A while back I wrote the following essay to help illustrate how the Federal Reserve central bank creates The Currency Scam:
What if Dollars Were Replaced by Strawberries?
The “Federal Strawberry Reserve” would immediately spring to action–a cartel of the 12 largest Strawberry producers. They would corner the currency market and threaten lawmakers with the possibility of no Strawberries, and that could shut down trade and potentially ruin the economy. Unless… the government partners with ONLY them, to ensure the free flow of Strawberries, forever. Plus, the FSR promises to keep Strawberries in reserve, guaranteeing that world Strawberry credit markets will never want for Strawberries during droughts or downturns in “the Strawberry cycle.”
In the event of such a drought, the FSR will loan Strawberry stock at 2.5% per new Strawberry, plus 3% annually. That tab will be reflected in the "National Strawberry Debt" payable to the private, mostly foreign-owned FSR corporation, also known as “The Fed.”
Interest on that debt would come due each year, payable to the Fed before any other national obligation, since the Federal Strawberry Reserve is far more important than the nation itself. Obviously, without (our) Strawberries, the nation would collapse.
To sweeten the deal, whenever the government needs spending Strawberries, the FSR promises to buy all the bonds they cannot sell using fresh, juicy Strawberries from the reserve, giving government officials an unlimited supply of spending money without the need to raise taxes. Taxation is a political burden of the past! That service, of course, will be part and parcel of the National Strawberry Debt. Not to worry! You’ll always be able to out-grow that debt, because you’ll always have an unlimited supply of fresh, extra juicy Strawberries to stimulate the economy.
By the way, don’t even think about producing your own Strawberries. We have a stable of lobbyists with millions of Strawberries, payable to any congressman who stops such a bill. And if you don’t like that, we have billions of Strawberries, payable our stable of assassins.
After the deal is done…
The FSR “accidentally” grows 10 trillion extra strawberries. Oops, sorry, we’ve devalued the Strawberry. Not to worry, you are all getting RICH!!! Your tiny little homes are now worth hundreds of thousands, if not millions of Strawberries. Go ahead and take that crazy bank loan, committing you to repay millions upon millions of Strawberries, Strawberries are everywhere so who cares? You are all rich! RICH! Strawberries are falling from Heaven!
After the debt hooks sink in, the FSR plows under the Strawberry crop. Sorry folks, no more Strawberries.
Strawberries are suddenly rare. Soon, there are almost none at all. Where did all the Strawberries go, the FSR chairman wonders aloud? Darn, he says, I loved Strawberries as much as you did. Oh well, congressman, it seems there are only a few Strawberries left in circulation, and hardly anyone can get Strawberry financing. Home prices, in Strawberries, have tanked.
That’s not the bad news. The bad news is you owe the FSR 10 trillion Strawberries, plus interest in perpetuity, and all your stuff combined is hardly worth one, single, Strawberry.
Lucky for you, we have a "stimulus" plan! We’ll loan you 5T more Strawberries from our reserves, if you agree to pay us back with interest. Great. Increase your debt, accordingly. Here are your 5T berries at 500% the short term Treasury rate, maybe this will get your silly banks lending Strawberries again.
What’s that? No one wants to risk borrowing the banks’ new Strawberries at 500% the going rate? Well, it's certainly not our fault your banks are hoarding our berries. They are trying to fix their balance sheets, instead. Of all the nerve, we even cut them a great deal over last year’s Strawberry rate.
Ok, we’ll make you an even better deal. We’ll take all your banks’ assets, instead. After all, they are just about worthless, hardly worth the Strawberries they’re traded in. We’ll even loan you the Strawberries to pay us.
So, now that you are nose-deep in Strawberry Debt, you better get to work. You owe us 20 trillion Strawberries plus fees and debt service at last year’s wildly inflated interest rates. It is going to take decades to pay back the FSR for saving you. Hop to it!
Hey, great news! Look! Out there in the Strawberry fields ...your skinny, sweat-drained, thirsty children have produced a brand new Strawberry!
Things are looking up.
Monday, January 5, 2009
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this is a wonderful metaphor i like to learn
ReplyDeleteThe 500% interest rate to which you refer, where did you get that? And, can you explain briefly the mechanisams in action driving that number?
ReplyDeleteBack when I wrote this, the Fed discount rate was about 500% the 3 Month US Treasury rate, so I used that as an example.
ReplyDeleteThe 3M Treasury is the benchmark for the maximum inflationary Fed rate. The Fed rate and the 3 Month treasury rate traditionally overlap near exactly (Fed rate slightly lower to inflate/bait, Fed rate slight higher to deflate/confiscate).
The reason the two rates historically correspond is that the Fed lends for 60 days or less, and there will be little borrowing above the market-driven rate at which borrowers opt to protect capital.
The Fed knows that banks will be unable to substantially lend at a markup above the 3 Moth treasury rate, but they defend their high rate whenever they wish to cause deflation (when they want to seize assets).
Think of the Fed rate as a tool to water or harvest the "Money-crop" from the masses:
Fed rate lower than 3M T = Fed watering crops
Fed rate higher than 3M T = Fed harvesting crops
In general, you want to buy stocks/real estate/assets when the Fed is in watering mode, i.e. their stance is inflationary, which puts the wind at your back instead of in your face. When they are above the 3M T, you want to stockpile cash, as asset prices fall around you.
It would be nice if we could invest rationally, instead of striving to be in sync with a commercial banking cartel's stranglehold over our currency supply, right?
looking at http://bit.ly/V0QLc, it doesn't look like "Fed rate lower than 3M T = Fed watering crops" situation has happened all that often since 1989, even during inflationary periods. how does this fit with your theory?
ReplyDelete