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I'm Forever Blowing Bubbles ----
I'm forever blowing bubbles ---- remember that song from a few decades ago? Well somebody certainly is, and that somebody is the Central Banks in collusion with the Federal Reserve and various Depts of government, principally in the U.S. but more and more it is becoming a world wide phenomenon. And WHY do we see one bubble after another blow up, housing being the most recent major one? It is quite simple really, a fractional reserve banking system that brings our medium of exchange into existence as debt, DEMANDS it, it is as sure as the rising of to-morrows sun. Banks MUST lend or eventually die, and don't be fooled by the banker propaganda that they make their profit on the "SPREAD" between the interest they pay on deposits, (almost nothing to-day) and the much higher interest they receive on loans, if only that were true we would be in much less of a predicament.
This popular myth is pure fiction as you can not loan out a liability, which is what "deposits" are to a bank, after all it is still your money, and you are at liberty to withdraw it at will, (though that is under pressure) in our increasingly precarious economy. Any banker who tells you this myth is either IGNORANT or an outright LIAR trying to deceive you, banks do NOT loan out their depositors money.
The little known truth, (among the joe 6 pack crowd) is that in actuality, banks are allowed by the Federal Reserve Act of 1913 to create up to $20. in NEW MONEY for every dollar they have on deposit. They are euphemistically called "RESERVES" because they must keep enough money on hand to facilitate daily withdrawals, but where they make their money is on 20 X reserves by creating loans out of thin air and loaning it (debt), out at interest, which is NEVER CREATED. The only way that interest can be paid is by new and BIGGER loans being taken out progressively and exponentially to cover both old loans being retired, AND the UNCREATED INTEREST, which is actually accumulating as un-payable DEBT! There is plenty of evidence, not only in government practice of continually rolling over bonds coming due, but many corporations and individuals refinance their loans as well and never achieve "final settlement" to become debt free, and even if they do, through TAXES on various levels of government debt they remain DEBT slaves.
My particular interest in this essay is to focus attention on the next likely DEBT BUBBLE that is already hurting our economy, and I am referring to student loans. It is bad enough that young couples are increasingly putting off marriage and in too many cases living with their parents into their late 20's and even 30's while they "finish their educations" to supposedly earn higher incomes for life only to find when they graduate that there are no high paying jobs available in the specialty they trained for. To add insult to injury, many have accumulated tens of thousands in debt to finance these so called educations, no wonder students in Montreal (and other places and countries) are rioting in protest against high enrolment fees. Worse, once they graduate they are expected to begin paying back these loans within 4 years, but may not be able to find a job, a NATIONAL DISASTER that is about to burst on the scene with dire consequences. Youth unemployment in Spain for example is already approaching 50% and is not solved by "printing money" just to pay off old debts, so a flashpoint looms.
It is well laid out in an article by Dan Amoss; @http://addisonwigginsapogeeadvisory.agorafinancial.com/2012/08/09/issue-extra-dan-amoss-on-the-next-government-budget-time-bomb/ should you wish to read the entire article with all the gory statistics. It appeared in an Agora Financial publication called Addison Wiggins Apogee Advisory Aug. 9th special edition from which I quote the following: "Right now, even professional investors aren't talking about the ticking time bomb of off-balance sheet student loan defaults. This, along with other unreformed entitlement programs, will swell the federal budget far beyond even the biggest projections. The ultimate losses on the Department of Education lending binge will probably be north of $100 billion. This is bad news for savers waiting for a return to reasonable interest rates on savings. The exploding deficit will force the Federal Reserve to not only keep rates at zero for the rest of the decade, but also to print trillions more dollars in order to buy the Treasury Bonds floated to fund these deficits." (end quote).
So if you have been wondering how the Federal deficit can balloon by a over a trillion dollars in one year, check the statistics on how the Obama Administration has run bigger deficits than all previous President's COMBINED. With student loans representing a NEW trillion dollar debt bubble, just one among many, how do you as a taxpayer feel about picking up the tab for the "defaults" being projected by Dan Amoss? Maybe you should consider reading the rest of the article to learn about some of the defensive tactics you can take as an individual. Not to worry, according to government officials INFLATION is normal and under control. Amazing how politicians can adopt a "hear no evil, see no evil" mentality and toss around looming billion and trillion dollar deficits as if there were no consequences.
The big question for investors and indeed any taxpayer/worker is, can you trust government and their appointed officials in key economic positions such as the Federal Reserve? Before you answer listen to these historic quotes from Ben Bernanke the Federal Reserve Chairman; http://www.futuremoneytrends.com/index.php/category-table/228-bernanke-dooms-student-loans and ask yourself, what will be the NEXT BUBBLE they blow up to maintain liquidity in the currency markets, remember, "every bank loan is a new creation of money" Graham Towers Governor of the Bank of Canada in 1939 testimony before parliament. Is in not high time that we as taxpayers DEMAND that our elected representatives legislate "HONEST MONEY" to replace our present debt creating system that has long been out of control?