The Revenge of the Creature from Jekyll Island
By Robert Romano
The Creature is on the loose yet again, and this time there may be no stopping it.
Yesterday, the Consumer Price Index (CPI) inflation numbers were released, and there may be a definitive trend developing. There was a .3 percent increase in January, and now a .4 percent increase in February on the heels of a 3.3 percent increase in the energy index. Gasoline prices rose some 8.3 percent.
At the current rate, there will be between a 3.6 to 4.8 percent increase in CPI inflation this year alone. But it will be even worse than that if the numbers continue increasing on a monthly basis, and far worse if the government continues on its monstrous spending spree.
Bloomberg reports that as of February, the government bailout has totaled some $9.7 trillion: $3 trillion lent or spent from the Federal Reserve, FDIC, and the Treasury over two years, another $5.7 trillion pledged (just in case), and the other $1 trillion directly from Congress.
Overall, only $1.75 trillion has even been appropriated by Congress. The rest, Bloomberg quotes North Dakota Senator Byron Dorgan, a Democrat, saying on February 3rd, has “[gone] out the back door of this government unlike any time in the history of our country… Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”
To date, the Fed still refuses to account for some $2 trillion in loans it has made.
In G. Edward Griffin's classic, The Creature from Jekyll Island, the prophetic author outlines the history of the Federal Reserve System, and takes a critical view of its mechanisms for creating fiat dollars. The takeaway point is that the U.S. dollar is backed, not by gold, silver, or something else of tangible value, but by debt. And lots of it.
This week, the national debt for the first time ever has passed the $11 trillion mark. And through the sale of Treasuries and other government-backed notes all over the world, the U.S. keeps up with its grotesque spending practices. Soon, $11 trillion will seem relatively small as the interest adds up.
Already, Fed Chairman Ben Bernanke is predicting that economic recovery may be coming sooner rather than later, and when it does, it will only be a question of where the next asset bubble blows up.
It gets worse. As ALG News reported on March 16th, the Chinese government is “a little bit worried” about the more than $1.2 trillion in treasuries and other U.S. government-backed securities it holds. It's looking more and more like a worthless pile of paper: empty promises from a cruel Creature.
And as a Wall Street Journal editorial stated yesterday, the Chinese are “right to warn the U.S. political class that the global demand for American debt will continue only if the U.S. runs economic policies that make U.S.-dollar assets worth the risk.”
But, it gets even worse, and this may be the clincher. The Fed is now openly purchasing U.S. treasuries. This, in essence, amounts to printing money to borrow money. So, as the Fed purchases U.S. government debt—so that the nation can go further into debt—it ensures a tautological recipe for financial cataclysm.
Worst of all will be the predictable, gruesome inflation unleashed by the Creature. Prices will soar. Once it gets started, there may be no stopping it. And, if the past is prologue, the Obama Administration's response will be naught else than Bigger Government, higher spending, and rising taxes.
In short, Mr. Obama, et al, will continue to feed the Creature.
Robert Romano is the Senior Editor of ALG News Bureau.