable monetary collapse.

Tagging not far beyond is England and Europe, both of which have used the same template for so many years. In the US and all of these nations we see more than 50% of the population functionally illiterate and this same group country to country essentially pays little or not taxes, and receive benefits from government. That does not include the illegal alien population in each country that pays virtually no taxes. Spending far beyond tax receipts can only mean eventually that the deficits will destroy the system. That means a lower standard of living, which has already manifested itself in all three regions. Such profligacy has in the US, UK and Europe caused the Fed, the Bank of England the European Central Banks to create money and credit out of thin air monetizing buying and holding sovereign debt as well as debt clogging the balance sheets of the financial sector. In Washington the administration is considering an oil tax increase as the public pays more than $4.00 a gallon and in Germany it’s $9.00 a gallon. Expect more of this non-income tax taxation. Each tax increase and each loss in services brings less purchasing power, as inflation rages.

All these entities each day find it harder and harder to sell bonds to support their debt load, thus, revenues have to be increased. In the US the top 10% of taxpayers will end up paying 75% of total income taxes. This has already started an exodus of high-income earners to leave the country over the past 15 years, and the numbers are increasing exponentially. That in turn throws an added burden on middle class taxpayers.

At the root of the problems of all these nations is Keynesian economics, which has become the basis for corporatist fascism. The growth of money and credit worldwide has been exponential and continues apace as nations refuse to cut spending and central banks continue to be fonts of money and credit for their financial sectors and for governments. The financial system worldwide is awash in liquidity, which is accompanied by low or near zero interest rates. If those conditions were to be higher interest rates and less monetization the world system would collapse, although governments are manipulating markets downward such as gold, silver and commodities. What they are accomplishing is very little versus the intermediate to long run. That is why in the long run gold, silver and commodities have to move higher, as investors flee the general stock and bond markets, that don’t reflect the results of inflation. That is why inflation will worsen as central banks continue to spew out more money and credit, which is now euphemistically called quantitative easing. First we saw inflation rise in the developing world for a number of reasons, which has since moderated to a great extent. Inflation is growing at a realistic 4% to 6% overall. The problem lies in the developed world where real inflation runs from 8% to 20%. Nations such as the US, UK, China, India, Brazil, etc. are not only suffering high inflation, but they are exporting it as well. Not enough to keep inflation at bay in their own countries, but enough to make financial conditions in victimized countries difficult. As an example, take America’s neighbors Canada and Mexico; instead of having a natural 3.5% inflation for 2011, their inflation at year-end will be 4% to 4.5%.

As we predicted a year ago, QE3 will become reality, although it will be called something else. Not only in the US, but also in the UK, Europe and other countries, as well. If the issuance of money and credit were to stop and interest rates were to rise the world would head into deflationary depression. That is why the music has to continue. Sooner or later it will stop and when it does the bottom will fall out of the world economy and financial system.

The Fed continues to create money and credit and prices continue to rise and will do so for at least 1-1/2 more years. If we get the equivalent of QE3 that will be extended 1 to 1-1/2 more years. Dependent on how big a QE3 could be two to three years ahead, inflation could range from 25% to 55%. As this affects the US economy the banking system will remain weak and near insolvency. As inflation rises in a moderate fashion in the developing world the first world will see inflation rise higher quickly.

We currently see yields on Treasuries falling again from 3.60% on the 10-year note to 3.22%, as the Fed manipulates lower yields into position. That would be in anticipation of higher real interest rates caused in reaction to QE3. This is all rear guard action to try to create employment from a sector that remains under intense pressure. Any job creation is being offset by the high layoff rates of municipal and state workers. These measures by the Fed will also continue downward pressure on the dollar and upward pressure on gold and silver and commodities. Any tightening by the government or austerity measures to reduce the fiscal deficit would be disastrous. That is if you want to keep the game going at today’s level. It is a different story if you really want to solve the problem.

As we switch to the Middle East we see serious trouble coming. In fact it probably is the groundwork for World War III, the event needed from an historical prospective to begin a new world war to cover up the economic and financial collapse now taking place. Why else would the US and UK stir up rebellion in Syria, the home of a Russian naval base and in Libya where the Chinese just recently had to remove 29,000 workers due to a US and UK created rebellion. Libya supplies relatively inexpensive quality oil to China in large quantities. As these adventures unfold it becomes more obvious that a new war is being set in motion. As a reaction we see China saying they want to reduce their dollar forex position by 2/3’s or by $2 trillion. The US won’t let that stop them, so China is going to be a large dollar seller and part of those funds will go in gold and silver. That means the dollar will definitely fall lower both in terms of other currencies, but more importantly versus gold and silver. Dollar bulls are very hard to find. Those negative regarding the dollar we doubt have a clue that WWIII is underway. What has come to the attention of those negative on the dollar is that the US is developing into a Nazi police state. The US government wants to know exactly where all the assets of every American are and at the same time set compliance rules on foreign banks and institutions, which have US persons as clients legally. For Americans, foreign countries have to report any real estate owned by Americans in their country and on January 1, 2013, annually these nations banks have to send 1/3rd of all bank assets to the US IRS ostensibly to pay taxes, which in most instances have already been paid. It is a grab of the assets of Americans who dare to live in another country. As a result the US government gets little or no respect outside the US. The US is a pariah and the laughing stock of the rest of the civilized world. What people other than Americans could believe the fantasies of the obviously phony “live birth certificate” and the death of a man that had already been dead for almost 10 years. The foreign opinion is that the sheeple deserve it.

As an adjunct to this the US government is going to keep US troops in Iraq beyond the end of the year. The Iraqis have to approve this action, so we’ll have to see what happens. It is obvious the US has no intention of permanently withdrawing their troops. The excuse is based on the Shiite uprising in Bahrain and the massive Saudi intervention, along with events in Yemen where the dictator has agreed to leave. Iraqis believe that accommodation with Iran is the only way to coexist. They see iran as the only real power in the region. They also recognize Iran as an emerging regional power. Thus, we see Iran balking at the US leaving 20,000 troops in Iraq.

As Iran vies for influence in Iraq so does Saudi Arabia. Both are funneling money into Iraq. Iran is the target of the US, Israel and Saudi Arabia, but it has an edge at the moment. That is because of a multiplicity of problems in Saudi Arabia itself and on its borders with Bahrain and Yemen. Thus, Saudi is in a difficult situation in trying to extend its influence into Iraq. The only real weapon the Saudis’ have is money and lots of it. They cannot really pretend to be anything but a minor defensive military power. Thus, their reach is limited. As of late the US has only been of limited assistance. Naval and air solutions lack the ability to threaten Iran’s center of gravity, its large ground force. The intrusions already made have been dangerous and the US lacks ground troop ability. One thing learned over the centuries of warfare is that if you conquer you have to occupy. Each place you occupy involves leaving troops that are lost to the vanguard. The US simply does not have the troops to occupy or to engage massive Iranian forces. In addition a war with Iran that probably would become WWIII, would cost trillions that the US doesn’t have. As opposed to the past America’s allies outside the region don’t have the stomach for war, or the resources and appetite for involvement. Their militaries are skeletons of what they had in the past.

We recently saw aggressive action long planned for in the Middle East and North Africa by the US. They may be able to create turmoil and a civil war in Libya and replace one group of American dictators with another, but no substantial change will take place. What has taken place is a temporary pacification process to leave the road to Iran unfettered. The supposed execution of Osama bin Laden has definitely made matters worse in the region just to make Mr. Obama seem like he has accomplished something. These are some of the worst foreign policy moves we could ever imagine.

*  *  *

We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster

by Bob Chapman
Publisher of The International Forecaster.

THE ADMINISTRATION and those who control it, the House and Senate, want us to believe that debt can be paid out of revenues now and forever. As inflation and perhaps hyperinflation set in we could easily see 10% interest rates. If that happened debt service would consume more than 40% of tax revenues. The projection that tax receipts over the next four years would grow by 1/3rd is ludicrous. That is more than 12% a year. Further increased taxation would send more companies and jobs offshore. The bottom line is that further will impede GDP growth and further stagnate the economy. Do not forget 70% of GDP is via consumption. There is no conceivable way with free trade, globalization, offshoring and outsourcing preceding a pace and with the manufacturing base in a shambles, that production and exports can pull the economy from its doldrums. How can revenues be increased under such circumstances? At the same time consumers are reducing debt and saving about 4% of income. This kind of environment is not inductive for consumption to rise from 70% of GDP to 74%, which is needed to bring about those revenues.

That brings us to QE2, and $862 billion in spending. QE1 and $868 billion did not cause a lasting recovery, so we do not believe Qe2 and pork spending will either. Last time we had five quarters of 3% to 3-1/4% subsidized growth. We call it the law of diminishing returns. We believe that by the end of September when the fiscal year ends that the Fed will again have spent $1.7 trillion, as they did in QE1, money and credit that they created out of thin air. Presently the expansion in spending from QE1 and stimulus 1 are starting to be monetized within the system in the form of inflation above and beyond that which is needed to neutralize the undertow of asset deflation. Presently Chairman of the Fed Bernanke tells us there is no inflation, and government tells us it is 1-1/2%, when in reality it is 6-3/4%. We believe by the end of the year we will be looking at 14%.

In QE1 the funding went to the financial sector, which was on the verge of bankruptcy. That was followed by record bonuses for the criminal syndicate known as Wall Street. QE2 is being used to bail out the US government by purchasing US Treasury and Agency securities again with funds created out of thin air. In the first process some $13.8 trillion was used to assist financial institutions in both the US and Europe. The Fed wouldn’t tell us what they were up to so the people had to get a court order to force them to reveal where all the funds had gone and how much had been spent.

We have spent ten years in which growth has been created by inflation. As far as we can see in the future this will continue to be the case, and as a result the US dollar will continue to deteriorate versus other major currencies and in particular versus gold and silver. Even though official Fed interest rates are close to zero real rates are advancing. That is in spite of Fed support of the long end of the market. The US 10-year note has recently traveled from 2.20% to 3.65%. It is probably headed to 4% to 4-1/4% by the end of the year. This is a reflection of investors demanding higher yields to protect against further dollar deterioration. These higher rates mean that US debt service will grow in the future causing debt service to become more onerous. As a result the Fed will have to create more money and credit and monetize it by buying ever more Treasuries and create ever more inflation. That is a vicious circle. In the meantime taxes will be raised, which will cut back on economic activity, which will cut revenues eventually and at the same time increase already high unemployment. The Fed is surely headed for a crackup of enormous proportions.

In the House and Senate and in the White House there is no talk of a balanced budget and budget cuts will be at a minimum. The cycle continues of never ending debt, as taxes move relentlessly higher. That includes 44 million on food stamps that could grow to 88 million – 15.7% below the poverty line that could easily double, unemployment at 22.6%, which could double. At the peak in 1933 unemployment, U6, was 37.5%. Yes, this time it will be worse. Workers are now receiving 42% of their income from non-government income. That could fall to 21%. The 18% receiving who get their income could rise to 36%. Calling U3 at 9% is an insult to any thinking American. There is a way to cut costs under the Medical Reform Act; all those with chronic diseases will be allowed to die. Society can no longer afford useless eaters.

Inflation officially is 1.5%. Real inflation is 6-3/4%. It will be 14% by the end of 2011 and higher in 2012, as QE1 and QE2 flow through the system. The creation of inflation does not create jobs. It makes the rich richer. Government is presently trying to redefine a balanced budget by eliminating interest payments, which shows you the arrogance of these criminals. The President and his advisors know that interest payments will eventually become the largest debt budget item.

The President tells us he will increase spending by $20 billion, which will accompany taxes. We certainly do not call this tax reform, but an open door to tax increases and major spending policies. The CBO, the Congressional Budget Office tells us the bipartisan tax cut legislation, or pork package of $862 billion in stimulus, will drive the government’s deficit to a record $1.5 trillion in 2011.

Government is going to continue to borrow 40 cents of every dollar it spends. Soon the cash deficit will reach $14.3 trillion, which is the current limit by law. We expect the limit to be raised to about $17 billion and the best we can hope for in spending cuts will be $50 billion. If you subtract the President’s spending increases that is really a $30 billion cut. Who knows at this stage whether these cuts will really become reality. It just shows you the Republicans haven’t changed much. The cuts are really just cosmetic. In addition, the CBO believes GDP growth in 2011 will be 3.1%. We believe it will be 2% to 2-1/4%. If the CBO is incorrect it will deeply affect economic statistics and outcome. If you add in a 2% payroll tax cut this year and extended unemployment benefits you will get much different results. The payroll cut alone will cost another $400 billion.

The CBO also says Social Security will pay out $45 billion more in benefits this year than revenues, because since June 1935 the fund has been looted by channeling revenues through the general fund, which were immediately spent. After the next election in 2012 you can expect a reduction in future benefits and an increase in retirement age further reducing future benefits. We expect a 15-cent a gallon increase in gas taxes and a further scaling back in tax breaks, including the child tax credit. They will also try to eliminate the mortgage interest reduction, which would further devastate the residential real estate industry. The House will attempt to end the deduction claimed by employers who provide health insurance in exchange for rate cuts for corporations. The 500 major corporations are presently sitting on $1.9 trillion in cash, domestically and $1.9 trillion in offshore accounts — a benefit derived from free trade and globalization. There is already in the works, via secret White House talks on December 15th, a plan to bring those funds back into the US at 5-1/4% taxation rather than 35% costing taxpayers $650 billion in lost tax revenue. Those funds will be used to buy company shares boosting them, allowing officers to cash in their stock options and make billions of dollars, prop up the stock market and assist by buying Treasury and Agency bonds. This is what corporatist fascist governments are all about.

From 2010 onward two million addition citizens are expected to sign up for Social Security, Medicare and Medicaid annually. The COLA formula has been falsified for 30 years by bogus CPI figures. As bad as that has been and is, it will be much worse when that link is broken and only a flat benefit will be paid as inflation rages. If you couple this with the Medical reform death panels there will be very few Americans roaming around America. They’ll either have been eliminated as useless eaters or starved to death. Believe us this is no exaggeration.

In 2011 the US dollar will continue to deteriorate. It will test 71.18 on the USDX, which are 6 major currencies versus the dollar. The dollar will also fall versus gold and silver as will other currencies. Over the past ten years nine major currencies have fallen an average annually versus gold by 15-1/4% and versus silver 20-2/3%. Those are the real benchmarks of dollar deterioration. Versus the USDX 71.18 should be broken in 2011 and eventually reach 40 to 50 over the next few years as gold and silver rise. Do not forget based on 1980 methods of value, when gold was $850 an ounce officially gold should be selling for $2,400 an ounce. If you use unadjusted figures that price would be $7,700 today. It just shows you the extent of gold suppression by the US government, the Fed and other central banks over those years. If you were depending on Social Security for retirement or your pension, 401K or IRA, forget it. Your only guaranteed protection will come from your gold and silver assets and do not forget that.

The situation in the euro zone is well known to most readers. Greece has borrowed $132 billion or is in the process of doing so, and the EU, the ECB and the IMF are committed to $1 trillion in bailout money for the six countries in trouble. Several of these countries have been downgraded by rating agencies. This situation is problematic, but the US situation is fundamentally worse. In a way the European situation although not good has been used as a cover for US systemic problems. That is because American professionals do not want to hear about it and the American public is still wondering around in the darkness.  They still for the most part do not know what is being done to them, nor generally do they care. It is all Super Bowl and beer while it lasts. The US has been in a mode of printing money instead of producing goods and services for years. Dollars are the world’s reserve currency, which has given the dollar an unnatural extended life. In addition to that foreign countries have continually printed their own currency, bought dollars and bought US Treasuries in order to manipulate and cheapen their currencies. In this process the US has been able to export inflation. In time this unusual situation will end and the inflation will be turned inward in the US becoming very disruptive. This means at the dollar’s present pace it soon won’t be the world’s reserve currency. As currencies such as the dollar fall against other currencies the cost of imported goods will rise and US inflation will get another boost.

America needs to recapture its manufacturing base, which has been the basis of its success for more than 250 years. The way to do that is impose a 25% plus tariff on all goods and services. This is a matter of survival, not politics. The US carried the world for 65 years and it is time for these complainers to pay a price for their success and standard of living. The US will also profit from a much higher savings rates, 10% or more would be helpful. It is currently 4%, down from 7% prior to November.

There is no question that the dollar’s reserve status has and is being abused. The prime reasons for that status was it was the only nation really left standing at the end of WWII, and the dollar was backed by gold. That has not been the case since August 15,1971. If the US is to maintain its dollar status it has to devalue and revalue versus other currencies and go into multilateral default. Then gold backing can again be put behind the dollar. If they do not have the gold they will have to buy or borrow it. If that is not done another currency or group of currencies will have to be used.

Since WWII all other nations have deliberately devalued their currencies. The US didn’t mind because it was by far the strongest nation in the world. Whenever the world had a recession the US bailed it out by creating more money and credit. That made everyone happy and the world rolled along. This is no longer the case. Since the 1980s, at the behest of WTO, NAFTA and CAFTA, the trade tariffs have almost all been removed. This free trade, globalization, offshoring and outsourcing by transnational conglomerates has destroyed America’s internal manufacturing infrastructure with the loss of 42,400 company and 8.5 million good paying jobs. As long as this is allowed to continue America cannot compete and will continue to slip toward a lower status among nations. The only way to stop this headlong rush into oblivion is to leave WTO, NAFTA and CAFTA and reinstitute tariffs including penalties on those countries that insist on continuing to depreciate their currencies. If this is not accomplished with the unpayable debt the country is carrying, it is doomed.

Yes, tariffs mean higher prices for imported goods and more inflation. Our trade deficit would fall and the dollar would stabilize. All those American corporations that moved to foreign countries to take advantage of cheap labor would no longer be able to capitalize on cheap labor and perhaps keeping their profits offshore in secret tax havens when they pay no US taxes. Things have to change and change quickly, or America’s competitive position will be permanently destroyed. Other nations will be able to buy more domestic goods with their stronger currency, raise their standard of living and develop their own domestic economies.

Those whose aim is to bring about world government know that if a country does not have a sound industrial base it can never be successful as a nation. What is being done to the US and Europe in the name of free trade is to force the people of those nations with a collapsing economic and financial structure to accept World Government. This is what this deliberate destruction is all about. In order to rebuild the manufacturing base the US has to erect tariff barriers on goods and services and savings have to be increased. The situation with savings is the same as it was in 1959, 43% of Americans have less than $10,000 saved for retirement. America needs a 10% savings rate if they ever hope to recover. Accumulation of savings has been difficult since 2000 due to declining interest rates. Stocks have risen only 9%, bonds 67%, but gold has risen five-fold and silver six-fold. We have recommended gold and silver coins and shares over that 11-year period so subscribers have been able to save and profit. The other 99% of professionals have been losers, not to mention the losses to inflation. The gold and silver bull market will be the greatest bull market of all-time. There is no safer place to be.

Listen to American Mercury contributor Bob Chapman on GONOB Radio (Though the host has a few flights of fancy, he’s learning, and it’s great to hear Bob’s insights, from being trained in intelligence work a half century ago to becoming the “worst nightmare” of our illegitimate rulers. — Ed.)

*  *  *

We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster

THE CHAIRMAN OF THE FEDERAL RESERVE, Ben Bernanke, would have us believe that if it were not for QE1, unemployment would have been considerably higher. Since QE2 began in June, U6 has only improved by ¼%. Perhaps better numbers are on the way, but that has not been an auspicious start. If we remember correctly almost all the funds in QE1 and now in QE2 have been lent to financial firms in the US and Europe, transnational conglomerates and governments and central banks. Most of those funds have been held on balance sheets to fain solvency. Very little has reached the public or to reduce unemployment. All we have to show for 2-1/2 years is a financial sector hanging on by a thread and more massive debt in the trillions.

What should be permanently stamped in your minds is that the financial carnage we have experienced is the fault of the Fed and the financial sector and that same Fed bailed out the crooks and left the public high and dry with 22-3/8% unemployment and a shattered residential and commercial real estate sector that is still two years from the bottom and perhaps 30 years away from appreciation.

It is despicable for Mr. Bernanke to have insinuated he helped avert higher unemployment when it was the policy of the owners of the Fed and Wall Street and banking, which was the cause of the worst depression since the “Great Depression” of the 1930s. It should be noted that the end of the damage is nowhere in sight. Throwing trillions of dollars at a problem doesn’t solve it, and in this case will only make it get worse. In addition, trillions of dollars in wealth were destroyed and as a reward for their greed the Fed, which allowed the public to pay for the Ponzi scheme, protected the financial sector.

As far as we know the Fed has already purchased with taxpayer funds about $1.5 trillion in MBS, known as toxic waste, which was created by the financial sector. The question is how much more has been purchased by the Fed and are they going to purchase more to bail out financial institutions and others? One of the things that is never mentioned is restitution for all the money these crooks stole. In a civil action concerning $5 billion in bogus MBS and other derivative products, Goldman Sachs, neither admitted or denied, and was found guilty of civil fraud, and paid a fine of $500 million. They got to keep the other $4.5 billion – another sweetheart deal to permanently protect them of criminal charges. Michael Milkin stole $3 billion, gave $1 billion back and kept $2 billion after doing 1-1/2 years in a prison country club. Then there was Warren Buffet’s, Berkshire Hathaway, which defrauded the government of $300 million. His firm paid a $100 million fine and kept the rest. Milkin was the exception, no one else since has been incarcerated. As you can see, it pays to be an elitist crook in America.

Now banking and Wall Street gets interest-free money, but the public does not. What is wrong with the public? Don’t they realize what is going on? What has happened to our representatives and senators and our courts? We’ll tell you what has happened; the NYC-Washington crime syndicate is paying almost all of them off. Americans have lost control of their government and if the slight improvements in the past elections are indicators, the situation is going to get worse.

As a result the Fed is monetizing debt in order to bail out government, banking and Wall Street, and to offset the persistent undertow of deflationary depression. All we can say is what is wrong with the American people? Can’t they see what is going on? If they do not wake up soon we could have a revolution on our hands.

America is facing almost zero interest rates. If those rates are raised the bottom will fall out of the economy and the financial structure will collapse. Any talk about higher rates is just that — talk. The only way out now is for the elitists to have another war as they did in 1941. How much longer can corporations keep two sets of books? What you have seen just didn’t happen, it was planned that way to force Americans and Europeans to accept world government.

Due to the current power of the Fed and other interconnected central banks, all other factors take a back seat to credit creation and their creation of money supply. Under mercantilist Keynesianism, which we prefer to call an economic plan for corporatist fascism, the greater the distortions the deeper the depression. This is the method of perpetual political and social control, which in one way or another has been successful over the centuries. These are the same people who have deliberately created economic cycles, which are extremely profitable, and when things are not going as planned they simply have another war. None of what you have seen has happened by chance, it has been planned that way.

As George Wallace said, “there isn’t a dime’s worth of difference in either party.” He was right. What he should have said was both parties are almost totally owned by Wall Street, banking, insurance, big Pharma and transnational conglomerates. The criminal deals that have and continue to exist in Washington are far worse than anything the Mafia ever did. Our government is operated just like any criminal syndicate.

What is becoming evident to us is that all is not going well for the Titans of Wall Street. Investors have been fleeing the stock and bond markets in hordes, although their owned rubber stamp is still in place. In fact, some of the higher placed elitist players are questioning whether they can again pull off a deflationary depression and war and still survive? As you can see they still have more than 50% of the electorate buffaloed, but as any student of history knows revolutions are led by 5% to 15% of the citizens. The rest are split along the sidelines.

Oddly enough what has suited both Democrats and Republicans has been a big loser for Americans, because the elitists almost in total control both parties. As a result, major Wall Street firms, which have for years owned the SEC and the CFTC now have virtually no regulatory oversight. Essentially Wall Street has a license to steal and they take full advantage of it.

The big question is can Ron Paul disarm or perhaps even eliminate the privately owned Fed? The answer to that question we should have over the next two years. Will it take a constitutional amendment or a monetary collapse? Again we will have to wait and see. It should be noted that after China and Japan the Fed now holds third place among those holding Treasury and Agency bonds. More than 60% of Americans want to dump the Fed and Wall Street, which owns the Fed, owns Congress, thus it will have to change by other means.

The greed of transnational conglomerates just never ends. Readers you are soon going to witness another great scam pulled off by America’s elitist corporations to further enrich themselves at your expense.

In a secret meeting on December 15th, business executives met in the White House requesting that the President declare a tax holiday, so that they could repatriate as much as $1.9 trillion from offshore subsidiaries in tax havens such as the Cayman Islands. Instead of going through Congress as they had to do six years ago, these crooks want an executive order. We were wondering how long it would take them to be back at the trough.

To make it simpler, participants recommended a reprise of a 2004 tax holiday that allowed these multinational conglomerates to return profits to the US at a tax rate of 5-1/4%, not the regular 35%. That piece of largess allowed these crooks to move $362 billion virtually tax free back into the US by declaring they will use the funds to create jobs for Americans. Needless to say, very few jobs were created. That money laundering operation and this new proposed operation would move part of $1.9 trillion into the US stock market, as was done before, to buy the shares of these US blue chips, which in turn buoys the stock market. The shares would rise in value as they did six years ago, and the executives would cash in their stock options making themselves billions of dollars. This is what this was all about last time and it is what it is all about this time. If under normal circumstances these companies paid the 35% tax they would owe the American people $665 billion. At a 5-1/4% tax rate that figure would be just under $100 billion. Is it any wonder that our government is broke?

In addition to this new caper in banditry these multinationals are already finding legal ways to avoid taxes. We won’t go into the details here but believe us their actions of the last five years have cost taxpayers billions of dollars. These US companies are very sophisticated and are routinely repatriating hundreds of billions of dollars in foreign earnings.

This is one of the main reasons tariff walls were torn down and why today we have free trade, globalization, offshoring and outsourcing. This not only enabled these crooks to pile up profits in tax havens, but it has hastened the demise of the American economy, so that Americans will be forced to accept world government, something these fascist monopolists want to take place in order to impose a new world order. This is really what this is all about. This is much more than meets the eye if you know what to look for.

Needless to say, there is a very simple solution to this financial treachery. All we have to do is re-impose tariffs of 25% to 40% and then there would be no reason to hold earnings offshore. This exercise over the past ten years has cost America 42,000 lost businesses, which were shipped overseas as well as 8.5 million high paying jobs. You ask yourself how could this happen? The answer is your House and Senate are bought and paid for and whatever these elitists want they get. If tariffs are not soon implemented there will be no way back for the US and European economies.

The answer by these transnational conglomerates is America is uncompetitive due to its tax structure. They convinced Congress of this some time ago and that is why they are allowed to keep profits offshore. The problem is when they bring those profits back to the US it is at 5-1/4% and these profits end up in the stock market for reasons we’ve explained. Thus, they get enormous tax benefits but in the process they destroy the underpinnings of society. In 1967, we wrote an article in a leading journal stating that this was where the elitists were headed and the article has proven prophetic. The American Mercury‘s legacy lives on. Such tax breaks for the mega rich holds no water. These are the same corporations that in part are already sitting on another $1.9 trillion in cash in the US. This has nothing to do with investment or job creation and everything to do with corporate greed. This infusion of offshore funds onto the active US balance sheet has a tremendous levering effect as well on earnings.

We have all the dirty details but we’ll spare you homework. It is the way we say it is. Let’s see if they try to end run Congress on this issue and perhaps in the interim we can find out how much the President is being paid for ramming through such a grand venture. Why do you think such meetings are secret?

If you are wondering why your country is broke, one of the reasons is the antics of these elitists, when great profits are never enough.

First it was Argentina two years ago, then Hungary and France and now it is Poland. Argentina took over pensions and the others are using pension funds. Poland wants to limit transfers to private pension accounts to plug a widening budget deficit.

Poland faces an excessive debt, in part a result of pension contributions. Legislators want to limit transfers not temporarily but permanently. That being the case this move is not to solve a short-term problem, but a new policy to cut off retirees from their benefits and to spend the funds elsewhere. Politicians being what they are won’t reduce the deficit appreciably. The idea is to cut pensions from 7.3% of salaries to 2%. Just to give you an idea as to how efficiently government has been run since 2007, the deficit went from 1.9% to 7.9% of GDP. The pension flow demand is 40% of GDP. As you can see worldwide everything is on the table and America will be no exception.

Even though Ben Bernanke may end up being recognized as a disaster for the American economy, he is particularly popular on Wall Street and in banking. He supplies the liquidity for financial institutions to increase profits hopefully exponentially. Simultaneously, via the “President’s Working Group on Financial markets,” he directs the manipulation of markets. The results are known as the Bernanke put. There simply cannot be market and bond declines except for gold and silver. The latter have been restrained, but only on a temporary basis, because that is what they now are only capable of.

As we wrote this past January, the effect of stimulus would end in April and in May some sort of effort had to be put forward to help a sagging economy. That came in the form of aid from the Fed in the bond market and via swaps. This proved an important event because we could then see that the Fed had to get more accommodative and allowed us to predict QE2. Thus, there is the Bernanke put. You can be sure he guaranteed Wall Street, before he was ever appointed, that he would do exactly as they instructed. No one has ever had that job that didn’t do so, and those orders come from JPMorgan Chase, which is the ringleader and always has been. Why do you think we have quantitative easing and zero interest rates? Those are Morgan’s orders. From Ben’s utterances we believe there will be a QE3 and more as we move toward hyperinflation and we predicted that last May. We also see indefinite low interest rates. He and they are not really concerned about the dollar. They have influenced many other nations to do the same thing, so its bad currency versus bad currencies. This way they can lay off their inflation on everyone else. That is why they have suppressed gold and silver because versus all currencies they are the only alternative. In that process they will make those who understand what the Fed is up to, essentially the Fed’s enemies, wealthy, an unavoidable fallout the elitists will have to live with to retain control of the system.

Mr. Bernanke arrogantly tells us he saved the system. What he should have said is that “I saved the finance houses and moneylenders at your expense; it is the way we have done it for the last 1,000 years.”

*  *  *

We at The American Mercury are honored and pleased to welcome back to our pages Mr. Bob Chapman, an international economic expert and distinguished writer who was part of the print Mercury in the pre-Internet era.

Read the full article at The International Forecaster

Exclusive to The American Mercury

TODAY THE FEDERAL RESERVE, America’s private central bank, began to ship billions of dollars to the central bankers of Europe in an attempt to stem the fall in the value of the euro created by Greece’s debt crisis. The total value of the deal could easily top $1 trillion according to experts. Americans — suffering from high unemployment and a tanking economy themselves — are expressing astonishment that 1) the “Fed” has the authority to unilaterally ship dollars to foreign bankers, and 2) that the desires of European-domiciled bankers come first in the Fed’s eyes over the needs of suffering, over-taxed, and unemployed Americans. (ILLUSTRATION: Federal Reserve Chairman Ben Bernanke)

According to Congressman Dennis Kucinich, Congress did not authorize the move. “The Federal Reserve is no more Federal than Federal Express,” he said, which means that, as a consortium of private banks, the Fed can decide on its own and Congress can do essentially nothing about it. Pittsburgh Examiner financial commentator Joe Schoffstall added “Their ultimate goal, just like [that of] any other bank, is to maximize their net profit to the highest levels possible. None of this would be possible without the option of printing endless amounts of money at will….”

The dollars created by the Federal Reserve — which, according to analysts, will dilute and reduce the value of every dollar in Americans’ pockets — will be swapped for rapidly-declining euros, just as the euro’s value is plummeting, and for that very reason. The Fed is acting in concert with other central banks — including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and others — in the so-called “dollar swap” effort.

The European Union and the International Monetary Fund had already pledged a $140 billion “defense package” for the euro, but it wasn’t enough. Estimates of the ultimate cost of the Fed’s dollar giveaway run from $900 billion to more than twice that amount — nearly as much or more in a single day’s pledge, critics say, as in a year of the disastrous Iraq war, which has already devastated the US economy.

The Federal Reserve’s decision today constitutes a reopening of a program started during the 2008 “global financial crisis” under which dollars are shipped overseas directly to foreign central banks. These central banks can then lend the dollars they receive to commercial banks in their home countries that they decide are “in need of dollar funding” to prevent their collapse — and make a huge profit in the bargain, courtesy ultimately of the US taxpayer.

The New York Times published information this morning which appears to buttress supporters of the deal, saying “The swap operations do not carry any exchange rate risks or credit risks… The Fed would not be a party to whatever dollar-denominated loans the European Central Bank may make to European financial institutions…. The Fed actually made money from the previous dollar swap program. The foreign central banks paid the Fed interest equivalent to what they made from lending the dollars.”

Critics say the “making money” and “no risk” claims are irrelevant, though: the dollar’s value is being diluted nevertheless and the fact that the lenders of these newly-created funds will make huge profits should be a source of outrage, not reassurance, they say.

According to American Mercury analyst Gideon Dene, “It is an outrage. But Americans have slept while the Fed has been given the power to control our entire economy. When private banks — and that is what the Federal Reserve is, the central hub of the private banking system — control your currency, you’re naturally going to see them act in their own interests instead of in the interests of American workers and small businesses. The Fed has essentially taken over one of the functions — you might say the most important function — of government: control of the currency. And so you get government by the bankers, of the bankers, and for the bankers.”

“And remember,” Dene added, “European-domiciled banks aren’t necessarily ‘European’ in any real sense. Look at the stockholders and you’ll find out that many of these characters are no more European than George Soros or the Rothschilds. These are internationalist, globalist ‘operators’ with no loyalty to any country. It’s both insane and tragic that we’ve handed over our currency to these private bankers. It’s like hiring Al Capone to run your Neighborhood Watch program.”

I asked Dene what could be done: “The problem actually goes deeper than the Fed,” he said. “The ‘Audit the Fed’ folks, if they get their way, will just uncover the tiny tip of a mountainous problem that’s been buried in ignorance and obfuscation. And that problem is fractional reserve banking. That’s the system that essentially is our financial system today. Most money is not created by the government. Most money is not created by the Fed either — most money is created by commercial banks through the ‘magic’ of the fractional reserve system, acting on demand deposits — like checking accounts. The Fed supervises and hopes things don’t get out of hand — and steps in when they do.

“The fractional reserve principle is based on the idea that most depositors won’t ask for their money all at once. So you can lend out 90 per cent. of your depositors’ funds without deducting the amount you lend from their accounts — in essence creating money.

“That’s a system that guarantees panics, failures and bubbles. And until people understand that, there will be no push for meaningful reform. Not one citizen in ten thousand has even heard of fractional reserve banking. And not one journalist in a thousand understands it. And those who are getting rich off of it are going to do everything they can to maintain that general ignorance. I do hope that what the Fed did today has an educational effect.”