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The student loan bubble was due for a collapse last year as record defaults occurred. Wall Street investment firms found that investors were fleeing the bond market that backs student loans late last year due to fears of an impending collapse.

Investment firms buy loans from Sallie Mae and then issue bonds backed by these government guaranteed loans. It’s a profitable business when investors are buying.

In a remarkable coincidence last year, the government doubled the rate of interest students pay for student loans, from 3.4 to 6.8 percent. This doubled the return on investment for bond buyers, but also redistributed income from working class students to Wall Street bankers and investors. In other words, doubling the interest rate on students made the student loan backed bonds a more attractive investment.

We don’t know how many meetings Wall Street pirates had with President Obama, Senate majority leader Harry Reid, and House Majority Leader John Boehner to discuss raising rates on students, or what they said to get the government to jack up the  interest rates, but we can rightly suspect that meetings did occur, and the middle class was the victim of this income redistribution scam.

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Big business makes a ton of its money off of or through the government. Take student loans, for example. Thirty years ago, Wall Street con artists convinced federal legislators to cut back on federal grants for students and to increase student loans. That’s because they found a way to profit from student loans. Buy the loans, bundle them, issue bonds against them, and sell the bonds to rich investors.

The money you pay for your loans goes in great part to those investors. In other words, your student loan debt is greater than what it would’ve been in the absence of these bonds, and you’ve become an indentured servant to the investor class the moment you take out a student loan.

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Who owns the Federal Government? Hint. It’s not the voters.

Think about this. The Federal Reserve bails out rich investors even as these investors are sucking the middle class financially dry. See Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, but Rich Investors. Also, the Federal government has gone out of its way to bail out the one percent, while the rest of America wilts.

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The United States Federal Reserve’s recently announced that it’ll continue “Operation Twist” by buying an additional $267 billion of long-term Treasury bonds during the following six months. That means they’ll have bought a total of $667 billion for 2012. So far, this policy has had virtually no impact on interest rates or equity prices. Those markets failed to respond. That means that monetary easing is no longer a useful tool for increasing economic activity.

The fed’s policies during the economic crisis that began almost five years ago have been extremely helpful in bailing out rich, but remarkably dumb investors, but the policies have been lacking in bailing out the 99 percent. That’s the purpose of the Federal Reserve.

Of course, the federal government has followed the same path; bail out the 1 percent, to hell with the 99 percent.

Don’t expect the Federal Reserve or the Federal Government to deal with the massive redistribution of income and wealth (that has been legislatively created by the Federal Government) from the 99 to the 1 percent during the last thirty-one years. That’s the real problem with the economy. The demand for goods and services is lower than 30 years ago because the 1 percent now receive 27 percent of the total national income compared to about 8 percent thirty years ago. That means the 99 percent has less cash to buy stuff. And that means the demand for goods and services will continue to be weak.

Related Stories

The Federal Reserve Has Run Out of Options–The Guardian

Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, But Rich Investors,

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The folks at the Federal Reserve have a grim view of the United States economy. They won’t raise historically low interest rates until late 2014, at the earliest, and Fed Chairman Ben Bernanke is ready to expand the money supply by purchasing more treasuries.

This suggests Obama’s rosy outlook for the economy that he laid out in his state of the union address is substantial lunacy, essentially the ravings of a madman or a lying politician. It also suggests that neither the Fed nor Obama plan to do anything about the massive mal-distribution of income and wealth that has occurred via government policies over the last thirty years, and which has dragged the economy down and keeps it down. In fact, Obama’s policies have been to continue to redistribute income from working people to the rich. A prime example is the fact that he signed into law the South Korea free trade treaty.

Click here for the complete story

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