Your Wealth Is Being Embezzled

American Wealth Eroding

by Bill Sardi

In dollar terms, what does Presidential Candidate Ron Paul mean when he says: "The standard of living is going down for a lot of people on fixed incomes." What does Mr. Paul mean when he says this is what happens when "a country destroys its money" and "destroys or eliminates the middle class." What does that mean in dollars and cents? 


It means the American people are aggregately losing the value of their banked money at the rate of $16,881 per second, $970,904 per minute, $58,254,253 per hour, $1.398 billion per day, or $510,304,260,000 per year (that’s $510 billion!). That is the most conservative figure, based upon a 7% rate of inflation. The erosion of American wealth could be as high as $780 billion/year if a higher 10% inflation rate is employed.

How did I come up with these numbers? Americans have $8.505 trillion on deposit in American banks (FDIC numbers: includes $6.410 trillion in interest-bearing accounts, $1.848 trillion in time deposits like CDs, with an additional $2.094 trillion in non-interest bearing accounts). 

The estimated yield (interest) on that banked money is less than 1% today. Let’s say Americans are getting 1% interest on $8.505 trillion. That would amount to $85.05 billion. Now take away ~18% of $85.05 billion the federal government would be in taxes, or $15.3 billion, and this actually amounts to $69.78 billion gained that must be balanced against inflationary losses. 

The federal government says the rate of inflation is around 3%. However, the real rate of inflation is not the 3% figure government provides (government calculations don’t include the cost of fuel or food, for example). 

According to ShadowStats economist John Williams (www.shadowstats.com), who reverts back to ways the government calculated the rate of inflation in 1990 and 1980, Americans are losing 7% to 10% of purchasing power of their banked money annually. 

Using the 7% figure, that comes to a $510 billion erosion of saved money per year. Using the 10% inflation rate, Americans are losing $780 billion of their banked money via inflation per year. 

In just 5 years $8.505 trillion in aggregate banked wealth will diminish to as little as $4.250 trillion in purchasing power using the 10% inflation estimate. John Williams shows savers who deposited $100 in banked money in 2006 would need $160 today to buy the same amount of goods and services as 5 years ago. 

What an insult: bankrupt banks offer dividends to stockholders

To make matters worse, American banks, which were imprudent in offering home loans, temporarily creating a false demand and a crashing real estate bubble, have been delivering small dividends to bank stockholders since the crash. It’s a wonder why the Federal Reserve allows these insolvent institutions to declare dividends at all. But Americans banks are being allowed to cook their books and dream up profits. 

The Federal Reserve is now unleashing American banks from restrictions on dividends. This means Americans are essentially capitalizing Americans banks at a loss while banks are divvying out dividends to make it falsely appear they are solvent. Bank stockholders, including many bank executives, will now reap even larger rewards at the expense of the savings class. 

What to do? (It’s not pretty)

Methinks if Dwight D. Eisenhower or John F. Kennedy were President during these trying times, and they realized Americans’ personal wealth is being wiped out, they would take some strong action. It’s obvious what must be done. 

The central Federal Reserve Bank which currently supplies banks with cheap money (0.25% interest) needs to increase its interest rate to lender banks so that home mortgage rates go back up to around 10% and bank depositors would be rewarded with ~7% interest, and bankers with the remaining 3%. The stealth robbery of the people’s money would cease.

But the real estate industry is going to cry foul as it has been using low interest rates (now as low as 3.9%) to jump start sales again. But that is the very manner in which the real estate bubble was created, with low teaser interest rates. Lenders have driven the real estate industry into a box canyon. Who could afford a home mortgage at 10% interest these days? But to realize that 3.9% mortgage interest rates aren’t revitalizing the real estate industry and the low interest rates on banked money are eroding Americans of their savings, is a double whammy. Let the real estate industry wallow in the mud but spare the savers before the wealth of Americans vanishes.

Essentially future home buyers are being subsidized by savers. It’s a miserable state of affairs.

Planned inflation erodes personal wealth

Ben Bernanke, the chieftain at the Federal Reserve, unashamedly says the nation’s central bank, fearing deflation more than inflation, has established a buffer rate of inflation, which appears to be around 3% officially (but recall John Williams’ 7-10% inflation rate). 

So let’s consider an example of a single-mom who gave birth to a child in 1990 and was making $36,000 at that time, and whose salary has not subsequently risen. And let’s say today, 21 years later, that child is ready to enter the work force for the first time. And that mother’s goal has been to try and make sure her child will do financially better than she did. 

Thanks to Mr. Bernanke’s planned inflation, that child, now entering the work force, will have to make $62,317/year beginning salary just to equal the purchasing power of his/her mother 21 years ago. This is what the Federal Reserve has done to the value of American money. Does anybody wonder why Ron Paul says the Federal Reserve must be taken down?

Soon, food stamps for all

Incomes are not keeping up with inflation and more and more Americans are slipping into poverty. The Census Bureau now says nearly 1 in 2 Americans are living near the poverty line and food stamps are at an all-time high. An estimated 46 million Americans are now living on food stamps. Five more years of this insanity and the majority of Americans will be on food stamps.

When Mr. Paul says he wants to derail the Federal Reserve Bank and put it out of business it is because it has failed to live up to its objective – to stabilize the value of money.

The Federal Reserve deceives your kids

The Federal Reserve Bank website posts the following graphic which shows a $50/month savings plan adhered to for 30 years (an $18,000 investment) @4% interest (recall, the current interest rate on banked money is less than 1%) would grow to around $35,000. But the Federal Reserve does not calculate for inflation or taxes here. Calculating for an 18% tax rate on $17,000 added from interest would mean $3000 needs to be deducted from that the gains. Then inflation, even using the government’s own low rate of inflation, would more than wipe out any remaining imagined gains. Read more>>