Diary

The Debt Flood Continues as Fed Extends $1.45 Trillion Housing Bailout

The Federal Reserve has announced plans to extend beyond the end of this year a $200 billion bailout for Fannie Mae and Freddie Mac as well as a $1.25 trillion mortgage-backed debt purchase program. Additionally, they will continue to monetize debt by purchasing $300 billion in Treasuries to finance record Federal deficits.

Federal Reserve officials in their August meeting discussed extending the end-date for purchases of mortgage bonds…The central bank boosted its mortgage-backed securities and agency-debt programs in March and they are currently scheduled to end in December.

…Central bankers extended their $300 billion U.S. Treasury securities purchase program by a month in August and continue buying up to $1.25 trillion in agency mortgage-backed securities and $200 billion in the debt of agencies including Fannie Mae and Freddie Mac.

By renominating the Fed chairman, Obama has fully endorsed the central bank’s inflationary policies which are being used to help fund his own domestic agenda. Leading financial analyst Jim Rogers has termed financial actions in the US, which have been copied in Britain, “ludicrous and insane” because it will lead both countries into bankruptcy.

Speaking exclusively to Channel 4 News, Jim Rogers says politicians could be leading us into another Great Depression.

One of the world’s leading financiers has called the economic rescue plans being put forward by Gordon Brown and President Obama, ludicrous and insane.

He has been called a Wall Street legend for his investment nous. Now he sees a fundamental shift of power from the west to east. Our economics correspondent reports.

As 300,000 more jobs were lost in August, pushing the total since the start of the recession over 7 million and the unemployment rate towards 10%, it is hard to fathom that anyone could honestly argue that the policies shoved forward by the administration have improved the economy.

The U.S. labor market is still weak amid the worst recession since WWII, as employers continue to layoff more workers in order to reduce costs and battle the ongoing recession, and it seems that unemployment will continue to rise in the United States over the course of this year and might indeed top 10 percent.

The ADP employment report signaled today that private employers shed 298,000 jobs in August following the prior revised 360,000 jobs shed back in July and worse than median estimates of 250,000 lost jobs.

However, clueless liberal pundits such as Newsweek’s Daniel Gross are making the baseless claim that not only is Obama’s socialist program working but that the recession has ended!

The Great Recession, which rolled over our financial lives like one of P.J. Keating’s giant pavers, is most likely over…The Obama administration’s strategy rests on what some might call industrial policy or excessive government intervention—or even creeping socialism. I call it “the smart economy.” It means eschewing the blunt economic instruments we’ve always used and focusing resources and rhetoric on strategic sectors: renewable energy/green technology, infrastructure, broadband, and health care. It means making investments to run vital systems more intelligently and efficiently, thus creating a new infrastructure on which the private sector can work its magic.

…Those on the right say the Obama plan can’t work simply because it’s directed by government. (Every Republican in the House voted against the stimulus plan.) But even some on the left say it’s aimed disproportionately at industry. In an economy in which consumers account for 70 percent of activity, “what we need is more demand for goods and services.”

The level of nonsense in Gross’s article is almost unbelievable. Despite acknowledging that the economy is already unbalanced in that only 30% of it comes from the productive sector, while 70% feeds off of that part through consumption, the journalist calls for the lecherous portion to increase! To fund this expansion, he proposes to suck more wealth out of private industry and that literally by magic this will somehow cause a recovery!

He also apparently has no idea that the definition of a recession is a decline in gross domestic product, which has continued to fall at the highest rate in the post-war era. This can only be turned around through an increase in production. Socialist giveaways funded by debt will, by their very nature, destroy the economy.

The economy contracted four quarters in a row for the first time since the Great Depression of the 1930s. Compared with a year ago, real GDP is down 3.9%, the largest year-over-year decline in the post-war era.

…The news on wages doesn’t bode well for a sustained increase in spending. Including downward revisions to bonus income, total income from wages and salary has fallen 4.7% in the past four quarters — the largest decline on record, dating back to 1948.

In a recent media appearance, investment adviser Peter Schiff faced off with the hapless editor from Newsweek, Daniel Gross, to set the record straight.

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Part 2

It was suggested last week in Digital Journal that Peter Schiff, who has raised nearly $1 million in his campaign for Senate in Connecticut (www.schiffforsenate.com), could emerge next year as a real leader by returning Republicans in the Northeast to their fiscally conservative roots. The message of spending restraint sent to Washington would be particularly potent by knocking off the sitting Democrat chairman of the Senate Banking committee, Chris Dodd, in a state which lies between the liberal bastions of New York and Massachusetts.

A recent survey showed that Democratic approval rating is down but Republican approval rating has stayed consistently flat since the 2008 Presidential and Congressional elections. This is the time where the Republicans need a decisive and bold leader.

Peter Schiff, the [potential] Republican Senate candidate for the Connecticut seat in 2010, could be the perfect fit. Peter Schiff believes in limited government, sound money and Austrian Theory economics, which is the platform the Republican Party used to promote…Most important of all, he understands economics and foresaw this global financial collapse for several years when the majority in Washington continued to tell their constituents that everything was fine.