The Federal Reserve - The Shocking Event That Occurred In October

The Great Recession hasn't been good for much, but there definitely has been one major silver lining. In 2000, any mention of the Federal Reserve would have produced a blank stare from most Americans. Ten years later, everyone knows who the Fed is, the chairman and how the Fed really controls the financial strings of this country. This month, things even became more apparent.

The level of national debt in this country is absolutely horrific. The latest numbers as I run this are in the mid thirteen trillion dollar range. Think about that for a second. Thirteen trillion dollars. That is a lot of cheese, mulla, greenbacks or whatever name you want to give it.

This high national debt scares people. One of the concerns is foreign entities own so much of our debt that it is feared we could become puppets of their desires. To be blunt, the concern is China. The country is growing into a force that will surely rival the United States this decade. The fact the Chinese own so much of our debt would seem to suggest they could crush our economy by dumping the debt and refusing to buy anymore.

Well, here is some breaking news. The Chinese have not purchased any of our long term debt in, well, a long time. In fact, they've started to sell it off to other countries and investors. So, who exactly is buying it? Well, this is where we get back to the Federal Reserve Bank and the shocking revelation.

The Fed is buying our long-term debt. Think about that for a second. We are buying our own debt. How? Through "quantitative easing", which simply means the Fed is creating the money out of the air. We used to call it printing money, but there is little need to do that now given the digital revolution.

Okay, times are tough. Maybe this is just a temporary situation that will be corrected when things get better. Well, here is where the big shock comes in. This is not a small dabble in the market by the Fed. No, this month the Federal Reserve Bank became the second largest holder of our debt trailing only China. Is this not a Ponzi scheme of sorts? It certainly seems so. Bernie Madoff must be snickering in his prison cell.

When you hear the glowing reports in the media that the recession is over and everything is great, don't fall for it. We are on the cusp of a major debt crisis in this country. Just keep watching the Fed to see how things are going.

Barry Milton writes about financial planning for UFCAmerica.com.