April 17, 2023 - The Truth Central - Dr. Jerome Corsi
34:06
The Federal Reserve is Bankrupt
After the pandemic, the Federal Reserve expanded the money supply significantly to support a swift economic recovery. It did so by purchasing vast amounts of US Treasury bonds and mortgage-backed securities. While those assets seemed like good investments at first, they are now a major hole in the Fed’s financial position.Now, the Fed has raised the interest it pays to 4.55 percent on ONRRPs and 4.65 percent on bank reserves, but the rates it earns on its QE purchases remain mostly unchanged. Assuming, as a rough approximation, that the bonds it purchased pay an average rate of 1.75 percent, and the average rate paid on bank reserves and ONRRPs is 4.6 percent, then the Fed is paying about 2.85 percent per year more than it receives on its $8 trillion dollar securities portfolio. That’s a loss of $228 billion per year. As this contributes to the worldwide decline of the US dollar, the situation could also spiral us toward a new credit crunch and another major recession.Dr. Jerome Corsi delves deeply into what's happening, the ramifications and what you need to know.Visit Dr. Corsi's The Truth Central website: https://www.TheTruthCentral.comMyVitalC: https://www.thetruthcentral.com/myvitalc-ess60-in-organic-olive-oil/Swiss America: https://www.swissamerica.com/offer/CorsiRMP.phpBecome a supporter of this podcast: https://www.spreaker.com/podcast/the-truth-central-with-dr-jerome-corsi--5810661/support.
This is Jerome Corsi and today is Monday, April 17, 2023, and we're happy to be with you here today on TheTruthCentral.com.
We've got quite a bit to cover.
and monday
april seventeenth twenty twenty three
we're happy to be with you here today on the truth central dot com
we've got quite a bit to cover we're gonna get right into it
the uh... economy is drawing a lot of my attention these days i i think we're
gonna focus on this first story which is that
as you remember last week it was reported that the inflation numbers were
down that we had inflation under control of five point five
Well, as we told you last week, that's not the whole story.
When you get into the numbers, food prices are increasing dramatically, and the drop was really reflected by the energy prices declining, which had been the case as the global economy was slowing down.
With interest rates rising, that was the goal.
But what we're finding is with the OPEC cutback in production, energy prices are going to go up again, and overall, The economy is in a slowdown.
So what this story is saying, this comes from the, was reported on the Hill.
This was reported a couple of days ago, but retail sales in the US fell 1% from February to March, according to the Census Bureau data, which just came out at the end of last week.
And again, as you see, spending is down, which is across the board.
In other words, people are spending More dollars, but they're getting less going out to dine or eat out or to buy more expensive goods.
So people are really pulling back on their spending, which is following years of continuous price hikes and elevated borrowing costs brought on by the Federal Reserve's higher interest rates.
So people are squeezed.
They're paying more for credit.
Which you may or may not immediately realize, and if you've got an adjustable rate mortgage, you'll realize it pretty quickly.
But even spending at gas stations fell 5.5% last month, which is the largest drop of any category.
And again, what this reflects is a slowing down of the economy.
People are spending less.
Prices are going up.
Food prices were especially noticed in the March figures.
And what we're going to see again, I think, is the, in general, a slowing down of the economy, which is going to mean we're probably headed into a recession.
Now, I've posted on thetruthcentral.com several different stories which show this today.
I want to cover another one, this story about the Federal Reserve being bankrupt.
Now, this story came out again over the weekend.
It was on April 14th, today's the 17th, so it's Friday, but it's in the American Institute for Economic Research, which is a very credible source.
What they're pointing out is that the Federal Reserve chairman, Jerome Powell, testified before Congress essentially saying that we were going to hopefully have not as many rate increases in the future because the economy is slowing down pretty quickly.
But the part of the testimony that wasn't really focused on or picked up by the media had to do with the Federal Reserve's balance sheet.
Okay, now in the post-pandemic period, what the Federal Reserve did is it printed a lot of money.
It flooded the market with money.
It tried to create demand stimulus in order to get the economy back in gear again.
Now, with the money supply increasing, that's a very dangerous sign.
It, first of all, is likely to increase inflation.
And what happens is, With interest rates going up again, the Federal Reserve has more costs of borrowing.
But there's a phenomenon here because the Federal Reserve had kept interest rates at zero, or near zero, during the Obama years.
And so, this quantitative easing, which again kicked in in 2020 and 2021, quantitative easing is when The Federal Reserve buys treasury bonds.
We're basically buying our own debt, as crazy as that sounds.
But this is under the fiat currency and the modern monetary theory, which says you can just print money.
Because as long as the debt is being paid off in the country's currency, in dollars, we can just print more money to pay off the debt.
And the whole thing is basically a Ponzi scheme.
Now, what happens is, When all these treasury bonds, which are on the Federal
Reserve's balance sheet as assets, at zero interest or near zero interest, the market rate on
these treasury bonds under the quantitative easing, especially in 2020-2021, is
producing about 1.5 to 2% interest return. But the Fed was then at that time paying
interest on bank reserves and overnight repurchase agreements of 0.15% or less.
So in other words, the Fed profited on the difference between the higher rate it was getting from its bonds, the treasury bonds, and the lower rate it was having to pay to get its reserves and these overnight repurchases.
So what the Fed does is the Fed It takes in the reserves from the banks.
They basically are the lender of last resort for banks.
And they pay for those reserves to book them so that they can close their books and have everything be copacetic.
And they have to pay for those reserves.
But as long as they're earning more from their assets, it's not a problem.
It's profitable.
But now the Fed's raised the interest rates to 4.5%.
And it's paying 4.65% on the overnight reserves, on the bank reserves, so therefore Its earnings on the quantitative easing treasury bonds are unchanged.
So basically, those bonds are, let's say, averaging 1.75% in a profit to the Fed.
That's the interest the Fed's being paid on the treasury bonds they're holding.
But they're having to pay out 4.6% For their overnight reserves, which means the Fed is in the hole about 2.85% on the $8 trillion securities portfolio, largely made up of government bonds, treasury bonds, and various agency bonds, mostly mortgage-backed security bonds.
So the Fed is losing $228 billion a year, which means essentially the Fed is bankrupt.
And it's not just intellectually.
It says like a private bank, the Fed maintains some level of capital as a buffer against losses.
When those losses exceed the value of its capital, the Fed becomes insolvent, meaning the liabilities it owes others are greater than the total value of the assets it holds.
Most recent data shows the Fed owes the treasury over $41 billion, which exceeds its total capital.
Okay, so the Federal Reserve does not have, with these treasuries and its assets, the Fed essentially is bankrupt and running on fumes.
Okay, now that again supplies the money supply into the country, which is a stimulus, but the Fed is bankrupt, the Fed is going to have a credit crunch.
And banks across the country are.
Now JPMorgan Chase just reported very high earnings.
Okay, but that's only the big banks.
What will happen, I think, is the community banks and the smaller regional banks are going to get pounded in the next bit of time.
And that's the next story I want to cover, because it's essentially the commercial real estate crash, which is coming.
If the Fed, again, Morgan Stanley, who's one of the biggest investment banks, is saying that we're going to have a massive crunch in commercial real estates, which could collapse as much as 40%.
And again, it's a matter of financing.
There's like 1.46 trillion of commercial real estate debt It's going to mature by year end 2025 and banks hold about 56%, maybe that's the maximum of the maturing debt.
Now the problem is going to be that this debt is maturing at a time when the revenue from commercial real estate is going down because there's vacancies in most every major city from commercial real estate.
People are not being as massive layoffs are going on.
And secondly, people don't really want to go and commute into work.
They want to work from home.
They got used to that during the pandemic.
So the people who own the commercial real estate, when they have to refinance those buildings, are going to be facing much larger refinancing charges, which are going to make those buildings bankrupt.
We're holding a lot of commercial real estate where the revenue is not going to permit them to make the debt service.
Now this entire debt crisis, which is what we've got, because we've borrowed so much money and the inflation has made the purchasing power of the dollar so much weaker, is that we're going into a collapse of the banking system, like we experienced in 2008, But it's also at a time when, like under Jimmy Carter, when we had the OPEC embargo and oil prices increased dramatically, what we're going to find is that we're basically facing a double whammy.
A recession caused by increasing energy costs, at the same time as 2008, 2009, when the subprime real estate collapsed, That also put banks underwater because the banks were holding those subprime loans, or through mortgage-backed securities, holding the loans and securitized assets.
When that collapsed, the banks did not have asset ratios sufficiently to remain solvent.
When that happens, the bank collapses.
Just like I'm saying, the Fed is at risk of collapsing.
And the Fed has taken on this $8 trillion buying our own debt.
Buying our own debt is a bad idea.
Now, I mean, how do you buy your own debt?
You've got to pay the debt off eventually.
And the interest earnings only get larger the more debt you've got.
And if the interest rates go up, that debt service costs more money.
One final story here on the economy.
I know this is somewhat complicated, but if you get your mind around the fact that we get increased energy costs and the ability to finance homes and commercial real estate collapses because higher interest rates I mean, at inflated prices, these buildings and homes are not going to be able to generate.
People aren't going to have the money to pay the mortgages.
People who own these buildings are not going to have the money to pay the debt service on the buildings they own.
Now, at the same time, we are starting to collapse the money supply.
We had this great influx of money printed by the federal government to stimulate the economy after the lockdown.
Biden has tremendously raised the U.S.
debt by just printing money.
Three or four trillion dollars just printed and money handed out during the pandemic to keep the economy going when the lockdown was in place.
Well, now the U.S.
money supply is contracting.
The M2, which is one of the measures of the money supply, has started collapsing, shrinking, at a rate we've not seen since the Great Depression in the 1930s.
That does not mean that a depression's coming.
Between 1929 and 1933, the money supply plummeted by 28%.
In other words, it was just less cash in circulation, because people weren't working.
Well, again, we're not quite at that point.
We're not at that massive amount, 28% of a decline in the money supply, but the rate of decrease is faster than when we went into the depression.
We haven't accumulated that much yet to be 28% less money supply, but the rate at which it's collapsing is faster.
Now what all this means is that we're going to have a massive, I believe, recession, and it's in the works.
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Chris, you want to have some comments before we transition here?
Give you a chance to get going.
Here you go.
Go ahead, Chris.
If you're plugged in.
Yeah, plugged in a little bit on here.
That's where I'm going.
I had to pay attention to a little bit behind the scenes, but yeah, if you watched, if you look at the, if you look at the Swiss America page and get that, as you just said, off the Truth Central website under our sponsors, you're going to find that there's a history of gold and silver appreciating while at the same time the dollar is depreciating.
What happens is, I'm going to ask you this, Jerry, Is, if one, let's say, buys gold and silver, and the world currency kind of strays away from the dollar, would that affect gold and silver purchases if, let's say, the currency goes over to, again, very hypothetical, I'm not saying it's going to happen, but let's say the yuan takes over, or maybe a digital currency takes over?
Well, what you've got is the weakening of the dollar.
Dollar's going to have less purchasing power.
So, if you use your dollars today to buy gold or silver, that has an intrinsic value.
So, as the dollar depreciates, your gold and silver will be worth more dollars than you paid for it.
That's the fundamental principle.
Because the gold and silver keeps its purchasing power.
It takes about, and if you go back historically and say, how much gold and silver did it take to buy a home 20 years ago or 30 years ago?
It takes the same amount of gold and silver to buy a home today.
Okay, so basically the purchasing power of the dollar has decreased almost 99% since 1971 when Richard Nixon took us off the gold standard.
But every time we get an economic crisis, what happened in the 1970s, 1980s under Jimmy Carter, was that was the first dramatic increase in the price of gold.
And then gold went up to something like $800 an ounce from $35 an ounce where it had been When gold was capped under the dollar being linked to gold before Richard Nixon removed us from the gold standard in 1971.
And then in the 2008-2009 period, that's when gold started going to $2,000 an ounce.
So what'll happen is that if the dynamics are what I think they're going to be, Gold has the potential to go to something like $4,000 an ounce before we're done with this economic decline.
I think it's going to be that serious.
Even if I'm wrong and I'm not giving anyone economic advice, I think that's, you know, investment advice is from, go to Swiss America for that.
I'm just analyzing the economics.
And the economics to me indicate that we're going to face a continuing massive loss of purchasing power of the dollar.
Which you can see, go to a restaurant, take a family of four to a restaurant, and not have any alcohol, and in a reasonably priced restaurant, get a bill for like $170 to $200.
I mean, that's outrageous.
What it means is the dollar has less, go to the grocery store.
You get a, you know, hardly a full bag of groceries.
Of course, you can't use bags anymore.
We've got to use, can't use plastic.
We can't.
Yeah.
Okay.
New York, New Jersey area.
Yeah.
We can't do that.
That's right.
Illegal.
Illegal.
Can't use plastic anymore.
So you have to buy bags, but you've got a reasonably sized bag.
You're still paying.
You can't fill that bag for a hundred dollars anymore.
People are spending three, $400 at the grocery store to feed a family.
This is really a massive change.
It's kind of like the little green frog problem.
You know, you put a green frog, it's an old story, into a pot of water and turn on the heat.
Well, that water will get to boil, but it does so slowly that the frog fries to death.
If you drop that frog in boiling water, the frog will just jump out.
It's the incremental gradual changes that we find hard to really appreciate until enough time has
passed that you can look back and say, I don't remember paying $200, you know, $50 a person
for a dinner at a not expensively priced restaurant. So again, I mean, even go to a
fast food store and see what the price of food costs.
I mean it's it's pretty shocking in terms of and that's that's the kind of measure you've got to take.
At some point or other people become shocked by the decrease in value purchasing power and that's why spending is decreasing because people realize that there aren't fixed incomes or a salary.
Well that salary isn't going to go up Because inflation goes up, you can buy less because your dollars don't go as far.
So again, these are the fundamental economic dynamics and modern monetary theory, we can just print money, is a Ponzi scheme.
And what I'm telling you is that I think that this credit crunch is because basically our financial institutions, except maybe the very largest, do not have a strong enough asset base Given that they're holding investments that are either shaky because commercial real estate is going to collapse, or they're holding low yielding bonds, treasury bonds, for instance, that were issued under the zero or near zero interest rate scenario we had with the Fed under Obama.
So I think let's switch gears because we're going to continue to talk about economics.
I'm going to focus on these because a lot of people, you're not getting this news anywhere.
And you're not hearing the real economic situation.
I mean, I've had a long background in economics.
I've spent 20 years working with financial institutions around the world.
And again, I have securities licenses.
I've held insurance licenses.
I still have them.
They're all valid, but I'm not giving you investment advice.
I'm just explaining the economics.
All right, let's switch into India.
The news came out over the weekend that India has now surpassed China.
In population, which is again kind of surprising because for a couple hundred years, China's been the most populated country in the world, but now what demographers are saying is it could happen this month, but it hasn't already happened.
India's population is expected to reach 1.429 billion, almost 1.4 billion by the end of the
year. China is going to get to second place.
It's very close.
India is 1.429 billion and China 1.426 billion.
So it's not far apart.
But what it means again is that China's demographics are going to make it harder for the country To achieve all of its ambitions.
I'm gonna explain that in a minute.
But India, which is now the world's largest democracy, has been a natural investment partner with the United States.
And again, I think India and China are positioned with these brick nations, which are Brazil, Russia, India, and China, These are the future of economic growth in the world.
The United States is not in the future, in part because we've got a bunch of suicidal economic policies in place under this green agenda.
And that was reflected, as we talked about last week, on the nature of All the EPA saying we're going to have to have electric vehicles when 60% of cars are going to be electric vehicles by mandate, not by economics.
Now, I want to cover the underlying dynamic here, which is the story about what they call a dependence ratio.
Now, China and India are different on this.
In India, We have a dependence ratio that's very favorable, as India has a lot of young.
India's had a lot of children, they're growing up, and the dependence ratio, which is the percentage of the population that are working versus the percentage old and young that are not working.
As you get an aging population, your dependence ratio goes up.
But the UN projections show that India's dependence ratio is 47 dependents for every 100 workers.
And that's very good.
It ranks them about 23rd in the world.
In the United States, we're going the other direction.
Because we've got an aging population and we do not have the population producing as many children.
Not as many marriages, not as many children being born.
Again, for economic reasons and cultural reasons.
The attack on the family.
And China is also not in a good position with dependence ratio because China had for years this one child per family policy and China was actually killing female babies because they didn't want the population to grow.
Well that produced a blip in the normal demographics where China has got increasing Age population, but they have fewer people coming into adulthood to be able to work, because they missed a whole demographic chunk of babies that should have been matured by now and having their own children, and those were killed or just not produced.
So there's a blip in China's demographic pattern.
Whereas in the United States, it's for other reasons, but again, our dependence ratio and China's dependence ratio means we're gonna have a harder time making economic progress compared to countries like India, which have an active working population.
Now, India does not have the same standard of living we have in the United States, but again, it's got a very, very productive and very large economy.
And India and China are both using hydrocarbon fuels.
Which means they're in a position to grow.
They're not trying to go to a green energy situation.
And again, I think this is a dynamic that's going to be very important as the world changes into a new emerging pattern.
We're in a shift right now.
We're the pattern that's been in existence since the end of World War II, which has been a Pax Americana.
The United States has been the dominant economic and military power in the world.
That's ending.
And the new emerging power is not yet, the new emerging configuration, what they call a new world order, is not yet seen.
And there's a lot of competition for what that new world order is going to be, including the Great Reset, which the World Economic Forum wants it to be, which is an oligarchy running the world.
So we're in a very dynamic period of time, which is a transition in human history.
Chris, any last comments before we wrap up for the day?
You bring up a good point, the World Economic Forum wanting an oligarchy running the world.
We have a lot of support, or at least support within Washington for this great reset, but the same people are railing against Vladimir Putin's setup in Russia, where an oligarchy, not necessarily him, he does dictate policy, but an oligarchy pretty much runs the country.
This happens in a lot of smaller countries as well, and if you watch how they're run and how life conditions or as the left would like to call it the
happiness or misery index whatever they want to do to spark emotion the fact is
having an oligarchy run things will make the problems that people complain
about here much much worse eventually.
I mean, oligarchy is also what we have in Ukraine.
It becomes corruption.
And nepotism.
They breed nepotism and corruption.
And they begin to look at the population of ordinary people as useless eaters and want to eliminate people because they want all the wealth concentrated among themselves.
And again, that's a very unstable situation.
If you don't have a strong middle class, as I say back to Aristotle, was realized that that country becomes unstable.
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Okay, so Chris, I think we'll wrap it up now.
This is Dr. Jerome Corsi.
Today is Monday, April 17th, 2023.
I always end by saying, in the end, God always wins.
God will win here too.
Could become some difficult going in the next little period of time.
Economics, politics, I see war on the horizon everywhere I look.
Ukraine, NATO, Taiwan at risk.
Sudan is breaking out again.
Iran is threatening Israel and firing missiles through surrogates, Hezbollah, Hamas, etc.
