Economic reports show U.S. economic growth running at a weak pace of around
2.0%, this is down from three percent as recently as February, 2012.
While there is Job growth in the U.S., it is less than new entrants to the labor
market. Approximately 150,000 more job seekers enter the labor market each month than those that retire
or leave for other reasons. Unemployment has fluctuated around 8% as the economy digests these new graduates
and young people.
Personal Income and Personal Spending continued to grow in October.
Internal Manufacturing and Purchasing Manager Index's in the U.S. are showing anemic growth with contraction
in some regions of the country.
The Federal Open Market Committee (FOMC) met in October. There was no change in
their commitment to print an additional $40 billion dollars per month until the unemployment rate
improves. This is on top of the $45 billion dollars being utilized in "Operation
Operation Twist is the program of selling short term Treasuries and buying long term
Treasuries. The Fed offers short term interest rates to banks of 0.0% to 0.25%. Banks can borrow money
from the Fed and buy short term treasuries to make a profit on the interest rate spread. This keeps short
term rates at historic lows.
This creates "artificial" demand for short term Treasuries. The Fed is
selling these short term Treasury notes and buying long term Treasuries to bring down interest rates in the
Savers are being squeezed. Every plan the Federal Reserve has is counter to the
financial health of people who have been frugal and saved money.
The Fed is buying 70% to 80% of all Treasuries issued on the long end of the
The U.S. is now monetizing our nation's debt.
This will end badly.
For savers, this is theft of the highest magnitude. The Fed has destroyed the
yield curve, making it impossible for savers to make a fair return on their liquid assets without taking on more
By forcing interest rates below what the free market would demand, the Fed enables
the government to overspend. Low Treasury interest rates encourage deficit spending because
it allows government to finance the growing debt. Higher interest rates, that paid savers a fair return
on their investment in Treasuries, would expose the true cost of deficit spending and force the
government to balance their books.
Richard Fisher, President of the Dallas Federal Reserve bank, said he does not
believe the central bank has the experience or ability to reverse course from the present expansion of its balance
Nobody does. To think the Federal Reserve is smarter than anyone else would be
misplacing your confidence. They aren't, and the 'unwinding' of their present course of action will be
painful and create more damage than if they had done nothing.
If they do not 'unwind' the money expansion scheme they have embarked on, we will
have inflation in the future that makes us look back on the 1970's with nostalgia. The Fed's actions in Sept.
2012 may have sealed the fate of the U.S. dollar as the "world's reserve currency."
Other countries have conducted international trade in dollar terms since WWII.
This has given us great freedom to overspend, over consume and under save. King Dollar could be dethroned in
the next few years, simply because our president and congress will not cut spending and the Federal Reserve enables
The FOMC committed to keeping short-term interest rates "exceptionally low"
through mid-2015. You can read the FOMC statement from Oct. 24.
Elections are next week. President Obama has already vowed to veto any bills that do not raise taxes on the
"wealthy" in negotiations on the "Fiscal Cliff." Candidate Mitt Romney has vowed to work with congress to
address the nation's problems, bring down spending, create jobs and kick start the nation's
We see continued and possibly lower interest rates for the next year or longer.
Interest rates on new contracts for deposit will be as follows:
Past President messages:
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