Where the money is....

When Willie Sutton bank robber was asked why he robbed banks he said "Because that is where the money is". How things have changed.

The banker's Bank the Federal Reserve is now robbing savers with near zero interest rates. Why? Because that is where the money is. It is a hidden tax. No law was passed. Still you are having the your money stolen through near zero interest rates to restore bank's balance sheets. If you had $300,000 in an IRA (or 401k) earning 5% in 2007 ($18,000 a year with nearly no risk) you are lucky if you earn half that today. That is a $9,000 or more of hidden taxes.

I hope to expose these types of actions and others by the FED and government. Boomers need to be vigilant - because their savings is where the money is. I will also delve into other areas of finances of interest to Boomers.

Sunday, April 3, 2011

What if EXXON had earned $81.7 billion last year?

Do you remember the last time oil prices spiked and Exxon earned about $30 billion.  It was the talk of the media as they demonized Exxon.  They were accused of price gouging.  There was talk that there should be an excess profits tax.  What if Exxon had earned more than twice as much ($81.7 billion)?  As an Exxon stockholder you would probably like that.  As a gasoline consumer you probably wouldn't.

Now if I told you there was an organization that earned that much last year - could you name that organization.  Probably not - there has been little mention of it by the media.  Furthermore , this organization doesn't fill your gas tank, doesn't stock your food pantry, doesn't manufacture the latest electronic gizmo.  It supplies nothing you consume.  Yet, you paid and paid dearly to create these earnings.

I bet you thought the FED was a non-profit organization.  Well, it isn't.  As an operating entity it provides many services to banks.  A large percent of the transfers of money go through the Federal Reserve system (3 very large computer systems located in New Jersey,  Richmond  (Va), and Dallas (Tx)).  The Federal  Reserve charges banks for each of these transactions involving hundreds of billions of dollars every day.  So even as an operating entity the Federal Reserve makes money. 

By controlling the interest rates the Federal Reserve has turned a sow's ears into silk.  Many of the assets that the Federal reserve took on during the financial crisis for pennies on the dollar are now being sold at double or triple what the Federal Reserve paid for them - all because low interest rates and increased liquidity has restored some value to these assets.   And who paid the price for all this?  If you have savings (401k, IRA, pension, CDs) you did because insanely low interest rates robbed you (hidden tax - see prior posts on this)  of the return you should be receiving on those savings.

So now we see the extent of this hidden tax.  We don't get a quarterly report from the FED, but by law they must turn over to the US Treasury (remember - these are taxes) most of whatever they earned each year.  So we know that in 2009 the FED turned over $47.4 billion to the treasury.  This is about 1.5 times what Exxon earned in their best year.  Yet, the media is silent.  In 2010 the FED returned over $79.3 billion (they earned  $81.7 billion) or about 2.5 of what Exxon earned in their best year.  Still nothing from the media.  In short The FED averaged about double what Exxon earned in their best year the past 2 years.  Now you know.

So what do you get for all your largess to the Federal Reserve,  You get sub par returns on your savings.  You get higher prices.  You get a devalued dollar.  Sounds like a bargain at any price.  As a bonus you probably get stagflation later (because the velocity of money - how quickly a dollar changes hands - is anemic).

Don't you ever believe the FED is independent of the government.  It isn't.  It is a tax collector for the government.  Furthermore, its very existence is probably unconstitutional.  The Constitution empowers the government to coin money not some agency like the FED.  But since when has the banksters and power brokers cared about a minor thing like being constitutional?



Also see the Federal Reserve statistical release year 2010 'Flow of Funds Accounts of the United States' page 118 ( http://www.federalreserve.gov/releases/z1/current/z1.pdf )

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