The FED is Canceling National Debt

If you have not heard of the news already, thousands of Corinthian College students are looking at having their college debt forgiven by the U.S. Department of Education. The college is accused of misrepresenting themselves to their student bodies and government for an extra buck. A criminal probe by the FBI is currently pending.

A more interesting development is that in recent years the Federal Reserve Bank ("FRB" or affectionally known as "The FED") has been "suspending" (or canceling) the national debt of the United States. Of course, the FED charges higher amounts of interest on loans issued to the public and they have loaned many trillions of dollars. What the FED has been doing is purchasing outstanding government bonds and paying a vast majority of its interest back to the U.S. Treasury effectively "suspending" debt owed to the FED by the United States.

The FED has dramatically increased this business model since the year 2008 - coincidentally, the same year President Barack Obama was elected. Because of the dramatic increase in this policy, the FED is only making a profit of a few billion annually. While proud ideologues of the democratic faith might be staging the idea that the Obama Administration is spearheading the reduction of the national deficit, this is factually false. This not an attack on democrats - this is to prevent foregone and confused conclusions. While the deficit is reducing under Obama's watch, the FED appears to be conducting business that just so happens to be effectively "writing off" national debt under Obama's watch.

Moreover, the FED is still printing trillions of dollars. While they print trillions, the value of the dollar decreases - simple economics. With the value of the dollar decreasing, the market price of goods naturally increase. At present, the FED is literally saving the hide of an entire United States however temporary it might be.

What is still looming over our heads is the Stock Market. Never, in the history of U.S. capitalism, has it been as high as it is now. That is both good and bad news. The good news is, some people are making good money since they got in during the 2008 crisis when stocks plummeted to unprecedented lows. The bad news is that baby boomers born in 1946 are coming of age and will become legally obligated to cash out their broker-recommended and glorified 401(k) retirement plans beginning January 1, 2016 if not before then as they turn 70 years. This will inevitably precipitate into the largest stock market crash the world has ever seen and the faithful will lose most everything.

Everybody I know who had 401(k) retirement plans before 2008 experienced a substantial loss in value thereafter, retirees returned to the work force, and many younger generations went back to school to learn to better repeat the practice of their fathers. What are these same people who lost then doing now? Depositing even more or "grandfathering" ("rolling over") into a Roth Individual Retirement Account (or "IRA") for more individual leverage. What happens to their money now? Most will continue to put their money towards the same mutual funds as their old 401(k) and call it "smart."

My next article will address this problem and name some solutions the financially rich are pursuing at this time.

Sources:

http://news.yahoo.com/u-wipe-more-corinthian-colleges-student-debt-234840715--finance.html