Monopoly Banking

The Fed­eral Reserve has run out of ammu­ni­tion. For all the money that the Fed has thrown into our finan­cial system, the economy actu­ally shrunk in the fourth quarter of 2012. Unem­ploy­ment is also ticking up again.

Con­trary to pop­ular belief, the Fed does not have absolute con­trol over interest rates. It often acts in hind­sight, adjusting its internal rates to market forces, and such has been the case during the long term bear market in interest rates. What the Fed does do, how­ever, is dis­lo­cate free mar­kets in order to pro­vide pri­vate money-making oppor­tu­ni­ties to its members.

This is seen in recent years by the blow-up of the sub-prime mort­gage industry and the mul­ti­tril­lion dollar bailout of large finan­cial insti­tu­tions. If the Fed had been absent during this period, these things never would have happened.

The Fed’s actual agenda has been to pro­tect its pri­mary con­stituents – the large U.S. and global banks. It’s feigned atten­tion to the Amer­ican economy, workers and cit­i­zens is a phony as a three-dollar bill. The largest U.S. banks, all of which hold shares in the Fed include,

• JP Morgan Chase
• Bank of America
• Cit­i­group
• Wells Fargo
• Goldman Sachs
• Morgan Stanley

How do you sup­pose they got to be the largest banks in the country? By free-market com­pe­ti­tion? Hardly.

John D. Rock­e­feller, the early patri­arch of the Rock­e­feller for­tune and founder of Stan­dard Oil, was an unabashed monop­o­list who famously stated, “Com­pe­ti­tion is a sin.”

The Rock­e­feller family has con­trolled the Chase-related line of banking since the 1920′s. When Chase Bank merged with Equi­table Trust  (John D. Rock­e­feller, Jr. was the largest share­holder) in 1930, it became the largest bank in the world. It is STILL the largest bank in the U.S. and the ninth largest in the world!

The essence of monopoly cap­i­talism is to always game the system in their favor while dis­crim­i­nating against com­peti­tors. These banks, and espe­cially JPMor­gan­Chase have turned gov­ern­ment manip­u­la­tion into an art form. Communist/Marxist Lenin was the first person to define “state monopoly cap­i­talism” as the suc­cessor to simple monopoly cap­i­talism. According to Marxist theory, state monopoly cap­i­talism is the final his­tor­ical stage of capitalism.

Per­haps this is why the global banks and cor­po­ra­tions are pushing so hard for a new eco­nomic model that they them­selves call a “green economy.” Under the cover of green lies Tech­noc­racy, which I have written about for sev­eral years now.

Interest Rates Headed Up

The long-term bull market in 30 year Trea­suries is over. As bond prices have recently moved lower, we can also say that the bear market in interest rates is over as well – it’s the flip side of the same coin.

The July 2012 low of 2.44 per­cent should stand as the bottom of this entire trend, with rates soon moving above 4 per­cent. Over the next five years, rates should move back up into the 6 – 8 per­cent range.

Someone might say, “Who cares?” Well, elite bankers do not make a market, they only manip­u­late, exac­er­bate, exag­gerate and dis­lo­cate already existing mar­kets. The Fed’s response to rising rates, and the resulting economic/financial effect will be played by the elite banks to fur­ther con­sol­i­date their monop­o­listic posi­tion and max­i­mize their profits. Most of those profits will be at the expense of the middle class and the Amer­ican taxpayer.

When the Fed shuts off the mon­e­tary spigot, and it is a cer­tainty that they will at some time in the next 12 – 18 months, the eco­nomic impact will be imme­di­ately felt. The dollar will rise in value in rela­tion to other cur­ren­cies in the world, defla­tion will increase its grip, gov­ern­ment spending will be cur­tailed, interest rates will rise dra­mat­i­cally, and stocks will fall.

If you were part of this elite, and knew these things were going to happen and when the trigger would be pulled, do you think you could make some money off the news? Of course you could. Buy dol­lars, short stocks and futures, sell long-term bonds, sell real estate, etc. I should men­tion that this is exactly what so-called “smart money” is doing right now – accu­mu­lating dol­lars, dumping stocks, bonds and real estate.

Con­sid­ering the chart above, think about the finan­cial damage that was done to America during a period of falling interest rates. There was the dot com bubble and the first leg of the great bear market starting in 2000. There was the sub-prime melt­down and real estate crash of 2006 onward. The stock market crashed again in 2007 – 2009. Busi­ness and per­sonal bank­rupt­cies soared. Unem­ploy­ment soared. [Note: during the first four years of Obama, some 8.5 mil­lion workers have dropped out of the labor force and are not counted in cur­rent unem­ploy­ment sta­tis­tics.] The national debt, trade deficit and budget deficit are at record levels.

All of this hap­pened with falling interest rates. What do you think will happen when interest rates turn up? Will it bring pros­perity or poverty? I am sad to say, poverty.

As small investors are finally coming back into the stock market, they are investing at a time when insti­tu­tional investors are dumping their stocks. They are buying bonds just when smart money is selling. (see Insiders Bailing on Dow 14000) They are buying homes again with cheap money, often bet­ting on vari­able rate mort­gages because they think interest rates will con­tinue to fall. In short, the middle class public is 180 degrees out of step.

Retire­ment accounts and trust funds that are heavily com­mitted to long-term bonds will be ham­mered as the prin­cipal value of their invest­ments crash. A $1,000 30-year bond yielding 3 per­cent today will be worth only $500 when yields go up to 6 per­cent.  In other words, a dou­bling of the rate cuts your port­folio in half.

Home owners with vari­able rate mort­gages will be “reset” at higher rates, dri­ving their mort­gage pay­ments up. Interest only on a $200,000 mort­gage at 4 per­cent is $8,000 per year. At 6 per­cent, it jumps to $12,000, and at 7 per­cent, it hits $14,000. The result will be the same as it was in 2007 – mass fore­clo­sures and fur­ther real estate deterioration.

It is not a bright pic­ture. Facing the reality of it is worth the time and effort, because you might avoid some very painful mis­takes, and per­haps even profit from it.

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