Chapter 7 - Inflation Continued

I have learned a lot about the Federal Reserve in this book, although he covered it lightly and has another book out specifically on that (just shows how little I knew about it to begin with:).

If the public is not interested in buying enough of America's debt at any given time, the Federal Reserve is obligated to step up and purchase the debt. They are the lender of last resort of America's debt so "the U.S. government always has a buyer for its debt". When Robinson wrote his book, the Federal Reserve was holding approximately 45% of the $9 trillion national debt.

So, how does the Fed do this? How can the Fed afford to do this? To quote Robinson, "Quite simply, the Federal Reserve creates the money out of thin air". What do that mean? They print it. They just print more money. Can you believe that? Wow. What if we ran our personal finances that way....oh, I forgot, that would be illegal:).

Robinson points out, "It is the beauty of the fiat currency system. When times get tough, you can always print more money!" He goes on to point out again that, when the government prints more money, it devalues our currency.

Currently, we are not having to print as much money, since we are still able to borrow from foreign countries. We owe foreign countries approximately 25% of our $9 trillion debt. And I thought this was interesting: "According to a June 2007 official report issued by the Federal Reserve, the total amount of all U.S. dollars in circulation is equal to $755 billion. This means that America owes foreign creditors nearly three times the total amount of U.S. currency in circulation!" That was another eye opener for me. Also "Today our economy is subsidized by foreign capital inflows to the tune of 470 billion a month.

Unfortunately for us, these foreign countries that are supporting our debt addiction are beginning to question whether or not our debt is good. I have read in the news several times lately that our AAA rating is in jeapordy. I believe I also read that the U.K. had recently lost their AAA rating. For those of you who are not sure what this means, this rating tells potential buyers of our debt how much risk is associated with it. Foreign countries who believe there is a risk they won't be paid back will not buy our debt.

Robinson included this interesting bit of information: "According to a report issued by the U.S. Treasury, $163 billion of foreign capital reportedly flowed out of all forms of U.S. investments in just one month during the summer of 2007. According to the detailed report released by the London Telegraph newspaper (Oct. 18, 2007), "Asian investors dumped $52 billion worth of U.S. Treasury bonds alone, led by Japan ($23bn), China($14.2bn), and Taiwan($5bn)." This major sell-off marked the first time that foreigners had collectively sold more U.S. treasuries than they had purchased since 1998. The Telegraph report added: "Central banks in Singapore, Korea, Taiwan, and Vietnam have all begun to cut purchases of U.S. bonds or signaled an intent to do so".

Robinson goes on to say, "The idea that America can forever spend and borrow its way to prosperity is a delusion that is promoted by the government and the media. It is a lie and its effects are going to harm many unsuspecting Americans who continue to believe the deception."

As we all know from watching the news, our government continues to borrow and spend, while going deeper and deeper into debt. Robinson says that the result of this will be more concerns from those who buy our debt and the end result will be that they will stop buying our debt. And then what will happen? If our government keeps moving in the direction it is currently going, they will simply turn to the Federal Reserve, who will simply print more money, which will continue to devalue the dollar, which will lead to massive inflation. That is the gist of the end of this chapter.

Robinson adds: "the U.S. Government Accountability Office (GAO) has project that by the year 2040, the entire U.S. federal budget will be spent on paying for its promised entitlements. This means that no money will be left over to pay for public education, national defense, and homeland security, or anything else for that matter."

I would hope that our government leaders would takes steps to fix some of these problems before it gets to this point, although it sounds as if their options are becoming fewer and fewer as time goes by.

And finally: "The ugly truth that no one is telling you is that America is preparing to enter the greatest financial crisis in world history. To be forewarned is to be forearmed."

In the next section of the book, Robinson addresses the energy crisis that our country faces. I will start on this section the next time I post.

In other news, the boys are doing great and are having a lot of fun playing outside this summer. We have spent so much time outside, working in the yard and just having fun that they were actually pretty happy to spend the majority of their day inside today.

Yesterday the dad and I took the boys to the local public swimming pool. They have a nice size kiddie pool fenced in separately and we spent most of our time there. The boys had a ball and loved climbing out and jumping in. It was good for just helping them become a little more at ease in the water.

B is still a bit scared of being in the water (he still vividly remembers his horrifying mishap last summer:(. It is interesting because when N accidentally falls so that his face is partially in the water, he is more upset about water getting in his eyes. When B falls like that, he ends up taking a huge gulp of water and he chokes and gags terribly. This happened twice yesterday and it makes it so that he tries very hard to avoid doing anything where he might accidentally get his face wet.

I am considering having them take swimming lessons. I need to spend some time in prayer over this before making a decision. I think B would really not like it at all, but I wonder if it might do him some good. I keep telling him that, if he knew how to hold his breath before going under water, he would not get choked or swallow water. He wavers on whether he thinks he would like to take swimming lesson. When we last spoke about it, after swimming yesterday, he said he did not want to take lessons. N says he wants to but then he does not want to do it without B.

Today we hung out at home. We had a workman doing some work upstairs so we had to be home. The boys wanted to paint today so that's what we did. We stayed busy with that for quite a while. After cleaning up, we had lunch and then we played with letters, letter sounds and blending letters. The boys are really doing surprisingly well with it. I'm sure if I made an effort to spend time on this every day, they would be reading fairly quickly. However, we really enjoy reading a lot and it is summer so we are just taking it easy and having fun playing a lot.

The boys are really enjoying the Frog and Toad books and also a couple of the Frances books. I stopped by the used book store and found a couple of the Frog and Toad books and another Frances book on Saturday. The boys are always so excited when I bring home books for them and they want to read them right away. I also found the Trumpet of the Swan book for $1 so I bought it so I could finish the story:). It was such a good book. I love getting to read so many of the books that I missed as a child. I know that, if it wasn't for the boys, this is not something I would have done. It makes for a great opportunity and I am so looking forward to reading so many good books together.

I'm going to catch up on some reading now. Hope you had a nice weekend. We did:).