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Federal Reserve leaves interest rates at zero

Sep 18, 2015

In the wake of the Great Depression of 2009, the Federal Reserve lowered interest rates to zero. This is known as ZIRP (Zero Interest Rate Policy). It has remained there to this day, giving banks free money, supposedly to provide liquidity to the markets.

Normally, such a policy would heat up the economy and cause inflation. Even the huge bailouts failed to do this. This was because the money did not hit Main Street except in trickles. The vast bulk of the new money simply brought the big banks back to solvency, and the banks used most of the excess money as investments, rather than as loans to the so-called “little people.”

The government forced these “little people” (taxpayers) to bail out the rich. The result was that the rich got bailed out and got richer. The poor got unemployment, homelessness, debt, and greater poverty. If the government had instead used the money to bail out the people, the money would have hit the street, rather than being locked up in the vaults of the rich. The debt load of the people would have been reduced, and many would have paid off their “toxic loans.”

The banks would not have had so many unpayable loans on its balance sheets, and this would have bailed out the banks indirectly by helping the people. In other words, the money would have flowed up to the banks, rather than trickling down to the people.

Babylon Provides us with Debt

The system is in trouble because of too much debt. There is not enough money in the world to pay off these debts, because since the Federal Reserve Act was passed a century ago, debt is what creates money. The problem is that because loans come with interest, more money must be repaid than was created by the loan. The only way that can happen is if more and more people borrow money (at interest), because their loans create the money needed to replace the money being sucked out of Main Street as they repay their loans. It is the ultimate Ponzi scheme, which has no chance of ending amicably.

The Babylonian system is designed to make money flow upward slowly and surely. The people at the bottom struggle with shortages of money, hoping that others will borrow more money into circulation to keep the economy going. As long as loans are made available (normally through low interest rates, which make loans attractive), the economy tends to grow. Increasing the amount of debt becomes “sustainable,” which means the people are able to pay back their loans and the interest as well.

Over the years, the Federal Reserve Bank raised and lowered interest rates in order to speed up or slow down the economy. It was all about the ability to get loans and to increase or decrease the amount of money in circulation.

The Debt Implosion in 2008

But then came 2008, when suddenly the system began to implode. There was too much debt and not enough money. The Fed immediately lowered interest rates to zero in the attempt to fix the problem as it had always done in the past. This time, however, it did not really fix the problem, except for the banks and big corporations. Unemployment shot up, people became homeless, and bankruptcies increased.

The government told us this was just another temporary setback. The bailouts would work. When unemployment went down to 6%, Obama said, all would be well, and the Fed would then raise interest rates back to “normal” levels.

Well, now the unemployment rates (government figures) is down to 5.1% and are expected to drop to 4.9% shortly. Yet the Fed still has not raised interest rates. Why? Because, as Janet Yellin explained yesterday, even with trillions of dollars of new money in the past few years, there is still no inflation. She is still not satisfied with the unemployment rate. Foreign markets are still shaky and could destabilize the US economy.

Well, of course! The trillions of dollars in new money never reached Main Street. The little people are still in debt and have to reduce their spending.

Unemployment Rate vs. Labor Participation Rate

The unemployment rates are not accurate, because they include only those who are getting unemployment checks. The rates do not include the rest of the unemployed, the homeless, or the underemployed.

They should not base their decisions on how many people are getting unemployment checks, but look at the actual number of people who are working. This is called the Labor Participation Force.

http://data.bls.gov/timeseries/LNS11300000

The participation rate (as of last April) is the lowest since 1979.

http://www.huffingtonpost.com/2013/04/06/labor-force-participation-rate_n_3028135.html

The rate is still dropping and is now at 62.2%. It is now the lowest since 1977, and more than 94 million people are not working in America.

http://right180.com/2015/09/05/record-94031000-americans-not-in-labor-force-participation-rate-stuck-at-38-year-low-for-3rd-straight-month

In January 1948 — the first year the data was recorded — 88.7 percent of men, aged 20 and older, were participating in the U.S. labor force.

Real employment has dropped 20% since 1948. Of course, this includes retirees, both in 1948 and in 2015. But a more accurate measure of real employment should start with the Labor Participation Rate and subtract the number of retirees and those with disabilities. But instead, the government continues to monitor those getting unemployment checks as its so-called measure of unemployment.

It is obvious that even Janet Yellin is not impressed with the 5.1% unemployment figure, even though it is far below Obama’s 6% goal indicating a booming economy.

The Result of the Fed’s Decision

Babylonian paper money derives its value from its rate of interest. When interest rates are high, the value of the dollar goes up. When interest rates are low, the value of the dollar goes down. So the first result of Janet Yellin’s announcement yesterday, keeping interest rates at zero, was that the value of the dollar dropped. It had already gone up in previous weeks because many were anticipating an increase in interest rates. But continuing ZIRP caused the dollar to drop back down.

The second result of her announcement was that the US economy did not crash immediately. Instead, it will only continue to erode at the same slow rate until some other event pushes it over the cliff. When that happens, the Plunge Protection Team will buy stocks by the billions in the attempt to stabilize the markets. (This is known officially as the President’s working Group on Financial Markets, created by Executive Order 12631 on March 18, 1988.)

As Fed chairperson, Janet Yellin is a member of this “Team.”

The PPT is the band aid on the Babylonian system, designed to manipulate the markets so that the system can remain viable for a longer period of time. The downside is that the band aid has become larger and larger over time as the markets have become more volatile. With the recent volatility seeing thousand-point ups and downs, it is apparent that this band aid is reaching the end of its useful life.

The End of Babylon

The Babylonian economic model does not work in the long term, because there is only so much money that can be sucked out of Main Street before the economy implodes. The system is designed to destroy the middle class by increasing the higher- and lower-income categories. A large and prosperous middle class, on the other hand, is the key to a healthy society and economy. As time has passed, America has become sick in this way.

Babylon is now like overripe fruit. All political systems go through the natural life cycle from the vigor of youth to maturity to old age, and then it dies. We are seeing this today with the Babylonian system. This does not mean that the world will end. Far from it. It just means that the system will be replaced soon.

Scripture indicates that Babylon will be overthrown by “the kings from the east” (Revelation 16:12), following the precedent set in 537 B.C. when Babylon was overthrown by the Medes and Persians coming in from the east. Today these “kings” are Russia and China, who are setting up an alternative system that will eventually replace the western money system.

In 537 B.C. the kings of the east dried up the River Euphrates in order to take down Babylon. In our time the “river” is the liquidity of money and the banks of the river are now the banks themselves. As we observe world events, we can see the emergence of conditions leading to the fulfillment of this prophecy. The timing, too, is perfect, as I have shown in past articles. We are currently in a crucial three-year cycle from 2014-2017, and it seems likely that the “river” will dry up during this time.


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Category: Financial

Dr. Stephen Jones


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