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Fed Pulls Plug

Fed Pulls Plug on Economy

Prior to the 1929 crash on Wall Street, the Federal Reserve had loosened the money supply so that people played the stock market on margin and indulged in interest-only loans for real estate.


It was "party time." "Speakeasies" and "flappers" were the 1920s equivalent of "karaoke" bars today. Then the Fed tightened the money supply and the party was over. Brokerage firms made margin calls, and bankers were required to tighten up their loan requirements. We all know what happened next… The stock market crash of 1929.

2008 Bust started in 2005

Last year the Federal Reserve expanded the money supply by over a trillion dollars. We hear that they ran the "printing presses" overtime. This does not mean that they literally printed more green dollar-bills. It simply means that they created over a trillion dollars of new debt.

This new debt consists of computer-entries, blips on a screen. Their loose money-supply policy was why banks made mortgage loans to illegal immigrants, and it is why they created new down-payment "loans" to buyers so that citizens could "double-up" in a home purchase. It was ridiculous and irresponsible.

It's All Over

However, this decade, just as in 1929, the Fed has "pulled the plug." On March 8, 2006 the new Federal Reserve Chairman, Ben Bernanke, warned bankers about their loose commercial real-estate loans and the Fed's policy toward them.

Banks will now face the dreaded Federal Reserve Bank examiners. Bank examiners march into banks and assess the quality of loans made by particular banks. As they cull-out bad or risky loans, they determine just how much money banks need to set aside as a reserve against possible losses. Bankers tighten-up their lending practices which slow down the growth of the economy. Interest rates rise and fewer people qualify for loans.

Warning from 2006

The party is over, folks. While we may not see real estate "plummet" in value, we will see a topping out and a possible decline in values over the next two to five years. According to our sources the credit crunch has begun. There will be less demand for properties as lenders pressure borrowers to sell and pay back their loans.

Fasten your seatbelts and get rid of greed. Remember, "The rich rules over the poor, and the borrower becomes the lender's slave" (Proverbs 22:7).



McHugh, Robert. The Fed officially kicks off the next recession. Available from: http://www.safehaven.com/showarticle.cfmid=4759&pv=1.

Missler, Chuck. Behold a black horse. (Tapes). Available from: www.khouse.org.

Phenomenon: Monopoly Men. 1999. Hosted by Dean Stockwell. (VHS tape). Liberty International Entertainment Inc. Available from: www.libintpub.com.

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