Monopoly Men (Federal Reserve Fraud) Must see Video!!!

The Creature from Jekyll Island - A Second Look at the FED
The Creature from Jekyll Island - A Second Look at the Federal Reserve

by G. EDWARD GRIFFIN

JIM: You hear a lot of talk about the Federal Reserve today: "the Fed is supposed to be an inflation fighting institution." In fact, much of today's headlines about interest rates and Fed comments are that the Fed is concerned about inflation, and the Fed is a stabilizing influence in our economy. My next guest doesn't believe that's the case.

Joining me on the program is G. Edward Griffin, he's a writer and documentary film producer with many successful titles to his credit. He is well known for his talent for researching difficult topics, and presenting them in clear terms that all can understand. He has dealt with such diverse subjects archaeology, ancient earth history, the Federal Reserve System, and the international banking system. We're here to talk about his book today, The Creature from Jekyll Island.

Mr. Griffin, when investors or citizens hear stories about the Fed - like the Fed met today, they left interest rates but one Fed governor is concerned about inflation - it usually portrays the Fed as an inflation fighting organization, when in fact it is really an inflation-creating institution. Doesn't this create a problem of perception?

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Money used by the federal government as "Treasuries" are also responsible for paying interest on the "debt."

The whole rigermarole called "interest rates" the feds supposedly control is a fraud perpetrated against the masses. Quarter point changes in rates does not control inflation; increased fuel prices, home prices, and food stuff does.

What amazes me in this day and age is how the feds can influence the stock market with the threat of increasing or decreasing the interest rate. The prices of stock should be based only on the profitability of the company; not how much the feds change the interest rate. People bounce around between bonds and equities based on the Fed's mood on interest rates. That's no way to make investments, and determine where one invests their money. Stocks have always done much better than bonds. Unless we see the possibility of another great depression, there is not much sense to keep shifting money between stocks and bonds, and the likelihood of another great depression is almost zero. The reasons are many, but today's world economy and the makeup of the economies are much different today than it was in the early 20th century. One or two industries will not destroy the world economy of today.

Not quite: The price of a stock should correspond to the net present value of all the company's profits, present and future. To calculate net present value, the company's future profits are discounted by a percentage that depends on the interest rate, and on the time when the profits materialize. So the Fed's interest rates decisions do play a legitimate role in investors' decision on which stocks to pick, and on whether to prefer stocks over bonds.

Thomas, There is nobody who can forecast future profitability for any company.

That's a different subject. The subject you were talking about, and I was responding to, was the impact of interest rates on the price of stocks. As long as companies make any profits in the future, it is rational for profit-maximizing investors to account for the interest rate before buying a stock. This is true even if they cannot precisely predict future profits.

Well, can you predict the future impact of interest rates on stocks? I'd love to see that!

The key is "profit maximizing." For the long-term duration of investing, stocks have always outperformed bonds. People who think they can out-guess the ups and downs of the stock market and bond rates have lost money.

So, what's your point, again?

Yes. I can predict that if the Fed raises the interest rate today, stocks will be down tomorrow -- as well they should.

Disclaimer: this is true if the Fed raises the interest rate and the market doesn't expect it. If it does, stock prices will already have declined in anticipation of the event.

You're talking about short-term gambling.

I'm talking about short term, but not gambling. We know that if the Fed raises the interest rate, the net present value of a stock declines. That's because the expected future profits are discounted with the interest rate, which is rising. We can't be sure how much stock prices will decline, because -- as you say -- we're not sure what future profits are going to be. But the point is, rising interest rates decrease the net present value of every stock, and hence the price it will trade for.

Thomas, Just from personal experience and observation, anybody who thinks they can out-guess the trend in interest rates or the stock market is a fool. I have also seen studies that shows that the majority of day-traders lose money, and those who do make some money barely pay for their trading costs. Even the so-called experts at most of the funds don't always show their mettle in picking the right stocks or bonds.

So, what is it? The long-term investor has the short-term investor beat any way you look at it. Our retirement investments increased on average over 10 percent for the past three years. How does this compare with day trading? I'll stick with the long-term strategy any day: I sleep well at night too!

That's a different subject yet again.

You say "it's not gambling." In my jargon of words, if most people lose money at something where they hope to make money, it's called "gambling." Same issue.

Fed interest rates have a very real effect on the economy.

Most loans are tied to the Fed rate in some way. If the fed rate goes up interest on credit cards goes up. If the fed rate goes up interest on car loans will probably go up. The same with home improvement loans, etc. Banks charge more for the borrowing because they are charged more.

Why does this effect the economy? For the very real reason that when interest rates go up the amount of money available for a person to spend goes down. If a person has $10,000 on credit cards and the interest rate goes up 1/4 point on that card then his monthly payment will go up a little bit. That quarter point may not seem like much but multiply it by millions and we see how it can start to have an effect on the economy. A quarter point on home loans means fewer people will qualify for a home loan at the median home price. It means a few dollars less will be spent on that home improvement.

It is similar for business borrowing. The increase in credit costs drive down profits. Capital improvements may be put off because they are no longer economically attractive.

parados, It does have "some" influence, but not the major one. You probably haven't noticed, but interest rates on credit cards have been in the double-digit ranges for as long as I can remember; that didn't stop consumers from borrowing on their credit cards and paying those usurious rates of over 20%. All that has happened when the fed rates were below 3%, and even through to today's rate at 5.25%. It seems consumers would rather borrow and spend then watch their personal budget. Many home-buyers purchased their home on sub-prime loans; a good percentage of those people are now in big doodle.

What has impacted most consumers are the prices of housing and fuel. Food costs have gone up, but I can still buy a jar of peanut butter for $2 when it's on sale. I can buy fruits at $1.50 lb.

When housing prices increase at 5 to 10 percent per year on a base average price that's over $250,000, that adds $12,500 to $25,000 to the price of the average home. Inflation. The "interest rate" is not the major culprit.

When the price of fuel (gasoline) goes up from about $2.25. to $3.50 (increase of over 50%) in about one year, that's inflation. Depending on how far the worker has to commute to work every day, that $1.25 per gallon cost increase is inflation. The Fed's "interest rate" is minor compared to what that worker needs to pay for gasoline.