Somewhere in the 80’s or perhaps the early 90’s, the American dream changed. The American dream became to own a house. Before that time, it had been about the future. I was raised to believe that if you were smart and worked hard, you could build a better future for yourself. Also, I have always wanted to believe that whatever future I could build, my children would have a brighter future than me. I no longer believe this.
Many of my friends and relatives childrens are becoming of age to go to college or enter the work force. It makes me sad because they do not have anywhere near the opportunities I had when leaving college. There were literally a line of companies that wanted to interview me. I was 20 years old flying throughout the entire country for free trying to select the best company for me. It made me feel great about myself and my future. Today’s college graduates are lucky to get a job at all much less get wined and dined by the most attractive companies in the country.
So how did we get here? How did such a bright future turn so bleak in the course of one generation? It has taken me a while but I have figured out the answer. It is the Fed. The Fed has ruined the future. Let me explain how.
The core of the issue is ZERO percent interest rates. What are interest rates? What does that mean? Interest rates are generally thought to be the time value of money. So therefore, if you want to borrow $100 today and interest rates are 10%, you must pay back $110 one year from now. More importantly, if you pay back in two years, you now owe $121. Basically, the longer you wait to pay, the more you owe which in general is not good.
How are interest rates determined? Interest rates historically have been considered a price between the supply and demand of money. Back in the gold old days, if a lot of people were saving money in their bank accounts, this would drive interest rates down. Conversely, if a lot of people wanted to borrow money, that would drive interest rates up. This entire equation has been broken in the last 10 years but one retard named Alan Greenspan who was the chairman of the Fed under Ronald Reagan, George H. Bush, Bill Clinton, and George W. Bush.
During the end of Clinton’s term, and throughout all of George W. Bush’s term, Greenspan consistently pushed interest rates down. It’s not hard to do. He just snapped his fingers and more money flowed into the economy and interest rates are pushed down. This raises many questions about our country and our society. What gives this asshole the right to just print money out of thin air? What is the impact on us citizens when he does this shit?
Here is the impact. Imagine if someone could counterfeit money in our country. Imagine if they could print and spend one million dollars each and every day. What would be the impact on all of us? The reality is that it would not impact us much at all. The counterfeiter is devaluing all the people that hold dollars in the world. Given that there are so many dollars in world wide circulation, and no one would notice the impact of one million dollars a day.
That’s what Alan Greenspan was hoping for. That we would not notice! Instead what we notice is that money is cheap. Rather than save for something, it is better to borrow. Where are we borrowing from? The future. And so we have. Let’s be clear. This zero percent interest rate has entrenched itself in every part of our society and country. Our citizens are in debt like no other country in the world. Our state and local governments are now flowing in debt. And of course as we read in the news, our federal government is the poster child for fiscal malfeasance. The ONLY reason that all of this has happened is because money is too cheap. Way too cheap.
Circling back to the theme of interest rates. Since interest rates are supposed to reflect the equilibrium between supply and demand of money, what does zero percent interest rates mean? It can only mean one thing. There is infinite supply of money. As long as their is a person, state, city, county or country that wanted money, we would give them the money. It did not matter whether they needed the money. It did not matter if they could ever pay back the money, we would lend it to them.
NONE of the financial tragedy that has happened in the US would have happened if interest rates were not so low if Greenspan had not gotten our nation addicted to cheap money. It was Greenspan’s responsibility to regulate and deter this propensity of society, instead he encouraged it.
All of this leads us to one unavoidable conclusion. Zero percent interest rates mortgages our future. It mortgages the future of our cities, counties, states and our country. But more important than that, it mortgages the future of our children. As long as we have zero percent interest rates, our children will NEVER have a better life than us.
There is only one solution to this entire mess. The Fed must STOP intervening in the market place and let interest rates rise to an equilibrium between supply and demand. I am going on record now and state with 100% certainty that it will happen. In my view, it should happen sooner rather than later, but it will not. The reason is that allowing interest rates to rise will significantly contract our economy. Unemployment will go up not down. 401K’s will decline in value. The Dow Jones will fall like a rock. So therefore no one even discusses this issue.
Think about it. The root cause of our entire mess is cheap money from the Fed which bankrupts our future. Do we hear any candidate Republican or Democrat discussing this issue? Aside from Ron Paul, all the other candidates run from this issue. They try to blame our issues on everything but the Fed. Worse yet, even if a candidate believed that the Fed was the problem, our government is powerless to fix things since the Fed is actually not part of our government. The Fed can basically do whatever it wants, and so it does.
America is going through a hard time right now, but if we want to fix our country, we need to let interest rates rise. If we do so, then it will get really bad, but we can secure our long term future as a country and also for our children. The problem is that we live in a democracy and soon as there is a little pain, our democracy will vote away the pain. We are stuck at zero percent interest rates. And QED. Our future has no value. Sorry.