Insightful comments from Paul Craig Roberts.

Paul C Roberts was Assistant Secretary of the Treasury for Economic Policy under Reagan from 1975-1978.  Clearly he used to be an insider in the government fiat currency game.  Clearly he knows how the scams work and how the people are befuddled by all of the fancy talk.  But he has been a whistle blower for many years now, trying to explain to those of us who will listen, those of us who will suspend disbelief for just a few moments, what a total scam the federal reserve is and how it screws the American people.

Today's article is very interesting on the subject of how the federal reserve is manipulating interest rates to the down side.  As a simple background refresher, treasuries are like anything else in the economy in terms of supply and demand.  The US government keeps supplying more and more of them as it increases the US debt.  It counts on buyers scooping all of them up and it hopes they do so at a very low interest rate.  In other words, low interest rates are not a function of decree by the federal reserve but a consequence of buying demand.  The low interest rate is not only important to the government's borrowing operations (lower rates mean that you can take out more debt and still afford to make the debt payment).  More importantly, however, is that low rates make it easier for individuals to borrow (for housing) and for corporations to borrow as well.  In fact, low interest rates are now required in order to enable home buying at current prices by individuals.

Low interest rates convince people to take on more debt because they can make the monthly payment.  This encourages them to buy larger, more expensive houses (or to simply bid up shoe box sized homes in CA, WA and also in NY and other east coast locations.  It never fails to boggle my mind to see people tell the TV show realtor in NH or other overpriced locations that their housing budget is $600k or $800k.  Who can afford that??  Only those who are rolling the proceeds from their prior homes (which rose in price due to money supply expansion) and who then add more debt on top of it.  $600k will buy you 3 very nice single family detached dwellings in Texas on a golf course in a fairly new community.

Because of the monster size of the real estate market, it will be a disaster at this point if interest rates go up, EVER.  Why?  Because people will have to cut the housing price in half (or more) so that buyers will be able to afford the monthly PITI. But nobody has much equity in their home so they instead will just default and the banks will take the hit.

And therein lies the real problem.  The federal reserve is just a private bank to which we have been stupid enough to give over control our money supply.  If the economy collapses due to imploding credit, the federal reserve workers will be lucky to avoid being taken out into the street and executed by mobs.  This is not an exaggeration.  When people who are taught to believe that money is everything end up losing all their money, they think they have nothing left to live for.  Why else would bankers be walking off of rooftops lately?  Bottom line: the federal reserve will do whatever they can in order to keep the system from imploding.  What they really need is very stupid buyers who are willing to throw tons of money at US debt based consumption.  This flood of buyers will receive very low interest rates for their investment in our debt which makes it a stupid deal for them but without those buyers the interest rates will rise.

So what to do?  Well, that is what Dr. Robert's article is about.  Using documents from the US government itself, he has found that small economies are somehow buying ridiculous amounts of US debt.  Amounts that make no sense not only from an investment standpoint but also from a math standpoint.  It's the kind of thing that government DEA agents flag on when they see this kind of behavior from an individual.  They ask, where did this person get all the money to buy that new car and new swimming pool and to take those 3 high end vacations, etc.

So if this logic works to catch individuals, then why is it not valid to catch the federal reserve cheating too.  Dr. Roberts wrote, "From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.".  OK so think about it. In 1/4 of a year they spent 30% of their GDP not on food and clothing and housing but on US debt that pays almost no interest.  If they keep this up for a year they will have spent 120% of their entire GDP on US treasuries.  This is a complete joke.  Even if they had the money they would not put it all into one asset class and as Dr. Roberts points out in the article, they don't have that much money.

His conclusion: the federal reserve is illegally laundering money through small countries.  This way the fed can hide a good deal of the intervention that is required in order to manipulate interest rates to such low levels.  IMO the feds probably just give the cash to these countries in order to make the purchases.  They might as well because, being fake money, nobody has to work to earn it.  It is simply conjured up from thin air.  So Belgium (Illuminati central) and other small countries are conspiring with the federal reserve in order to keep the debt Ponzi running.  Who knows how long the herd will allow it to continue.  The only thing we do know is that the answer will not be "forever".