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Title: Mcgowanjm Wire 2012
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Published: Feb 26, 2012
Author: Various
Post Date: 2012-02-26 09:15:13 by A K A Stone
Keywords: None
Views: 1423999
Comments: 2390
Mcgowinjm Wire Service.
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#1743. To: A K A Stone (#0)
www.zerohedge.com/news/gu...everyone+drops+to+zero%29 "At first the Fed used open market operations illegally. It could get away with it because of the connivance of the Treasury in ‘forgetting’ to collect the penalty. The conspiracy created a fait accompli and, in the end, Congress was forced to legalize the corrosive practice retroactively in 1935 when it amended the Federal Reserve Act. A bond issuer is short a bond. Unlike a homeowner who takes out a mortgage on his house, a bond issuer cannot simply “refinance”. If it wants to pay off the debt, it must buy the bonds back in the market, at the current market price. Let’s repeat that. Anyone who issues a bond is short a security and that security can go up in price as well as go down in price. The newly invented monetary policy of open market operations is responsible for much of the deflationary damage inflicted on the world economy during the Great Depression of the 1930’s. It started an avalanche of falling interest rates that soon went out of control. Falling interest rates destroy capital as they increase the burden of debt contracted earlier at higher rates. Perfectly sound businesses fail if their debt burden, through no fault of theirs, exceeds the profitability of deployed capital. The whole process was most insidious. Entrepreneurs did not know what hit them. From one day to the next they found themselves uncompetitive as competitors financed their business at lower rates. They had to lay off their employees. They went bankrupt in droves. Wanton destruction of capital was the main cause of deflation and the Great Depression in the 1930’s." The bottom 50 percent of American households hold just 1.1 percent of the nation’s wealth, after its share declined steadily following the financial crisis, a report from the nonpartisan Congressional Research Service found. The richest one percent, meanwhile, hold 34.5 percent of the wealth, as the chart below shows. The top 10 percent’s share of wealth has risen over the last two decades, the report found, but it has fallen for households in every group below that."
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