Just When You Thought Your Money Was Safe

It has only happened once before where practically a whole generation felt the real urgency to keep whatever money they possessed away from the very institutions that are supposed to safeguard their savings. In the 1930’s so many individuals purposely held on on to what little they had because it was the financial institutions that failed to secure the peoples money and reinvest that savings for the purpose of generating more profits [interest on savings accounts] for the public and for the banks themselves. Since then Banks as well as stock brokers and other financial institutions that have set up retirement accounts like IRA’s, Roth IRA’s, and companies 401K accounts where they all have hidden fees,”maintenance fees” and other miscellaneous fees associated with personal saving accounts. These fees drastically reduce the total value of your money. When people put their hard earned money into retirement accounts they rely on that savings to grow. We’d all like to think that retirement savings would at least keep pace with the cost of living so that when a person does retire there will be sufficient funds to cover day to day expenses as well as any unexpected emergencies. Not so today. Social Security is now on the chopping block because of what has transpired in our economy. No longer are social security recipients going to receive any cost of living increases and in fact due to the ever increasing cost of living the publics social security benefits will actually decrease in value. Unconscionable in this day and age where so many United States citizens now rely on social security as there only source of income.

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The similarities of the 1930’s and today are very striking in the way the financial crisis in 1929 came about and the way the financial meltdown in 2008 through 2009 occurred. Both are very reminiscent of the same type of behavior that prevailed in our financial institutions, the stock market, and the Federal Reserve. The chain of events leading to both crisis is almost a duplication of behavior of corporate America and the government. One of the key factors that propelled the United States into such an economic nightmare in 1930 according to the Council of Economic Advisors was the Smoot Hawley Tariff Act. By the way, it was sponsored and passed by the Republican’s. This piece of legislation alone was probably one of the most damaging pieces of legislation ever signed in the United States up until that time. The act was passed in June of 1930 and increased tariffs on goods imported into the United States by more than 50%. This single piece of legislation only exasperated the ongoing deterioration of our economy.  Enacting the tariff was exactly the wrong thing to do and about 1,000 economists signed a petition begging Congress not to pass it. But, like today government continues to ignore the publics concerns and passes acts and mandates contrary to the majority of the publics wishes, Eventually, 60 other countries passed similar retaliatory tariffs in response. This led to global inflation.  Other contributing factors incurred which contributed to the initial cause of the Depression and deepened the economic abyss that the United states fell into was that the Federal Reserve made some very bad decisions. Whether it was by design or not the only people that came out of the depression were the few very wealthiest individuals. We have to remember the during the 1920’s was the time of record growth of our economy hence the term “Roaring 20’s. What made it possible was that the Fed infused cash into our economy and increased the money flow by more than 60%  At that time US currency was on the Gold Standard but to induce more investment more capital was needed so more money was printed which made it possible for the economic expansion of the ” Roaring 20’s. Had the Federal Reserve been a little more careful in expanding the money supply could have prevented the artificial Stock market boom and subsequent crash. There were factors that indicated that the robust spending and borrowing was tapering off by early 1929 making interest hikes unnecessary which would have averted the subsequent stock market fallout. But since the crash occurred what the Fed did was the exact opposite of what sound economic principals dictated and that was they raised interest rates. This was done in 1931 at exactly one of the worst periods in our economy. When there is a contraction in economic mobility interest rates have to fall not rise. At the time when interest rates sharply increased only further deteriorated already deteriorating conditions. Another element that helped our slide into the Depression was that very few new that the country’s gold stock was already increasing by the early fall of 1929, so if the Fed did not intervene the money supply would have increased on it’s own and would have felicitated economic recovery. Today, unlike that of the 1930’s the Fed has at least done something right and that is the interest rates have fallen to record lows. But with record low interest rates these rates have done nothing to encourage people to but their hard earned savings back into the financial institutions. While this is happening the banks meanwhile are doing everything they can to recoup any amount of extra funding to offset the lack of personal savings. Up front fees and hidden costs abound in personal banking accounts now. These checking and savings account fees along with credit card fees now account for a hefty amount of capital that is infused into the banking industry. When the Government infused billions into these same financial institutions that caused the financial catastrophe in 2008 has only managed to keep the economy at a virtual standstill. Mean while the financial institutions continue to rake in billions of profits every quarter, impose fees that cut into personal savings, continue to deny homeowners mortgage modification loans {credit scores are purposely set up to higher] all while continuing to make money by foreclosing rather than issuing lower payments for so many strapped homeowner.  The similarities of the 1930’s and today are very striking not only on the financial front but with the weather of this past spring and now this summer’s heat wave and drought depicts almost the same conditions that America experienced in the 1930’s. Both then as now millions of Americans are faced with so much adversity and insecurity.  Let’s remember how the United States inniciated economic crisis we have today. The monetary system all over the world is based of faith, honor, and trust. Monies are no longer backed up by tangible assets. The gold standard has long since been replaced so that currencies all over the world involve trust that the government will act responsible and actually pay their debts. What’s happening today with the debate in Washington on raising the debt ceiling is a blatant disregard of the trust that other nations have for the United States. Our legislatures are playing Russian Roulette when it comes to maters of fiscal policy. But what actually happened prior to 2008 the financial institutions, the largest banks in the United States and Wall Street since 1999 were already laying the groundwork that led up to the financial meltdown of 2008. Since then the world’s central banks have put nearly 1/2 trillion dollars into the US economic system in trying to stabilize it. But unfortunately irrevocable damage had already been done. The United States economic system was once the envy of the world, but now we are perceived with contempt and suspicion. The continuing debacle in Congress over the debt ceiling is a prime example. The continuing sub-prime mortgage crisis is only the tip of the economic ice-burg in America today. Trust in America is quickly disappearing. Why? Because we single handily brought the international financial system to almost insolvency by passing off fraud-ridden sup-prime debt on unsuspecting economies.  Apparently the Fed finally realized their mistake from the 1930’s when they raised interest rates. This time the realization is that at any time a possible recession looms interest rates have to fall. What the Fed did in 2000 and again in 2007 was a way to make up for the disastrous rate hikes of the 1930’s. But, 2000 and again in 2007 when mortgage rates fell it induced more people to apply and get loans. This resulted in higher home prices and eventually the whole system fed upon itself. Now, as home prices rose banks needed to develop more ways of recruiting more home buyers. That brought about the easy sub-prime mortgage scheme. This whole system was based on low interest rates. Banks really did know the risks in holding all of the overvalued sup-prime mortgages so they looked to foreign financial institutions to sell their mortgages by marketing them as a safe investment. American banks convinced { Here is why trust is vital in the financial world ] investment rating agencies like Mood’s and Standard & Poor’s to give mortgage securities higher valuations than regular sub-prime rates would normally receive. This amounts to fraud brought on by the United States banking industry. now the whole world realized that the United States thirst for quick and easy profit created a world wide financial and economic disaster. Different set of circumstances today from the developments of the period leading to the Depression of the 1930’s but none the less in both instances the United States whether through the alt right greed and zeal of unscrupulous bankers through callous acts of legislatures and regrettable decisions form the Fed all have had a hand in creating major financial and economic catastrophes. The problem now is how is the United States going to restore our credibility and regain the trust of the international community. the first step is to immediately raise the debt ceiling in the United States. nest to create an international regulatory system that monitors and challenges any national regulatory agency including the United States. This can be accomplished thru the World Bank and The United Nations. Finally what the United States congress must do is to pass and implement National Economic Reform. Once these conditions are meet the rest of the world will witness what a united United States of America can do to restore and regain economic stability and ensure national security. A nation where everyone’s saving will be secure and grow.