Rodney Johnson | Thursday, February 07, 2013 >>
You’ve heard about them a hundred times…
NINJA (no income, no job, no assets) loans.
And all those other things that happened with mortgages prior to the ’08 crash.
And of course you know all about high interest rates on credit cards.
All examples of areas where the Consumer Finance Protection Board (CFPB) is supposed to ensure consumers like you and me have all the information we need to make sound financial decisions… and that lenders and financiers aren’t taking advantage of the unsuspecting public.
But who’s protecting us from our “protector”?
The board was formed through a White House initiative and was meant to be as independent as possible so that it could function unfettered. To this end, the funding mechanism for the board was removed from the normal operations of the governrnment and put under the Federal Reserve, which is where the CFPB itself resides.
And this is where things get interesting…
The Federal Reserve is not a branch or agency of the U.S. governrnment. It may have been created by a Congressional Act, but it is owned by private shareholders, which are the member banks. (Incidentally, those shares pay 6% interest per year… nice!).
The Fed is supposed to be the watchdog of the U.S. currency. Its track record is debatable.
What is not in question is where the Fed gets its money to operate. In short, the Fed prints it.
The actual path is a bit longer… The Fed does a one-sided transaction to buy bonds from member banks and then the Fed receives principal and interest payments on those bonds.
This is the basis for most of the money that flows to the Fed, which it then uses to fund operations, fund the CFPB, and remit funds to the U.S. Treasury as well.
So in the world of irony, the CFPB, which is charged with protecting unsuspecting consumers from financial shenanigans that would fleece them of their savings, is actually stealing wealth from all savers in order to fund their operations! Just brilliant!
Unfortunately, there’s nothing any of us can do about this current situation.
Fortunately for us, the Fed cannot run the printing presses recklessly forever. There must come a day when the ink runs dry. As we’ve said many times before, the Fed is trying to fight an unwinnable battle again an unstoppable demographic tide.
Even better for us, we know what lies ahead so we can help you prepare. And right now we recommend two things…
Build income streams wherever and whenever possible.
And stay flexible.
Above all else, stay flexible.
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