Zion, IL
By A.B. Dada
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The housing bubble has popped, and not just a small loosening of air from the gigantic, Federal Reserve-created madness. It’s a full blown pop, one that will quickly affect more than just the housing/construction markets. If you’re looking to be a wise and protected individual, today is a great day to restrain spending — even necessary spending — to brace yourself for the day when cash of any sort is king.

As of last week, mortgages are in very low supply — the banks don’t have easy access to new money (counterfeited legally by the Federal Reserve), and investors on Wall Street aren’t looking to buy bonds backed by new mortgages. The subprime mortgage market is in complete collapse (again, the fault primarily of the Federal Reserve’s easy money policy), the Alt-A mortgage market is rolling as people who were given loans by banks are now finding the banks backing out of those deals. Even the prime market is seeing an increased foreclosure rate due to people with excellent incomes and excellent credit scores getting ridiculous loans to buy homes significantly more expensive than common sense dictates.

This is all a good thing, and we need to let the market work its way out. The poor and the middle class are quickly become slaves to debt, with many fearing losing their cars, their credit lines, their credit scores and even their homes. In my home town, “For Sale” signs are common everywhere, but “Desperate Seller” signs are popping up. You can thank the Federal Reserve for that — and the best thing they can do is be restrained.

Remember, for every person who is in over their head, there is another person who made money on the deal. If a family earning $50,000/year gross bought a $400,000 home and is in trouble today, someone else received that $400,000 before, so the money still exists somewhere. What likely happened, and what always happens when the Federal Reserve creates new money, is that money trickles up from the poor and the middle class to the ultra rich. Even people earning $200,000 per year household are considered middle class when you look at the incomes of the wealthiest Americans (see: Wall Street and Banking bonuses for the past few years). If the Federal Reserve holds back and restrains ANY bail-outs, what will happen is mass foreclosures causing people to lose their homes, forced to return to renting.

In the short term and mid term, this is not as bad as it sounds. With empty repossessed homes on the market, banks will be forced to sell the homes at liquidation prices. Those (wealthy) who are sitting on cash will eventually see a huge potential for long term profit: buy homes at 50% off firesale prices, and then rent them back to those who lived in them previously. This is the main game and plan of the Federal Reserve — to transfer not just money but assets from the masses to the elite few. It doesn’t hide this fact when you look at all the years of bubbles and busts the Federal Reserve created, starting with what they did to create the Great Depression. The poor make malinvestments with all their “easy credit,” buying overpriced stocks and homes and assets from the wealthy elite who are quick to exit the market and sit on cash.

There is a TON of cash floating around the world, just waiting to buy hard assets at fire sale prices. That money isn’t going away. Maybe millions of previous homedebtors will be “reduced” to renting for the rest of their lives, but this is an EXCELLENT lesson for their offspring — don’t be a slave to debt. Some will learn, most will repeat the same mistake. It’s a fact of life, one that was warned about since the Bible and before — 2000+ years of warnings about debt.

What will the Federal Reserve likely do, and has already started? They’ll start a bailout of various industries in hopes of “saving people their homes and retirement investments.” I put that in quote because it is a fictitious declaration, so don’t believe it.

Picture this: someone invents an item that cures cancer. It sells for $500 and it sells millions. Then people find out that this item does cure cancer, but it causes people to go dumb and blind. People withdraw from buying the item, and want to sell this useless item for whatever they can get for it. Quickly the cancer-cure prices fall, from $500 to $400 to $200 to $50. This is the market responding to an oversupply and an underdemand. Many people will lose their “investment” but some people may want this item because it can be used for other things, maybe drying the laundry.

Now, let us assume that the Federal Reserve decides to jump in and “save” the industry by loaning money to people who promise to keep buying the cancer-cure device for $400-$500. What happens is that our government, unconstitutionally and immorally, creates new money to loan to people who will prop up the cancer-cure device’s price. Eventually the market “recovers” as others find new uses for the device, and the device’s price may actually go up because of all the new money in the market, created by the Federal Reserve. Yet in addition to that market being “saved,” everyone else’s money is reduced in value because of the new money. If the market still crashes, even with the legal counterfeiting, we’d be left with the taxpayers holding the bag — forced to pay off the bailout over decades or generations with interest to — guess who — the elite who form the banking industry and investment industry in this country.

This is NOT a free market, not as long as the money supply is dictated by powerful forces such as the Federal Reserve and the U.S. government. This is terribly immoral, and makes it impossible for the poor and the middle class to stave off losing the value of their money savings because of all the new money created. No matter what the Federal Reserve does, only by restraining themselves completely can the market return to whatever equilibrium should exist based solely on supply and demand.

Remember this, voters: every Presidential candidate of every party wants to keep the Federal Reserve in power. That is, every Presidential candidate but one is lying to you about their ultimate goal: to continue to control the money supply, so they can prop up the profits of whatever elite-driven market controls that candidate should they win the election.

Beware of those who DON’T speak out against the Federal Reserve, the most immoral and unconstitutional agency in our fine Republic.

Zion, Illinois
By A.B. Dada
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Dr. Ron Paul, candidate for President for 2008, is the only candidate of any party who is warring against the Federal Reserve. The Federal Reseve is a group of bankers and financiers, controlled by the Federal government, who decide regularly to create new money or destroy it. Rarely have they destroyed money (causing prices to fall), instead they usually create new money which causes interest rates to fall, and prices to rise. Prices don’t rise because items become more expensive, instead prices rise because the dollars you hold are losing value as new dollars enter the market. These dollars can be physical (printed) or electronic (injected credit).

Dr. Paul doesn’t go far enough — I believe he should be actively calling for a criminal investigation into the Federal Reserve on a Constitutional basis. There is no basis for the Federal Reserve. Lately, the stock markets in the US, along with the housing market, are on the verge of a virtual crash. Some experts envision a 20% fall, I personally can’t see it stable at any less than a 40% fall. When rents are so far out-of-whack from mortgage payments+overhead (taxes, association fees, maintenance), there is a market deficiency. The Federal Reserve has worked hard to trick consumers into looking around this market deficiency that is solely created by this cartel organization.

Overnight, the Federal Reserve just added another $24 billion dollars to the market, supposedly on a short term basis. They did this because interest rates were growing beyond the rate set by the Federal Reserve. In a free market, interest rates aren’t magically calculated to be the same everywhere — instead, interest rates are set by banks based on how much they need money, or how much money they have. Look at it this way: if a bank needs money from investors in order to loan it out, they will raise rates for savings and money market accounts. This will get people to invest money into the bank, which the bank can loan out. If the bank has a lot of ready cash in their vaults, they will lower interest rates to try to get people to borrow the money. This is how the market works.

When the Federal Reserve tries to target a specific rate, they do so by creating, or destroying money. If rates get ahead of where the Fed wants them to be, they just create new money to loan out, which usually (!) has the effect of lowering rates since there is now an oversupply of money available. The downside of this is that new money created makes your money worth less. The people borrowing the new money are now causing prices for you to rise — you are paying for their loans first.

Dr. Paul is right to want to end the Federal Reserve. This organization has destroyed the dollar since the Fed was created in 1913. The idea is socialist, taking the idea that government knows what is best for your money. Do they? Have you met many government officials who know how to spend your money better than you do? If not, why are you giving them control of your money?

Gary North, academic historian and economist, noted something amazing that many people don’t believe (and that I have been saying for years in a different way): the stock market is a terrible place to make money for most people. Let’s look at North’s example:

If we take the Dow Jones Industrial Average as the benchmark, it was about 1,000 at its peak in early February, 1966. It is about 14,000 today. According to the Inflation Calculator of the Bureau of Labor Statistics, the dollar bought 6.5 times as much in 1966, so dividing 14 by 6.5 gives us about 2,150. So, it took 41 years for the DJIA to double in real terms. That’s about 1.9% per year. There were dividends, of course, but these were taxed as regular income. Dividends after 1982 fell to about 2% or less. If the investor was in a DJIA index fund, he paid management fees: maybe 2% per annum. (There were very few no-load index funds in 1966.) If he invested $1,000 in February, 1966, and sells for $14,000 today, he will be taxed 20% on his $13,000 increase. So, he will take away $10,400 in after-tax profits. Divide this by 6.5. We get $1,600. Over 41 years, that’s a return on investment of 1.15% per annum. In other words, the stock market investor after taxes and fees has just about nothing to show for his 41 years of doing without the use of his money.

Just because your dollar value of a stock has gone up over a period of time does not mean that you earned a profit. The Federal Reserve over that period of time has destroyed your dollar’s buying power, yet the other hand of the State taxes you on a paper profit, even if you can buy less with the new value of the stock. As North shows, in 1966 a $1,000 investment “grew” to $14,000 in 2007. Over 41 years, the investment “grew” 1400%. It sounds good, until taxes bite you: that’s a 20% loss, so your “investment” grew 1300%. During that same time period, the dollar fell in value 650% (and probably more, but those are official government statistics), so your investment really only “grew” 200% in value — over 41 years! Is doubling your money over 41 years worthy of the risk of the stock market? I’d say not.

What is worse is if you put the dollars in your mattress. Over 41 years, your money would have gone from being worth $1000 in 1966 to being worth $71 in terms of what it could buy compared to 41 years earlier. This is the Federal Reserve in action. What a joke — and you voters have supported Democrats and Republicans for decades who love this system. It makes them powerful, it finances their friends and relatives, and it steals from the middle class slowly but surely. Even today I hear friends tell me that they’re happy because they earn $60,000 a year versus their parents earning $6,000 a year just 40 years ago. The downside is that houses are $300,000 today (if you’re lucky) versus $20,000 40 years ago, so you’re actually earning less.

Your money is hitting the toilet, without your knowledge. Your pensions may have no actual investment backing, your stock investments aren’t growing in value even if they’re going in dollars. You’re being suckered by a system that taxes 50% of your income annually at various levels of government, and you’re being suckered by a banking system that devalues your dollar by 5-10% a year without you knowing.

Stop being a sucker. Don’t support these monsters in government — not at the Federal level, not at the State level and not at the City level. We need a political party called The No Party which runs on one absolute position: no more growth in government, unless it is negative growth (firing, closing departments, selling property). Dr. Paul runs on a position to reduce the size of the Federal government, but if he wins, the State governments will grow beyond belief. While I do believe we need a President, and a Congress, like Dr. Paul, we need local governments to stay out of our lives just as much.