Stealth Wealth Redistribution

July 7, 2009 | Filed Under Anti-Americanism, Barack Obama, Budget, Business, Communism, Dan Scott, Democrats/Leftists, Economy/Finances, Government, Corruption, Journalism, Liberals, Media Bias, President, Socialism, Taxes |

-By Dan Scott

A number of warnings have gone out about the printing of money. The Federal Reserve has been injecting money into the economy by buying US Treasuries in an attempt to keep down interest rates. Their efforts thus far are beginning to fail as bond rates are starting to climb. As we all know, the US Treasury has been forced to issue ever increasing amounts of bonds to finance Congress’s irresponsible spending. The chilling part is the bulk of the Stimulus money has yet to be spent meaning the US Treasury will have to significantly ramp up its bond sales to finance government operations. That on top of the trillion dollar budget deficit this year, next year and years to come.

Given the massive amounts of debt issuance, one must wonder if we are about to become another Zimbabwe experiencing hyperinflation. While the US Treasury, who is tasked to raise funds for government operations, doesn’t have the authority to say no to Congress, the Federal Reserve does. At what point is it the Federal Reserve’s responsibility to say to Congress we can’t print anymore money regardless of your desire to spend it? If the Federal Reserve did so, interest rates would shoot up due to the US Treasury attempting to meet the spending levels. Recently, I have begun to rethink the threat of hyperinflation due to all the wealth destruction over the past year.

Looking over the estimated losses to the US here are some facts:

US-originated assets’ total loan losses and securities writedowns are expected to reach about $3.6 trillion. The US banking sector is exposed to half of this figure, or about $1.8 trillion (i.e. $1.1 trillion loan losses + $700bn writedowns).

I speculate that the Fed could in theory could print $3.6 trillion in bank notes with zero inflation based on the wealth destroyed because it would be replacing that which was destroyed. Lets consider for a moment an example demonstrating this idea. If a house burns down, the value of that house is lost. Now if a home owner properly insures their house in case of a disaster and that house burns down, the insurance company pays for a new house to be built. However, that money doesn’t come out of thin air, it raises money for the rebuilding of the house by selling investments. The economy loses investment capital to pay for the rebuilding of the house, in other words the loss is shifted from the homeowner to the market, but a reduction of wealth still occurs. If this were not so, then the Broken Window Fallacy would not be a fallacy. Why is that? Because at the beginning when the house was initially built, someone raised the money to build the house in the first place by using existing wealth. Furthermore, wealth is created when people value what is built more than the amount of money it took to build it.

Let’s take that example a little further, instead of the insurance company paying to rebuild the house, the Fed gives the home owner freshly printed money instead to pay for the rebuilding. In essence wealth was restored by the rebuilding of the house because the builders accepted the freshly printed money as they would any other money. Now let’s drive that example a little further, let’s say the home owner didn’t have any insurance and the Fed didn’t give them any money to rebuild the house. The net asset base of the economy would drop because the home wasn’t rebuilt. This means the Federal Reserve in theory could print an amount of money equal to the value of the house and then buy US Treasuries without affecting the net assets of the economy. Whether by design or incompetence the Fed could print $3.6 trillion in effect would be a wealth transfer via a stealth tax upon society.

Is it really in the liberal’s interest for the economy to recover? Wealth redistribution by its very nature means taking wealth from others to give to those who have less, it does not include the concept of creating wealth. If wealth redistribution is their goal then in order to accomplish that goal what better way to level the wealth inequality than to cause those at the top to loose what they have and the Federal Reserve print money replacing that loss for distribution via government hand outs? What better way to reduce wealth than to raise energy prices via cap (carbon) and trade pushing more people out of work thus causing more mortgage defaults which causes losses to all bank investors? The ten trillion planned in deficit spending (over and above current taxation) by Obama over the next ten years is the cost of the liberal’s Equality of Outcome by leveling the wealth of all American’s whose net assets are above the poverty line. Based on this I speculate that another $6.4 trillion will be drained from the nation’s assets. The point of Equality of Outcome is to impoverish society to grab power under the guise of superior management. The planned spending of ten trillion would be inflationary if it were not for all the wealth that has been lost or if the economy were never allowed to recover.

I must admit, the plan is ingenious on it’s face. The public never realized the liberals stole their life savings and investors money, never realized who the architects of the plan were and never connected the dots to see where the money came from the liberals are handing out as bribes to new victims of their scam to recruit them as supporters. Every dollar the Fed prints up (as a replacement) is a dollar stolen from the citizenry. In sum, the liberal plan of redistribution of wealth has accomplished a supreme act of prestidigitation from your wallet to their hands.

———-
Dan Scott calls himself a “Member of the Global Capitalist Cabal preaching Capitalism and personal responsibility as the economic solution to world poverty.” He is also a member of the 14th Amendment Society — victimhood is a liberal code word for denying the civil rights of others. He is also a proud member of the Global Warming Denier Cabal, insisting that facts not agendas determine the truth.

Dan can be seen on the web at http://www.geocities.com/fightbigotry2002/ as well as http://www.geocities.com/dscott8186/saidwebpage.htm, And can be reached for comments at dscott8186@yahoo.com.

Fair Use: This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. I am making such material available in my efforts to advance understanding of political, human rights, economic, democracy, and social justice issues, etc. I believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research, educational, or satirical purposes. If you wish to use copyrighted material from this site/blog for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Bookmark to: