Federal Reserve chairman Ben Bernanke announced last week the US central bank will continue its "quantitative easing" program, basically printing money like an African dictatorship to buy US debt. The harsh truth behind Bernanke's action makes the upcoming debate on raising the debt ceiling a red herring that diverts attention away from reality: the US ship of state has hit a giant financial iceberg.  Captain Bernanke's response is to continue to bail water.  

The Federal Reserve buys billions of dollars of US debt at near-zero interest to fund the ever-increasing deficit to keep up the charade that the good faith and credit of the nation is intact. In effect, Fed policy is a lie surrounding a bigger lie -- that Obama's economic recovery plan is on course. If the Fed does not step up and purchase US debt at ridiculously low interest, rates would have to float upwards dramatically to attract the usual buyers. Interest on the debt is already running at $26 billion per month; an increase caused by allowing rates to equate to investor requirements could easily double the staggering current monthly outlay. And what is the effect of squandering the US money supply on US debt that provides scant return?

The rate the US should have to pay in the real world to sell our debt would translate to rates charged to Fed member banks, who add vigorish for themselves and lend it out. But despite Fed rates artificially kept below one percent by Bernanke's sleight-of-hand, lending in the US to small businesses is at a 12-year low. If the Fed rate followed the appropriate level needed to attract buyers of our national debt, interest rates on bank lending will rise dramatically. The already suffering small business sector, which represents 90 percent of the economy and provides all new jobs, will be facing ruin.

This sorry state of affairs is due to Obama ignoring the small business sector and diverting stimulus money to save the banksters, fund pipe dreams to develop alternative sources of energy, launch unattainable transportation initiatives and hand gifts to friends and supporters. He saved Wall Street and left Main Street -- where small businesses reside -- holding the bag. That is the main reason his policies have failed -- and worse, permanently undermined the American economy. Yet, the Fed claims it is continuing its US debt purchases at near-zero interest   to prevent the inflation to come in the alleged recovery. The unpleasant truth is inflation is everywhere already, but there is no recovery -- despite wishful thinking by the administration, who spin the abysmal economic numbers to fit their hopeful belief that happy days are just around the corner -- and that Obama and his cohorts know what they are doing.

Even Obama devotees are seeing through this charade. The only piece of the Bernanke strategy that works is forcing capital into the equities and commodities markets (and their derivatives) which in turn makes the Dow go higher. This pleases investors and owners of 401-K plans, and fools voters that the Obama recovery is real. Underneath the increasing value of stocks is an economy that does not support their value. With the realization the economy is stagnating and real growth not happening, investors will cut back on equities. Since there is no return on cash in the Bernanke scenario, mattresses and coffee can sales will skyrocket. With scant lending available for the small businessman as things stand today, there will soon be none.

Will Bernanke print more money and buy more US debt to support Obama's new tomorrow? What happens then? We become a new Greece. The global economy sputters and nations with proper financial controls and procedures retreat inwardly as occurred during the Great Depression). The EU, already reeling from US crooks who sold member states mortgage backed securities, disintegrates ( an outcome several members desire) and the American-led post post-World War 2 global construct terminates.

The proof is here in America. Unemployment has not noticeably abated, except technically as more and more workers give up looking for jobs and don't show up in the figures. According to an economic statistician at MIT, two million new jobs would have to be created immediately to return the work force to pre-2008 levels. Long-term unemployment is approaching 37 weeks and bankruptcy figures are becoming like unemployment statistics: businesses, like the long-term jobless, are foregoing the process and simply fading away.

Stimulus financing under Obama is obviously not working, but has driven the federal debt to record highs. There is more bad news: According to the Pew Research Center, by 2030, 18% of the nation will be collecting Social Security and receiving Medicare, which means younger Americans will be called upon to pay the taxes to support their elders. But the millennial generation -- between 18 and 29 -- are severely negatively affected by the present economic climate with 13.1% unemployed (a two percent increase in the last year, a grim testimony to the alleged Obama recovery) and another three percent underemployed.  This ought not be Greek to Obama and Bernanke.

Obama's Affordable Care Act  is the coup de grace that will kill off the American Century. While most of us will suffer through the apocalypse, the politicians who created the backdrop for the mortgage crisis will enjoy a large pension. And the bankers and investment firm executives - who took advantage of government policy by creating fraudulent and impenetrable mortgage instruments - will slip off to Old Europe or their own private island with the money they stole from the American people. How fitting: federal socialistic policy mandating a house for everyone joins with corrupt capitalist bankers to turn the American Dream into a nightmare.

Bernie Reeves is Editor & Publisher, Raleigh Metro Magazine and founder of the Raleigh Spy Conference