The Fed

One of the biggest and most pervasive myths in modern-day economics is the myth of the omnipotence of the Federal Reserve.

With US government debt skyrocketing past $33 trillion and possible recession looming, the Treasury faces the prospect of running out of suckers. Finding buyers for US debt will become much more difficult.

The new problem we now face arises from the fact that huge deficits are only manageable so long as interest rates remain very, very low. 

Mark looks at the implications of famed investor Jim Chanos shutting down his hedge fund which specialized in shorting stocks.

America is draining its economy by federal debt in a way similar to how American farms and cities are emptying the nation's aquifers. We cannot sustain these losses much longer.

As the federal government continues its Ponzi scheme of issuing debt to pay for past debts, interest rates will increase to the point where this no longer is a tenable strategy—if it ever was.

Today, the Fed takes a short break from robbing us via inflation and, instead, delivers huge amounts of cash to banks to service Black Friday purchases. The large cash infusions often make banks vulnerable to robberies.

What lies behind the attempt to bypass fear of failure is the perceived lack of any substantial cost to failure. The illusion lasts only for so long before economic reality prevails.

The right way to tackle the problem of inequality is to end inflationary monetary policies. A fortune made through production is a fortune made by serving others. But a fortune made from inflation is a fortune made at the expense of others.

Mark reports on Pimco's former financial guru Mohamed El-Erian's new views on the Federal Reserve.