You Can't Print Production and Prosperity

by Doug French

It's hard to imagine that the monetary policy talk can get any nuttier, but we've likely only just begun. After all, despite the Federal Reserve growing its balance sheet by 140 percent and dropping rates essentially to zero, the bankruptcies just keep on coming. Ex-Fed governor Wayne Angell told Larry Kudlow's CNBC audience, "monetary policy always works!" Although Angell does stipulate that it takes time before the tromping on the monetary gas pedal will spin the economic tires and spray the prosperity gravel.

But good grief, the Fed started cutting rates in September 2007, dropping the federal-funds rate from 5.25 percent to 4.75 percent, and it was cut, cut, cut until daddy set the target rate at 0 to .25 percent in December of last year. In the meantime, one trillion dollars has been added to the M-2 money supply.

Despite all this money creation, Circuit City, Sharper Image, Goody's, Gottschalk's, Comp USA, Levitz Furniture, Chrysler, General Motors, General Properties, and – most recently – Eddie Bauer have filed for bankruptcy protection. And personal bankruptcy filings are up in every state and soaring in Nevada, Georgia, Alabama, Tennessee, Indiana, and Michigan.

In May, forty-eight states had more people out of work than in the previous month or year, with the national unemployment rate increasing from 8.9 percent to 9.4 percent. Moreover, California, Nevada, North Carolina, Oregon, Rhode Island, and South Carolina had their highest rates of unemployment on record. Maybe Mr. Angell will change his mind when he gets laid off. Just how long are we supposed to wait for this monetary magic to work?

Now the word is that zero-percent interest rates are just too darn high. That's why we haven't seen a reinflation of bubble America. The Financial Times reports the existence of a Federal Reserve staff memorandum that makes the case for a negative-five-percent federal-funds rate. Meanwhile, Japanese authorities are toying with the idea of outlawing cash in their country. Despite using every fiscal trick in the book and keeping interest rates at zero percent for a decade, that economy has been mired in a postbubble depression. So the current theory "would suggest that nominal interest rates of [negative four] percent might be closer to what is required to rescue the economy from another deflationary spiral," reported the Times Online.

The talking heads and policy wonks are trying to tell us that we're not borrowing enough, and that's why we're in a depression and why the Japanese economy has been depressed for more than a decade.

However, the real reason we're in a depression is because businesses and individuals borrowed too much and invested it poorly. Economist Murray Rothbard explained that a depression is the recovery stage: "The liquidation of unsound businesses, the 'idle capacity' of the malinvested plant, and the 'frictional' unemployment of original factors that must suddenly and en masse shift to lower stages of production – these are the chief hallmarks of the depression stage."

That's why monetary policy isn't working and won't work. People must save and pay off their debts. The malinvestments of the boom must be liquidated. New liquidity and zero-percent interest rates will only create new malinvestments, not a sound economy.

But you won't hear that on TV or read it in the New York Times. The Nobel Prize–winning economist and Gray Lady columnist Paul Krugman is now worried about the "paradox of thrift," the theory that, when consumers save too much en masse, the economy is worse off because there is not enough consumption.

But as economist Frank Shostak explains, it is savings – not demand – that enables the expansion of production of goods and services. "In short, no effective demand can take place without prior production," Shostak writes. "If it were otherwise, then poverty in the world would have been eradicated a long time ago." In other words, you can't print production and prosperity, much as the Fed may try. And Ben Bernanke is trying.

For those not familiar with Krugman's policy suggestions, he wrote back in August 2002 that "[t]o fight this recession, the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Sir Alan followed Krugman's advice, and look where we are now. More of the same will only create more financial pain.

This article originally appeared on Mises.org.

http://www.lewrockwell.com/french/french122.html

The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.

In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.

Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”

YouTube - Eliot Spitzer Takes On The Fed - MSNBC w/ Dylan Ratigan (7/24/09)

For those not familiar with Krugman's policy suggestions, he wrote back in August 2002 that "to fight this recession, the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Only possible if...

http://www.bizzia.com/yieldingwealth/what-if-the-bailout-went-to-people-instead-of-banks/

These dimwits talking about unsound businesses and idle capacity and malinvestments without mentioning the trillions of out-of-thin-air Federal Reserve dollars being dumped into Goldman Sachs, Chase, and AIG (et al) is simply beyond ridiculous. These various jewish-controlled banks are the very models of unsound business. They're little more than glorified monopoly money Ponzi schemes. At least I can buy decent clothing at Eddie Bauer. What can one buy from Goldman Sachs besides fancy paper "derivatives" and bogus stock notes?

Some Thomas Jefferson quotes:

We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds...[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers... And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.

The system of banking [is] a blot left in all our Constitutions, which, if not covered, will end in their destruction... I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity... is but swindling futurity on a large scale.

I am for a government rigorously frugal and simple. Were we directed from Washington when to sow, when to reap, we should soon want bread.

I consider the foundation of the Constitution as laid on this ground: That 'all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people' (10th Amendment). To take a single step beyond the boundaries thus specifically drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible to any definition.

We have slid far indeed.

Federal Reserve Banks Combined Financial Statements (http://www.federalreserve.gov/boarddocs/rptcongress/annual08/pdf/audits.pdf)

(4) Significant Accounting Policies

Differences exist between the accounting principles and practices in the FAM and generally accepted accounting principles in the United States (“GAAP”), primarily due to the unique nature of the Reserve Banks’ powers and responsibilities as part of the nation’s central bank. The primary difference is the presentation of all SOMA securities holdings at amortized cost, rather than using the fair value presentation as required by GAAP.

Does this factoid concern anyone?

At N.Y. Fed, Blending In Is Part of the Job

Some Fear Wall Street Too Heavily Influences The Financial Enforcer

By Neil Irwin
Washington Post Staff Writer
Monday, July 20, 2009

NEW YORK -- The low-slung cubicles wrap around the ninth floor of a building three blocks from Wall Street, each manned by a young staffer staring at flashing numbers on a flat-screen computer monitor and working the phones to gather the latest chatter from financial markets around the world.

It could be any investment bank or hedge fund. Instead, it is the markets group of the Federal Reserve Bank of New York, which has been on the front lines of the government's response to the financial crisis. Federal Reserve and Treasury Department officials make the major decisions, but the New York Fed executes them.

The information gathered there provides crucial insights into the financial world for top policymakers. But the bank is so close to Wall Street -- physically, culturally and intellectually -- that some economic experts worry that the New York Fed puts the interests of the financial industry ahead of those of ordinary Americans.

"The New York Fed sticks out as being not just very, very close to Wall Street, but to the most powerful people on Wall Street," said Simon Johnson, an economist at MIT. "I worry that they pay too much deference to the expertise and presumed wisdom of a sector that screwed up massively."

Even some former insiders at the Fed say the bank does not pay enough attention to the fundamental flaws in the country's financial system or to the risks associated with bailing out financial firms -- for instance, the chance that banks will be encouraged to take more unwise gambles. These experts worry that the New York Fed has adopted the mindset of a trading floor: well attuned to ripples in financial markets but not to long-term trends and dangers.

Last month, for instance, Wall Street bond traders wanted the central bank to ramp up its purchase of Treasury bonds, which would help the traders by driving up prices. But Fed officials in Washington and around the country concluded that such a move would be counterproductive in the longer run, in contrast to some New York Fed staffers, whose views more closely mirrored those on Wall Street.

New York Fed employees "play a very valuable role, day in, day out, with detailed contacts with the big financial firms," said William Poole, a former president of the Federal Reserve Bank of St. Louis who is now at the Cato Institute. "What I think is missing is a longer-run perspective. They tend to be sort of short-term in their outlook, which is true of a lot of the financial firms. Traders have a horizon of a few hours or a few weeks, at most."

The New York Fed's home is a fortresslike building, with bars securing the windows on lower floors. Its main lobby resembles a Gothic cathedral: dim, quiet, with stone walls, as if to inspire a mix of fear and awe.

Like the other 11 regional Federal Reserve banks, the New York Fed is a curious mix of public and private, part of a system Congress created in 1913 to avoid concentrated power in Washington or New York alone. Its board of directors is composed of bankers, businesspeople and community leaders, who select the bank president with approval from Fed governors in Washington. Banks in New York, Connecticut and parts of New Jersey own shares in the New York Fed, though its profits are returned to the U.S. Treasury.

The man in charge is a soft-spoken economist named William C. Dudley, who took over as president in January, replacing Timothy F. Geithner when he became Treasury secretary.

With a proclivity for button-down Oxford shirts and rumpled suits, Dudley does not fit the mold of a Wall Street executive. He has won fans across the Federal Reserve System for a collaborative style, as well as a talent for explaining complicated problems in the financial world and drawing up solutions to them.

It is his résumé that alarms some critics, who see an example of a too-cozy relationship between financial firms and their lead regulator. One of several bank officials who have worked in the private sector, Dudley was at Goldman Sachs for two decades, including 10 years as chief economist, before joining the New York Fed in 2007.

The bank's board of directors, which selected Dudley, includes such corporate titans as Jamie Dimon, the head of J.P. Morgan Chase, and Jeffrey Immelt, General Electric's chief. Richard Fuld, then the chief executive of Lehman Brothers, resigned from the Fed just days before his firm went under. Stephen Friedman, who sat on Goldman's board, resigned as chairman of the New York Fed board earlier this year after controversy arose over his purchase of Goldman stock while at the Fed.

"I don't think they're consciously doing things to tilt the playing field to Goldman Sachs and the other major banks," said Dean Baker, co-director of the Center for Economic and Policy Research. "But when you work at a place, you tend to internalize their views, and that is going to color your policies. It's not that they're being deliberately corrupt; it's that they come to incorporate the interests of major banks in their views."

Dudley argues that he has been willing to take on large banks repeatedly, especially with stress tests earlier this year that many viewed as onerous and which required some banks to raise more capital.

For their part, senior Fed officials in Washington say the experience Dudley and some of his colleagues have in the private sector has proved invaluable in helping them understand how markets are failing.

"He has been the right person at the right place at the right time," said Donald L. Kohn, vice chairman of the Federal Reserve System Board of Governors.

On the ninth floor, the first employees show up at 4 a.m. and hit the phones to collect the latest on overnight trading in Asia and Europe.

The workers on the front lines are "trader analysts." Many of them are around age 30, with master's degrees in international affairs or public policy from schools such as Johns Hopkins [neocon breeding ground] and Columbia. Some stay at the bank for decades, rising through the ranks; others go to Wall Street firms within a few years (some of those converts have looked to return to the Fed lately as investment banks have shed jobs by the thousands).

The staff, though paid much less than Wall Street workers, is well compensated by government standards. The 289 bank officers earned an average of $204,000 in 2007 -- more than Cabinet secretaries.

"They're the eyes and ears of the Federal Reserve in financial markets, and they wouldn't be doing their jobs if they weren't sensitive to what's occurring in that world," Kohn said. Then it is up to the board and the Fed's policymaking committee "to take that information, weigh it along with all the other information we get and set policy."

This intimacy with the firms they regulate can give Fed officials crucial intelligence. At the height of the financial crisis in September, staffers learned from their market contacts that Wall Street's two largest investment banks, Goldman Sachs and Morgan Stanley, were in mortal danger because their trading partners were so quickly losing faith in them, according to an update on the day's market activity by the New York Fed staff obtained by The Washington Post. Four days later, the central bank brought the two firms under the Fed's protective umbrella by agreeing to make them "bank holding companies."

But in allowing Goldman and Morgan to convert themselves to bank holding companies that received access to greater federal aid, Fed officials exempted them from the usual requirements, potentially putting taxpayer money at risk. (Since then, the firms' fortunes have improved enough that the government has incurred no losses.)

In responding to the financial crisis, the New York Fed has designed many of its programs to try to take advantage of some of the same business practices that contributed to the crisis.

Last fall, Fed staffers in New York and Washington began developing ideas to address paralysis in the markets for credit card loans, auto loans and other forms of consumer debt.

In Washington, Fed staffers wanted the central bank to hire a small number of firms to purchase the securities backed by these loans, thus injecting fresh credit into the market. But New York Fed staffers thought it better to let any investor put up money, matched with a loan from the Fed, to buy the securities. They argued that this approach would restart private markets more effectively and could be deployed faster. The downside: The New York Fed's strategy could allow private investors to earn huge returns while the government limited their losses.

Federal Reserve Chairman Ben S. Bernanke and other top Fed officials sided with New York.

The New York Fed, in scrambling to save the financial industry, has even taken a page out of the industry playbook, adopting a trick known as "special purpose vehicles." These entities, as used by Citigroup and other banks, contributed to the financial meltdown. But the Fed turned to similar entities when it bumped up against legal restrictions on its ability to buy risky assets. When the central bank decided to rescue Bear Stearns and, later, American International Group, New York Fed lawyers suggested creating separate limited liability corporations to buy the assets. The Fed then lent money to these new entities.

Dudley said the Fed has made such moves to support the overall economy, helping to keep a deep recession from getting much worse. When programs have helped individual firms, they have done so only to prevent catastrophic damage to the broader U.S. economy.

"Nobody here is trying to do anything but support the economy and support market functioning," he said in an interview. "We are worried about the stability of the system, not any individual institution."

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/19/AR2009071902148.html

I came up with a slam-dunk economic policy yesterday: eliminate electronic money transfers, checks, and possibly money orders. Nothing but cash(and design new cash currency that's damn near impossible to counterfeit, made out of a polymer with holograms and crap, no tracking mechanisms though.)

People would go absolutely batshit if they had to pay what they pay now only in cash, for everything.

Why Bernanke Is in Panic Mode

by Gary North

Bernanke video: He stutters; he stammers; he is in visible panic mode over Ron Paul's bill to audit the Federal Reserve. Watch it. You'll love it! Then send it to your friends.

Usually, when Ben Bernanke is interviewed, he has the demeanor of a college professor in the presence of freshman students. Of course, as a full professor, he did not have to teach freshmen. That is for untenured assistant professors to do. Stammering and stuttering are therefore a real departure for him. There is a reason for this.

For the first time since 1914, there is a public debate in Congress over the Federal Reserve's power. Never before has a majority of the House of Representatives called for what should always have existed: Congressional scrutiny over the FED's money. Bernanke says that Ron Paul's bill to audit the Federal Reserve is a bill to audit Federal Reserve policy. Yet the bill says nothing about auditing policy. So, what is he talking about?

Bernanke says that Congress can have access to an audit at any time. Sure it can – an audit vetted and sanitized by the FED, where no one knows which banks got what bailout money. This is an audit in the way a CIA audit is an audit. The main differences are these: (1) the CIA legally operates only outside the borders of the United States; (2) the CIA can assassinate any uncooperative Congressman who insists on a full audit. The FED does not have the second power, but it is not limited by the first restriction.

What has Bernanke panicked is this: the Federal Reserve has bailed out the biggest banks and has let almost 100 little ones die. This is crony capitalism at its most notorious.

The threat is that Congress will discover what should be obvious: the biggest banks last October almost went bankrupt. Bernanke and Paulson admitted this to Congressional leaders. This is how they got the leaders to authorize the Treasury bailout. This is why the FED swapped marketable Treasury debt for unmarketable toxic debt at face value with the biggest banks.

Which banks? The FED refuses to say.

This is the heart of the matter. This is what has Bernanke in a panic. If Congress compels a full audit – a real audit, not a FED-controlled audit – individual members of Congress will discover that the American financial system is a house of cards. A few of them will release the results of the audit to the public. This will include Website publishers, who will go over the audit, line by line. The mainstream media will face being scooped by newsletter writers, so they will try to publish first.

The public will find out which banks are not safe. This is what has Bernanke in panic mode.

The public will pull deposits out of the biggest, least safe banks and open new accounts at banks that look safer. That will bust some very big banks.

There is no way that the FDIC could cover the losses of even one of these giant banks. It is down to $12 billion in assets, mostly T-bills. It would have to come to Congress for the line of credit that Congress has extended: $500 billion.

The banking cartel would face a breakdown. Why? Because the public would finally learn which big banks got how much money, how much Treasury debt for toxic assets, and on what terms.

[much more]
http://www.lewrockwell.com/north/north739.html

The jews will stop an audit at all costs. They would sell their firstborn if required.

http://www.financialsense.com/fsu/editorials/holmes/2009/images/0727_clip_image002.gif

China is out making deals across the world. Last week’s BusinessWeek cover story details China’s recent shopping spree which includes a car business, appliances and department stores.
China is flush with cash and 2008’s meltdown has allowed it to purchase assets at bargain-basement prices. As a result, China’s overseas investments grew to $52 billion in 2008, more than double the $26.5 billion the country sent overseas in 2007.
The second reason is China’s looking to diversify away from its massive U.S. Treasury holdings. By purchasing these companies, China is acquiring the expertise needed to move the country up the manufacturing food chain.
If growth in China continues at the level we saw in the second quarter, it’s likely China’s shopping spree is just getting started. __________________http://www.financialsense.com/fsu/editorials/holmes/2009

Wednesday, July 29, 2009

So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.

Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure.

Over half the members of the House now support a bill giving the Government Accounting Office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board. Support for the bill has grown now that the Obama administration is proposing to give the Fed greater economic regulatory powers. The Fed which sets U.S. monetary policy was created as an independent agency to keep it free of politically-motivated interference.

Fed Chairman Ben Bernanke in a town forum filmed on Sunday which is airing this week on PBS stations said he is strongly opposed to the audit legislation. “I don’t think the American people want Congress running monetary policy,” *[oh, you dirty jewboy. That's actually Congress' job!]he said. Howard Rich addressed this issue in a recent commentary and concluded it was important to locate the “trillions of dollars” the Fed has spent over the last year-and-a-half (http://www.rasmussenreports.com/public_content/political_commentary/commentary_by_howard_rich/audit_the_fed).

The new survey finds that an overwhelming majority of Americans in every demographic category – including age, gender, political affiliation, race and income – disagree with Bernanke and favor auditing the Fed to make its secretive deliberations public.

Fifty-two percent (52%) of Americans support Bernanke’s efforts to speak out more publicly than his predecessors as Fed chairman, but his favorables have gone down over the past month. (http://www.rasmussenreports.com/public_content/politics/people2/2009/52_like_bernanke_s_public_outreach_but_fed_chairman_s_favorables_are_down) A plurality (41%) think the previous Fed chairman, Alan Greenspan, did a better job, too.

While the president hopes to expand the Fed chairman’s regulatory controls, 46% of Americans say he already has too much power over the economy (http://www.rasmussenreports.com/public_content/business/general_business/june_2009/46_say_fed_chairman_has_too_much_power_views_of_bernanke_geithner_unchanged).

Fifty-one percent (51%) oppose expanding the Fed’s regulatory powers. (http://www.rasmussenreports.com/public_content/business/general_business/june_2009/47_oppose_more_government_regulation_of_u_s_financial_system)

Despite Bernanke’s pledge that the Fed will keep interest rates and inflation down (http://www.rasmussenreports.com/public_content/business/general_business/june_2009/54_expect_interest_rates_to_rise_in_next_year), 54% of Americans think interest rates will be higher a year from now, up 20 points from April.

Perhaps helping to drive the support for regularly auditing the Fed is the growing unpopularity of Obama’s economic initiatives to date. While the Fed is an independent agency, just 20% of Americans believe the Fed chairman is truly independent of the Obama administration (http://www.rasmussenreports.com/public_content/business/general_business/june_2009/46_say_fed_chairman_has_too_much_power_views_of_bernanke_geithner_unchanged). Sixty percent (60%) say his decision-making is influence by the president.

Please sign up for the Rasmussen Reports daily e-mail update (http://visitor.constantcontact.com/email.jsp?m=1102135387545%26p=oi%255D) (it’s free) or follow us on Twitter (http://twitter.com/RasmussenPoll). Let us keep you up to date with the latest public opinion news.

See survey questions and toplines (http://www.rasmussenreports.com/public_content/business/econ_survey_toplines/july_2009/toplines_bernanke_2_july_27_28_2009). Crosstabs (http://www.rasmussenreports.com/premium_content/econ_crosstabs/july_2009/crosstabs_bernanke_july_27_28_2009) are available to Premium Members (http://www.rasmussenreports.com/premium_service_description) only.

Source:
http://www.rasmussenreports.com/publ...diting_the_fed (http://www.rasmussenreports.com/public_content/business/general_business/july_2009/75_favor_auditing_the_fed)

Section 8. The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;
To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

http://www.law.cornell.edu/constitution/constitution.articlei.html#section8

People would go absolutely batshit if they had to pay what they pay now only in cash, for everything.

Exactly what they DON'T want .

That would cause the entire debt pyramid to collapse . It would expose the Emperor's nakedness .

America is a nation living on borrowed time , everything is being done to postpone the settlement date .

Speed skating, across thin ice . You slow down , you fall through .

Dismantling the Temple

By William Greider
This article appeared in the August 3, 2009 edition of The Nation.
July 15, 2009

The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of central bankers, once described the Federal Reserve as "a pretty queer duck." Congress created the Fed in 1913 with the presumption that it would be "independent" from the rest of government, aloof from regular politics and deliberately shielded from the hot breath of voters or the grasping appetites of private interests--with one powerful exception: the bankers.

The Fed was designed as a unique hybrid in which government would share its powers with the private banking industry. Bankers collaborate closely on Fed policy. Banks are the "shareholders" who ostensibly own the twelve regional Federal Reserve banks. Bankers sit on the boards of directors, proposing interest-rate changes for Fed governors in Washington to decide. Bankers also have a special advisory council that meets privately with governors to critique monetary policy and management of the economy. Sometimes, the Fed pretends to be a private organization. Other times, it admits to being part of the government.

The antiquated quality of this institution is reflected in the map of the Fed's twelve regional banks. Five of them are located in the Midwest (better known today as the industrial Rust Belt). Missouri has two Federal Reserve banks (St. Louis and Kansas City), while the entire West Coast has only one (located in San Francisco, not Los Angeles or Seattle). Virginia has one; Florida does not. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being--providing regular liquidity loans for those caught short and bailing out endangered banks it deems "too big to fail." Critics look askance at these peculiar arrangements and see "conspiracy." But it's not really secret. This duck was created by an act of Congress. The Fed's favoritism toward bankers is embedded in its DNA.

This awkward reality explains the dilemma facing the Fed. It cannot stand too much visibility, nor can it easily explain or justify its peculiar status. The Federal Reserve is the black hole of our democracy--the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That's why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank's cover. Many in Congress are alarmed, demanding greater transparency. More than 250 House members are seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi observed that the Fed seems to be poaching on Congressional functions--handing out public money without the bother of public decision-making.

"Many of us were...if not surprised, taken aback, when the Fed had $80 billion to invest in AIG just out of the blue," Pelosi said. "All of a sudden, we wake up one morning and AIG was receiving $80 billion from the Fed. So of course we're saying, Where is this money coming from? 'Oh, we have it. And not only that, we have more.'" So who needs Congress? Pelosi sounded guileless, but she knows very well where the Fed gets its money. She was slyly tweaking the central bankers on their vulnerability.

Fed chair Ben Bernanke responded with the usual aloofness. An audit, he insisted, would amount to "a takeover of monetary policy by the Congress." He did not appear to recognize how arrogant that sounded. Congress created the Fed, but it must not look too deeply into the Fed's private business. The mystique intimidates many politicians. The Fed's power depends crucially upon the people not knowing exactly what it does.

Basically, what the central bank is trying to do with its aggressive distribution of trillions is avoid repeating the great mistake the Fed made after the 1929 stock market crash. The central bankers responded hesitantly then and allowed the money supply to collapse, which led to the ultimate catastrophe of full-blown monetary deflation and created the Great Depression. Bernanke has not yet won this struggle against falling prices and production--deflationary symptoms remain visible around the world--but he has not lost either. He might get more public sympathy if Fed officials explained this dilemma in plain English. Instead, they are shielding people from understanding the full dimensions of our predicament.

President Obama inadvertently made the political problem worse for the Fed in June, when he proposed to make the central bank the supercop to guard against "systemic risk" and decide the terms for regulating the largest commercial banks and some heavyweight industrial corporations engaged in finance. The House Financial Services Committee intends to draft the legislation quickly, but many members want to learn more first. Obama's proposal gives the central bank even greater power, including broad power to pick winners and losers in the private economy and behind closed doors. Yet Obama did not propose any changes in the Fed's privileged status. Instead, he asked Fed governors to consider the matter. But perhaps it is the Federal Reserve that needs to be reformed.

A few months back, I ran into a retired Fed official who had been a good source twenty years ago when I was writing my book about the central bank, Secrets of the Temple: How the Federal Reserve Runs the Country. He is a Fed loyalist and did not leak damaging secrets. But he helped me understand how the supposedly nonpolitical Fed does its politics, behind the veil of disinterested expertise. When we met recently, he said the central bank is already making preparations to celebrate its approaching centennial. Some of us, I responded, have a different idea for 2013.

"We think that would be a good time to dismantle the temple," I playfully told my old friend. "Democratize the Fed. Or tear it down. Create something new in its place that's accountable to the public."

The Fed man did not react well to my teasing. He got a stricken look. His voice tightened. Please, he pleaded, do not go down that road. The Fed has made mistakes, he agreed, but the country needs its central bank. His nervous reaction told me this venerable institution is feeling insecure about its future.

Six reasons why granting the Fed even more power is a really bad idea:

1. It would reward failure. Like the largest banks that have been bailed out, the Fed was a co-author of the destruction. During the past twenty-five years, it failed to protect the country against reckless banking and finance adventures. It also failed in its most basic function--moderating the expansion of credit to keep it in balance with economic growth. The Fed instead allowed, even encouraged, the explosion of debt and inflation of financial assets that have now collapsed. The central bank was derelict in enforcing regulations and led cheers for dismantling them. Above all, the Fed did not see this disaster coming, or so it claims. It certainly did nothing to warn people.

2. Cumulatively, Fed policy was a central force in destabilizing the US economy. Its extreme swings in monetary policy, combined with utter disregard for timely regulatory enforcement, steadily shifted economic rewards away from the real economy of production, work and wages and toward the financial realm, where profits and incomes were wildly inflated by false valuations. Abandoning its role as neutral arbitrator, the Fed tilted in favor of capital over labor. The institution was remolded to conform with the right-wing market doctrine of chairman Alan Greenspan, and it was blinded to reality by his ideology (see my Nation article "The One-Eyed Chairman," September 19, 2005).

3. The Fed cannot possibly examine "systemic risk" objectively because it helped to create the very structural flaws that led to breakdown. The Fed served as midwife to Citigroup, the failed conglomerate now on government life support. Greenspan unilaterally authorized this new financial/banking combine in the 1990s--even before Congress had repealed the Glass-Steagall Act, which prohibited such mergers. Now the Fed keeps Citigroup alive with a $300 billion loan guarantee. The central bank, in other words, is deeply invested in protecting the banking behemoths that it promoted, if only to cover its own mistakes.

4. The Fed can't be trusted to defend the public in its private deal-making with bank executives. The numerous revelations of collusion have shocked the public, and more scandals are certain if Congress conducts a thorough investigation. When Treasury Secretary Timothy Geithner was president of the New York Fed, he supervised the demise of Bear Stearns with a sweet deal for JPMorgan Chase, which took over the failed brokerage--$30 billion to cover any losses. Geithner was negotiating with Morgan Chase CEO and New York Fed board member Jamie Dimon. Goldman Sachs CEO Lloyd Blankfein got similar solicitude when the Fed bailed out insurance giant AIG, a Goldman counterparty: a side-door payout of $13 billion. The new president at the New York Fed, William Dudley, is another Goldman man.

5. Instead of disowning the notorious policy of "too big to fail," the Fed will be bound to embrace the doctrine more explicitly as "systemic risk" regulator. A new superclass of forty or fifty financial giants will emerge as the born-again "money trust" that citizens railed against 100 years ago. But this time, it will be armed with a permanent line of credit from Washington. The Fed, having restored and consolidated the battered Wall Street club, will doubtless also shield a few of the largest industrial-financial corporations, like General Electric (whose CEO also sits on the New York Fed board). Whatever officials may claim, financial-market investors will understand that these mammoth institutions are insured against failure. Everyone else gets to experience capitalism in the raw.

6. This road leads to the corporate state--a fusion of private and public power, a privileged club that dominates everything else from the top down. This will likely foster even greater concentration of financial power, since any large company left out of the protected class will want to join by growing larger and acquiring the banking elements needed to qualify. Most enterprises in banking and commerce will compete with the big boys at greater disadvantage, vulnerable to predatory power plays the Fed has implicitly blessed.

Whatever good intentions the central bank enunciates, it will be deeply conflicted in its actions, always pulled in opposite directions. If the Fed tries to curb the growth of the megabanks or prohibit their reckless practices, it will be accused of damaging profitability and thus threatening the stability of the system. If it allows overconfident bankers to wander again into dangerous territory, it will be blamed for creating the mess and stuck with cleaning it up. Obama's reform might prevail in the short run. The biggest banks, after all, will be lobbying alongside him in favor of the Fed, and Congress may not have the backbone to resist. The Fed, however, is sure to remain in the cross hairs. Too many different interests will be damaged--thousands of smaller banks, all the companies left out of the club, organized labor, consumers and other sectors, not to mention libertarian conservatives like Texas Representative Ron Paul. They will recognize that the "money trust" once again has its boot on their neck, and that this time the government arranged it.

The obstacles to democratizing the Fed are obviously formidable. Tampering with the temple is politically taboo. But this crisis has demonstrated that the present arrangement no longer works for the public interest. The society of 1913 no longer exists, nor does the New Deal economic order that carried us to twentieth-century prosperity. The country thus has a rare opportunity to reconstitute the Federal Reserve as a normal government agency, shorn of the bankers' preferential trappings and the fallacious claim to "independent" status as well as the claustrophobic demand for secrecy.

Progressives in the early twentieth century, drawn from the growing ranks of managerial professionals, believed "good government" required technocratic experts who would be shielded from the unruly populace and especially from radical voices of organized labor, populism, socialism and other upstart movements. The pretensions of "scientific" decision-making by remote governing elites--both the mysterious wisdom of central bankers and the inventive wizardry of financial titans--failed spectacularly in our current catastrophe. The Fed was never independent in any real sense. Its power depended on taking care of its one true constituency in banking and finance.

A reconstituted central bank might keep the famous name and presidentially appointed governors, confirmed by Congress, but it would forfeit the mystique and submit to the usual standards of transparency and public scrutiny. The institution would be directed to concentrate on the Fed's one great purpose--making monetary policy and controlling credit expansion to produce balanced economic growth and stable money. Most regulatory functions would be located elsewhere, in a new enforcement agency that would oversee regulated commercial banks as well as the "shadow banking" of hedge funds, private equity firms and others.

The Fed would thus be relieved of its conflicted objectives. Bank examiners would be free of the insider pressures that inevitably emanate from the Fed's cozy relations with major banks. All of the private-public ambiguities concocted in 1913 would be swept away, including bank ownership of the twelve Federal Reserve banks, which could be reorganized as branch offices with a focus on regional economies.

Altering the central bank would also give Congress an opening to reclaim its primacy in this most important matter. That sounds farfetched to modern sensibilities, and traditionalists will scream that it is a recipe for inflationary disaster. But this is what the Constitution prescribes: "The Congress shall have the power to coin money [and] regulate the value thereof." It does not grant the president or the treasury secretary this power. Nor does it envision a secretive central bank that interacts murkily with the executive branch.

Given Congress's weakened condition and its weak grasp of the complexities of monetary policy, these changes cannot take place overnight. But the gradual realignment of power can start with Congress and an internal reorganization aimed at building its expertise and educating members on how to develop a critical perspective. Congress has already created models for how to do this. The Congressional Budget Office is a respected authority on fiscal policy, reliably nonpartisan. Congress needs to create something similar for monetary policy.

Instead of consigning monetary policy to backwater subcommittees, each chamber should create a major new committee to supervise money and credit, limited in size to members willing to concentrate on becoming responsible stewards for the long run. The monetary committees, working in tandem with the Fed's board of governors, would occasionally recommend (and sometimes command) new policy directions at the federal agency and also review its spending.

Setting monetary policy is a very different process from enacting laws. The Fed operates through a continuum of decisions and rolling adjustments spread over months, even years. Congress would have to learn how to respond to deeper economic conditions that may not become clear until after the next election. The education could help the institution mature.

Congress also needs a "council of public elders"--a rotating board of outside advisers drawn from diverse interests and empowered to speak their minds in public. They could second-guess the makers of monetary policy but also Congress. These might include retired pols, labor leaders, academics and state governors--preferably people whose thinking is no longer defined by party politics or personal ambitions. The public could nominate representatives too. No financial wizards need apply.

A revived Congress armed with this kind of experience would be better equipped to enact substantive law rather than simply turning problems over to regulatory agencies with hollow laws that are merely hortatory suggestions. Reordering the financial system and the economy will require hard rules--classic laws of "Thou shalt" and "Thou shalt not" that command different behavior from certain private interests and prohibit what has proved reckless and destructive. If "too big to fail" is the problem, don't leave it to private negotiations between banks and the Federal Reserve. Restore anti-monopoly laws and make big banks get smaller. If the financial system's risky innovations are too complicated for bank examiners to understand, then those innovations should probably be illegal.

Many in Congress will be afraid to take on the temple and reluctant to violate the taboo surrounding the Fed. It will probably require popular rebellion to make this happen, and that requires citizens who see through the temple's secrets. But the present crisis has not only exposed the Fed's worst failures and structural flaws; it has also introduced citizens to the vast potential of monetary policy to serve the common good. If Ben Bernanke can create trillions of dollars at will and spread them around the financial system, could government do the same thing to finance important public projects the people want and need? Daring as it sounds, the answer is, Yes, we can.

The central bank's most mysterious power--to create money with a few computer keystrokes--is dauntingly complicated, and the mechanics are not widely understood. But the essential thing to understand is that this power relies on democratic consent--the people's trust, their willingness to accept the currency and use it in exchange. This is not entirely voluntary, since the government also requires people to pay their taxes in dollars, not euros or yen. But citizens conferred the power on government through their elected representatives. Newly created money is often called the "pure credit" of the nation. In principle, it exists for the benefit of all.

In this emergency, Bernanke essentially used the Fed's money-creation power in a way that resembles the "greenbacks" Abraham Lincoln printed to fight the Civil War. Lincoln was faced with rising costs and shrinking revenues (because the Confederate states had left the Union). The president authorized issuance of a novel national currency--the "greenback"--that had no backing in gold reserves and therefore outraged orthodox thinking. But the greenbacks worked. The expanded money supply helped pay for war mobilization and kept the economy booming. In a sense, Lincoln won the war by relying on the "full faith and credit" of the people, much as Bernanke is printing money freely to fight off financial collapse and deflation.

If Congress chooses to take charge of its constitutional duty, it could similarly use greenback currency created by the Federal Reserve as a legitimate channel for financing important public projects--like sorely needed improvements to the nation's infrastructure. Obviously, this has to be done carefully and responsibly, limited to normal expansion of the money supply and used only for projects that truly benefit the entire nation (lest it lead to inflation). But here is an example of how it would work.

President Obama has announced the goal of building a high-speed rail system. Ours is the only advanced industrial society that doesn't have one (ride the modern trains in France or Japan to see what our society is missing). Trouble is, Obama has only budgeted a pittance ($8 billion) for this project. Spain, by comparison, has committed more than $100 billion to its fifteen-year railroad-building project. Given the vast shortcomings in US infrastructure, the country will never catch up with the backlog through the regular financing of taxing and borrowing.

Instead, Congress should create a stand-alone development fund for long-term capital investment projects (this would require the long-sought reform of the federal budget, which makes no distinction between current operating spending and long-term investment). The Fed would continue to create money only as needed by the economy; but instead of injecting this money into the banking system, a portion of it would go directly to the capital investment fund, earmarked by Congress for specific projects of great urgency. The idea of direct financing for infrastructure has been proposed periodically for many years by groups from right and left. Transportation Secretary Ray LaHood co-sponsored legislation along these lines a decade ago when he was a Republican Congressman from Illinois.

This approach speaks to the contradiction House Speaker Pelosi pointed out when she asked why the Fed has limitless money to spend however it sees fit. Instead of borrowing the money to pay for the new rail system, the government financing would draw on the public's money-creation process--just as Lincoln did and Bernanke is now doing.

The bankers would howl, for good reason. They profit enormously from the present system and share in the money-creation process. When the Fed injects more reserves into the banking system, it automatically multiplies the banks' capacity to create money by increasing their lending (and banks, in turn, collect interest on their new loans). The direct-financing approach would not halt the banking industry's role in allocating new credit, since the newly created money would still wind up in the banks as deposits. But the government would now decide how to allocate new credit to preferred public projects rather than let private banks make all the decisions for us.

The reform of monetary policy, in other words, has promising possibilities for revitalizing democracy. Congress is a human institution and therefore fallible. Mistakes will be made, for sure. But we might ask ourselves, If Congress were empowered to manage monetary policy, could it do any worse than those experts who brought us to ruin?

About William Greider

National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism (Simon & Schuster) and, most recently, Come Home, America.

http://www.thenation.com/doc/20090803/greider/print

Bulletins From Clunkerville

By MIKE WHITNEY

Is the economy really recovering or is it all just hype?

Here's what we know. The Fed doesn't drop rates to zero unless its facing a 5 alarm fire and needs to pull out all the stops. The idea is to flood the markets with liquidity in order to avoid a complete financial meltdown. It's a last-ditch maneuver and the Fed does not take it lightly.

The Fed initiated its zero interest rate policy, ZIRP, eight months ago (December 16 2008) and hasn't raised rates since. In the meantime, Fed chair Ben Bernanke has pumped huge amounts of money into the financial system using thoroughly-untested and unconventional means. No one knows whether Bernanke can roll up his multi-trillion dollar lending facilities or not (and avoid Zimbabwe-like hyperinflation) because no one has ever created similar programs. It's all "make-it-up-as-you-go" policymaking. What we do know, however, is that the Fed intends to keep rates at rock-bottom for the foreseeable future, which means that the lights are all still blinking red.

Here's an excerpt from the Federal Open Market Committee (FOMC) on Wednesday:

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

Translation: The economy is still getting battered and the Fed will keep rates at zero until the storm passes. Bernanke will continue to purchase boatloads of Fannie and Freddie mortgage-backed securities (MBS) to avoid an even-more precipitous decline in housing prices. The Fed will also purchase $300 billion in US Treasuries (monetization) in an effort to prime the pump and keep long-term interest rates artificially low. (Note: The Fed is only suspending its monetization program--Treasury buy-backs--because the dollar dropped to a dangerous support level, below which lies the abyss. Thus, Bernanke's announcement is not a sign of confidence in the fictional "recovery", but fear of a "disorderly unwind" of the dollar.)

On balance, the Fed's statement is an expression of desperation, not optimism. Bernanke would like nothing more than to prove to his critics wrong by raising rates and shutting down a couple lending facilities. But he has no choice. The situation is dire. Just imagine where housing prices would be today if Bernanke hadn't bought $1 trillion of mortgage-backed securities? Housing would be crashing even harder than it is already.

The Fed is in a pitch-battle with deflation, and it's losing ground fast. If that wasn't true, then Bernanke would simply raise rates .50 basis points and soak up some of the excess liquidity he's been spraying everywhere. But he can't, because if he did, the equities markets would plummet 500 points in an afternoon and the financial system would be tossed back on the rocks. Bernanke's liquidity is the only thing keeping the economy vanishing into a deflationary black hole.

The economy is still on life-support and the "green shoots" storyline is pure fiction. The financial system will be on a drip-feed from the Fed for years to come. Maybe forever. Things aren't better; they're worse. Look at the facts.

There were 1.9 million foreclosures in 2009 in the first six months, and there will be another 1.5 before the end of the year. Is that better?

According to Bloomberg:

"A glut of unsold homes is also pushing down prices. The 3.8 million homes for sale in June would take 9.4 months to sell at the current pace of transactions, according to the National Association of Realtors. The inventory turnover rate averaged 4.5 months in the six years from 2000 to 2005.....More than 18.7 million homes, including foreclosures, residences for sale and vacation homes, stood vacant in the U.S. during the second quarter....Total home sales fell 23.7 percent in June versus a year earlier." (Bloomberg)

Bloated supply, falling prices, record foreclosures, flagging demand--and according to Deutsche Bank--48 percent of all mortgages will be underwater by 2011. It's all bad.

Here's another clip from Bloomberg today 8-12-09:

"Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values.

The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today.

‘I don’t think we’re at a bottom yet in home prices,’ said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. ‘There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent up supply out there.”...Home prices are tumbling even as mortgage rates remain near all-time lows. The average U.S. rate for a 30-year fixed home loan was to 5.22 percent last week, down from 5.25 percent the prior week.’" (Bloomberg)

The decline in housing prices is accelerating, not slowing down. The historic collapse in real estate is ongoing and it is wiping out trillions in homeowner equity making it increasingly difficult for consumers to borrow on the diminishing value of their collateral. This is why foreclosures, defaults and personal bankruptcies are soaring. According to the American Bankruptcy Institute: consumer bankruptcy filings reached 126,434 in July, a 34.3 per cent increase year over year, and a 8.7 per cent increase sequentially (116,365 in June). July's number is the highest monthly total since the October 2005 bankruptcy reform aka the Bankruptcy Abuse Prevention and Consumer Protection Act.)

This is why households and consumers can no longer spend as much as they had before the crisis. Credit lines are being pared back; personal savings are rising, and GDP (excluding fiscal stimulus) is shrinking.

Every one of the 3.5 million foreclosures represents hundreds of thousands of dollars the banks will never recoup. That's why the rate of bank failures will be much greater than current estimates. The banks are facing a triple-whammy; soaring foreclosures, tumbling asset prices, and a meltdown in commercial real estate. The combo has created a gigantic capital hole which is forcing the banks to slow lend even to applicants with flawless credit. The Fed has built up excess bank reserves by $800 billion, but it hasn't made a bit of difference. They banks are still not able to lend.

The uptick in housing last month reflects seasonal changes and a shifting of pain from the low end of the market to higher priced homes; nothing more. Homes that are priced over $1 million are now sitting on the market for 20 months; a lifetime in real estate parlance. High-end neighborhoods have turned into leper colonies. Zero interest; zero traffic. Expect a crash this year.

Now take a look at this from CNBC's Diana Olick:

"The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg," said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington.

“According to Zillow's latest Homeowner Confidence Survey, 12 per cent of homeowners said they would be ‘very likely’ to put their home on the market in the next 12 months if they saw signs of a real estate market turnaround, 8 percent said ‘likely,’ while 12 percent said ‘somewhat likely.’
Survey results could translate into around 20 million homeowners trying to sell their homes, a startling number given that the Census bureau indicates there are 93 million U.S. houses, condos and co-ops, Humphries said.

“According to the National Association of Realtors, the market is currently on track to sell 4.89 million homes annually.

"’At this pace, it would take about four years to run through this amount of backlogged inventory,’ he said.

"’Shadow inventory has the potential to give us another leg down on home prices during the second half of the year,’ said Steven Wood, chief economist at Insight Economics in Danville, California. (Diana Olick, "Shadow inventory lurks over US housing recovery" CNBC)

The banks are using all types of accounting tricks to hide the real losses or the true value of downgraded assets. The only difference between a common crook and a commercial banker is a well-paid accountant.

The banking system is broken and it’s only going to get worse as the hammer comes down on the commercial real estate market. The Fed and Treasury are already working out the details for another stealth bailout that they'll initiate without Congress's approval. It's all very hush-hush. The plan will involve more mega-leveraging of government liabilities. Bernanke has appointed himself the de facto Czar of Hedge Fund Nation, Clunkerville USA. An article in this week's Financial Times further illustrates how the Fed has transformed the economy into a riverboat casino:

"The Federal Reserve Bank of New York is aggressively hiring traders as its seeks to manage its burgeoning securities holdings, making the central bank one of Wall Street's most active recruiters of financial talent.

“The Fed, which says that most of its new recruits come from private sector financial firms, is hiring employees as many banks, rating agencies, hedge funds and private equity groups shed staff. New York city officials recently estimated that the sector's woes would lead to a loss of up to 140,000 jobs.

“The Fed's need for more traders is a direct consequence of the central bank's efforts to keep credit flowing through the US economy. The Fed has been buying fixed-income securities at such a rate that its assets have more than doubled to $2,000bn in the past year, leading the central bank to conclude that it needs more people to monitor the markets and to manage its credit risks." (Financial Times, "NY Fed in hiring spree as assets soar", Aline van Duyn)

Can you believe it? The Fed is drafting a gaggle of professional speculators just to keep all its balls in the air. What a joke. This isn't a recovery; it's a sit-com. Here's Warren Buffett summing it up on CNBC:

"I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while.... I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true."

"The economy is in a shambles". That's from the horse's mouth. Inventories are down 11 per cent year-over-year, durable goods are down 10.4 per cent y-o-y, industrial capacity is at record lows, manufacturing is still contracting, housing is in the tank, shipping and rail freight are scraping the bottom, retail is in a long-term funk, and--according to Krugman--the slight dip in unemployment was a statistical anomaly. Here's Bob Herbert's great summary of the unemployment data:

"Some 247,000 jobs were lost in July, a number that under ordinary circumstances would send a shudder through the country. It was the smallest monthly loss of jobs since last summer. And for that reason, it was seen as a hopeful sign. The official monthly unemployment rate ticked down from 9.5 percent to 9.4 percent....The country has lost a crippling 6.7 million jobs since the Great Recession began in December 2007...

“The percentage of young American men who are actually working is the lowest it has been in the 61 years of record-keeping, according to the Center for Labor Market Studies at Northeastern University in Boston. Only 65 of every 100 men aged 20 through 24 years old were working on any given day in the first six months of this year. In the age group 25 through 34 years old, traditionally a prime age range for getting married and starting a family, just 81 of 100 men were employed.... The numbers are beyond scary; they’re catastrophic.

“This should be the biggest story in the United States. When joblessness reaches these kinds of extremes, it doesn’t just damage individual families; it corrodes entire communities, fosters a sense of hopelessness and leads to disorder....

“A truer picture of the employment crisis emerges when you combine the number of people who are officially counted as jobless with those who are working part time because they can’t find full-time work and those in the so-called labor market reserve — people who are not actively looking for work (because they have become discouraged, for example) but would take a job if one became available....The tally from those three categories is a mind-boggling 30 million Americans — 19 percent of the overall work force.

“This is, by far, the nation’s biggest problem and should be its No. 1 priority." ("A Scary Reality" Bob Herbert, New York Times)

Sorry, Bob, the media has no time for unemployment news. It tends to undermine the positive vibes from green shoots stories.

The stock market rally has made it harder for people to see the truth. But the facts haven't changed. Deflation is setting in across all sectors and the economy has reset at a lower rate of economic activity. Housing prices are falling, consumer spending is slowing, layoffs are rising, and demand is getting weaker. That means growth will be sub-par for the foreseeable future. Here's an excerpt from a speech given by San Francisco Fed Janet Yellen drawing the same conclusion:

"I don’t like taking the wind out of the sails of our economic expansion, but a few cautionary points should be considered... a massive shift in consumer behavior is under way.. American households entered this recession stretched to the limit with mortgage and other debt. The personal saving rate fell from around 8 per cent of disposable income two decades ago to almost zero. Households financed their lifestyles by drawing on increasing stock market and housing wealth, and taking on higher levels of debt. But falling house and stock prices have destroyed trillions of dollars in wealth, cutting off those ready sources of cash. What’s more, the stark realities of this recession have scared many households straight, convincing them that they need to save larger fractions of their incomes.... a rediscovery of thrift means fewer sales at the mall, and fewer jobs on assembly lines and store counters....

“This very weak economy is, if anything, putting downward pressure on wages and prices. We have already seen a noticeable slowdown in wage growth and reports of wage cuts have become increasingly prevalent—a sign of the sacrifices that some workers are making to keep their employers afloat and preserve their jobs. Businesses are also cutting prices and profit margins to boost sales..... With unemployment already substantial and likely to rise further, the downward pressure on wages and prices should continue and could intensify....

“If the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation. Worse still, if deflation were to intensify, we could find ourselves in a devastating spiral in which prices fall at an ever-faster pace and economic activity sinks more and more."

"Falling prices." "Deflation." "Devastating spiral." That's not the kind of honesty that one expects from a Fed chief. Yellen must have stopped drinking the lemonade.

And don't forget the banking system is still broken. Not a dime from the $700 billion TARP bailout was used to purchase toxic assets. The banks are still drowning in red ink. Bernanke has known since last September when Lehman Bros. defaulted, that the bad assets would have to be removed before the economy could recover. An underwater banking system is a constant drain on public resources and a drag on growth. Bernanke knows this, but rather than remove the assets by nationalizing the banks or restructuring their debt (as he should have done) he expanded the Fed's balance sheet by $1.2 trillion which provided the liquidity that financial institutions pumped into the stock market. "Bernanke's Rally" has generated the capital the banks needed to keep them from writing-down their debts or filing for Chapter 11, but the problems still persist right below the surface. Just this week, Elizabeth Warren's Congressional Oversight Panel released a damning report which stressed the need to address the issue of toxic assets. According to the COP's report:

"Financial stability remains at risk if the underlying problem of toxic assets remains unresolved.... If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix....

“Changing accounting standards helped the banks temporarily by allowing them greater leeway in describing their assets, but it did not change the underlying problem. In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem.

“The problem of troubled assets is especially serious for the balance sheets of small banks. Small banks‘ troubled assets are generally whole loans, but Treasury‘s main program for removing troubled assets from banks‘ balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans.

“Given the ongoing uncertainty, vigilance is essential. If conditions exceed those in the worst case scenario of the recent stress tests, then stress-testing of the nation‘s largest banks should be repeated to evaluate what would happen if troubled assets suffered additional losses."

To sum up: There will be no real recovery until the toxic assets problem is resolved. Unfortunately, the Treasury and Fed have shown that they intend to sweep this issue under the rug for as long as possible.

Toxic assets, falling home prices, widespread malaise in the credit markets are just part of the problem. The deeper issue is the dismal condition of the US consumer who has seen his home equity dissipate, his retirement funds sawed in half,his access to credit curtailed, and his job put at risk. Ordinary working class Americans now face what David Rosenberg calls, "the era of consumer frugality---new paradigm of savings, asset liquidation and debt repayment ." Life styles will have to be toned-down and living standards lowered to meet the new deflationary reality. More and more people will be forced to jettison their credit cards and live within their means. It's not the end of the world, but it does foreshadow a protracted period of negative growth, social unrest and persistent high unemployment. Stock market euphoria can last a long time, but the laws of gravity still apply. Things will shake out eventually---and when they do--stocks will return to earth, debts will be written down, and a new era of thriftiness will ensue. Until then, it looks like we'll just keep faking it.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

http://counterpunch.org/whitney08142009.html

Bulletins From Clunkerville

By MIKE WHITNEY

Is the economy really recovering or is it all just hype?

Here's what we know. The Fed doesn't drop rates to zero unless its facing a 5 alarm fire and needs to pull out all the stops. The idea is to flood the markets with liquidity in order to avoid a complete financial meltdown. It's a last-ditch maneuver and the Fed does not take it lightly.

The Fed initiated its zero interest rate policy, ZIRP, eight months ago (December 16 2008) and hasn't raised rates since. In the meantime, Fed chair Ben Bernanke has pumped huge amounts of money into the financial system using thoroughly-untested and unconventional means. No one knows whether Bernanke can roll up his multi-trillion dollar lending facilities or not (and avoid Zimbabwe-like hyperinflation) because no one has ever created similar programs. It's all "make-it-up-as-you-go" policymaking. What we do know, however, is that the Fed intends to keep rates at rock-bottom for the foreseeable future, which means that the lights are all still blinking red.

Here's an excerpt from the Federal Open Market Committee (FOMC) on Wednesday:

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

Translation: The economy is still getting battered and the Fed will keep rates at zero until the storm passes. Bernanke will continue to purchase boatloads of Fannie and Freddie mortgage-backed securities (MBS) to avoid an even-more precipitous decline in housing prices. The Fed will also purchase $300 billion in US Treasuries (monetization) in an effort to prime the pump and keep long-term interest rates artificially low. (Note: The Fed is only suspending its monetization program--Treasury buy-backs--because the dollar dropped to a dangerous support level, below which lies the abyss. Thus, Bernanke's announcement is not a sign of confidence in the fictional "recovery", but fear of a "disorderly unwind" of the dollar.)

On balance, the Fed's statement is an expression of desperation, not optimism. Bernanke would like nothing more than to prove to his critics wrong by raising rates and shutting down a couple lending facilities. But he has no choice. The situation is dire. Just imagine where housing prices would be today if Bernanke hadn't bought $1 trillion of mortgage-backed securities? Housing would be crashing even harder than it is already.

The Fed is in a pitch-battle with deflation, and it's losing ground fast. If that wasn't true, then Bernanke would simply raise rates .50 basis points and soak up some of the excess liquidity he's been spraying everywhere. But he can't, because if he did, the equities markets would plummet 500 points in an afternoon and the financial system would be tossed back on the rocks. Bernanke's liquidity is the only thing keeping the economy vanishing into a deflationary black hole.

The economy is still on life-support and the "green shoots" storyline is pure fiction. The financial system will be on a drip-feed from the Fed for years to come. Maybe forever. Things aren't better; they're worse. Look at the facts.

There were 1.9 million foreclosures in 2009 in the first six months, and there will be another 1.5 before the end of the year. Is that better?

According to Bloomberg:

"A glut of unsold homes is also pushing down prices. The 3.8 million homes for sale in June would take 9.4 months to sell at the current pace of transactions, according to the National Association of Realtors. The inventory turnover rate averaged 4.5 months in the six years from 2000 to 2005.....More than 18.7 million homes, including foreclosures, residences for sale and vacation homes, stood vacant in the U.S. during the second quarter....Total home sales fell 23.7 percent in June versus a year earlier." (Bloomberg)

Bloated supply, falling prices, record foreclosures, flagging demand--and according to Deutsche Bank--48 percent of all mortgages will be underwater by 2011. It's all bad.

Here's another clip from Bloomberg today 8-12-09:

"Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values.

The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today.

‘I don’t think we’re at a bottom yet in home prices,’ said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. ‘There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent up supply out there.”...Home prices are tumbling even as mortgage rates remain near all-time lows. The average U.S. rate for a 30-year fixed home loan was to 5.22 percent last week, down from 5.25 percent the prior week.’" (Bloomberg)

The decline in housing prices is accelerating, not slowing down. The historic collapse in real estate is ongoing and it is wiping out trillions in homeowner equity making it increasingly difficult for consumers to borrow on the diminishing value of their collateral. This is why foreclosures, defaults and personal bankruptcies are soaring. According to the American Bankruptcy Institute: consumer bankruptcy filings reached 126,434 in July, a 34.3 per cent increase year over year, and a 8.7 per cent increase sequentially (116,365 in June). July's number is the highest monthly total since the October 2005 bankruptcy reform aka the Bankruptcy Abuse Prevention and Consumer Protection Act.)

This is why households and consumers can no longer spend as much as they had before the crisis. Credit lines are being pared back; personal savings are rising, and GDP (excluding fiscal stimulus) is shrinking.

Every one of the 3.5 million foreclosures represents hundreds of thousands of dollars the banks will never recoup. That's why the rate of bank failures will be much greater than current estimates. The banks are facing a triple-whammy; soaring foreclosures, tumbling asset prices, and a meltdown in commercial real estate. The combo has created a gigantic capital hole which is forcing the banks to slow lend even to applicants with flawless credit. The Fed has built up excess bank reserves by $800 billion, but it hasn't made a bit of difference. They banks are still not able to lend.

The uptick in housing last month reflects seasonal changes and a shifting of pain from the low end of the market to higher priced homes; nothing more. Homes that are priced over $1 million are now sitting on the market for 20 months; a lifetime in real estate parlance. High-end neighborhoods have turned into leper colonies. Zero interest; zero traffic. Expect a crash this year.

Now take a look at this from CNBC's Diana Olick:

"The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg," said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington.

“According to Zillow's latest Homeowner Confidence Survey, 12 per cent of homeowners said they would be ‘very likely’ to put their home on the market in the next 12 months if they saw signs of a real estate market turnaround, 8 percent said ‘likely,’ while 12 percent said ‘somewhat likely.’
Survey results could translate into around 20 million homeowners trying to sell their homes, a startling number given that the Census bureau indicates there are 93 million U.S. houses, condos and co-ops, Humphries said.

“According to the National Association of Realtors, the market is currently on track to sell 4.89 million homes annually.

"’At this pace, it would take about four years to run through this amount of backlogged inventory,’ he said.

"’Shadow inventory has the potential to give us another leg down on home prices during the second half of the year,’ said Steven Wood, chief economist at Insight Economics in Danville, California. (Diana Olick, "Shadow inventory lurks over US housing recovery" CNBC)

The banks are using all types of accounting tricks to hide the real losses or the true value of downgraded assets. The only difference between a common crook and a commercial banker is a well-paid accountant.

The banking system is broken and it’s only going to get worse as the hammer comes down on the commercial real estate market. The Fed and Treasury are already working out the details for another stealth bailout that they'll initiate without Congress's approval. It's all very hush-hush. The plan will involve more mega-leveraging of government liabilities. Bernanke has appointed himself the de facto Czar of Hedge Fund Nation, Clunkerville USA. An article in this week's Financial Times further illustrates how the Fed has transformed the economy into a riverboat casino:

"The Federal Reserve Bank of New York is aggressively hiring traders as its seeks to manage its burgeoning securities holdings, making the central bank one of Wall Street's most active recruiters of financial talent.

“The Fed, which says that most of its new recruits come from private sector financial firms, is hiring employees as many banks, rating agencies, hedge funds and private equity groups shed staff. New York city officials recently estimated that the sector's woes would lead to a loss of up to 140,000 jobs.

“The Fed's need for more traders is a direct consequence of the central bank's efforts to keep credit flowing through the US economy. The Fed has been buying fixed-income securities at such a rate that its assets have more than doubled to $2,000bn in the past year, leading the central bank to conclude that it needs more people to monitor the markets and to manage its credit risks." (Financial Times, "NY Fed in hiring spree as assets soar", Aline van Duyn)

Can you believe it? The Fed is drafting a gaggle of professional speculators just to keep all its balls in the air. What a joke. This isn't a recovery; it's a sit-com. Here's Warren Buffett summing it up on CNBC:

"I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while.... I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true."

"The economy is in a shambles". That's from the horse's mouth. Inventories are down 11 per cent year-over-year, durable goods are down 10.4 per cent y-o-y, industrial capacity is at record lows, manufacturing is still contracting, housing is in the tank, shipping and rail freight are scraping the bottom, retail is in a long-term funk, and--according to Krugman--the slight dip in unemployment was a statistical anomaly. Here's Bob Herbert's great summary of the unemployment data:

"Some 247,000 jobs were lost in July, a number that under ordinary circumstances would send a shudder through the country. It was the smallest monthly loss of jobs since last summer. And for that reason, it was seen as a hopeful sign. The official monthly unemployment rate ticked down from 9.5 percent to 9.4 percent....The country has lost a crippling 6.7 million jobs since the Great Recession began in December 2007...

“The percentage of young American men who are actually working is the lowest it has been in the 61 years of record-keeping, according to the Center for Labor Market Studies at Northeastern University in Boston. Only 65 of every 100 men aged 20 through 24 years old were working on any given day in the first six months of this year. In the age group 25 through 34 years old, traditionally a prime age range for getting married and starting a family, just 81 of 100 men were employed.... The numbers are beyond scary; they’re catastrophic.

“This should be the biggest story in the United States. When joblessness reaches these kinds of extremes, it doesn’t just damage individual families; it corrodes entire communities, fosters a sense of hopelessness and leads to disorder....

“A truer picture of the employment crisis emerges when you combine the number of people who are officially counted as jobless with those who are working part time because they can’t find full-time work and those in the so-called labor market reserve — people who are not actively looking for work (because they have become discouraged, for example) but would take a job if one became available....The tally from those three categories is a mind-boggling 30 million Americans — 19 percent of the overall work force.

“This is, by far, the nation’s biggest problem and should be its No. 1 priority." ("A Scary Reality" Bob Herbert, New York Times)

Sorry, Bob, the media has no time for unemployment news. It tends to undermine the positive vibes from green shoots stories.

The stock market rally has made it harder for people to see the truth. But the facts haven't changed. Deflation is setting in across all sectors and the economy has reset at a lower rate of economic activity. Housing prices are falling, consumer spending is slowing, layoffs are rising, and demand is getting weaker. That means growth will be sub-par for the foreseeable future. Here's an excerpt from a speech given by San Francisco Fed Janet Yellen drawing the same conclusion:

"I don’t like taking the wind out of the sails of our economic expansion, but a few cautionary points should be considered... a massive shift in consumer behavior is under way.. American households entered this recession stretched to the limit with mortgage and other debt. The personal saving rate fell from around 8 per cent of disposable income two decades ago to almost zero. Households financed their lifestyles by drawing on increasing stock market and housing wealth, and taking on higher levels of debt. But falling house and stock prices have destroyed trillions of dollars in wealth, cutting off those ready sources of cash. What’s more, the stark realities of this recession have scared many households straight, convincing them that they need to save larger fractions of their incomes.... a rediscovery of thrift means fewer sales at the mall, and fewer jobs on assembly lines and store counters....

“This very weak economy is, if anything, putting downward pressure on wages and prices. We have already seen a noticeable slowdown in wage growth and reports of wage cuts have become increasingly prevalent—a sign of the sacrifices that some workers are making to keep their employers afloat and preserve their jobs. Businesses are also cutting prices and profit margins to boost sales..... With unemployment already substantial and likely to rise further, the downward pressure on wages and prices should continue and could intensify....

“If the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation. Worse still, if deflation were to intensify, we could find ourselves in a devastating spiral in which prices fall at an ever-faster pace and economic activity sinks more and more."

"Falling prices." "Deflation." "Devastating spiral." That's not the kind of honesty that one expects from a Fed chief. Yellen must have stopped drinking the lemonade.

And don't forget the banking system is still broken. Not a dime from the $700 billion TARP bailout was used to purchase toxic assets. The banks are still drowning in red ink. Bernanke has known since last September when Lehman Bros. defaulted, that the bad assets would have to be removed before the economy could recover. An underwater banking system is a constant drain on public resources and a drag on growth. Bernanke knows this, but rather than remove the assets by nationalizing the banks or restructuring their debt (as he should have done) he expanded the Fed's balance sheet by $1.2 trillion which provided the liquidity that financial institutions pumped into the stock market. "Bernanke's Rally" has generated the capital the banks needed to keep them from writing-down their debts or filing for Chapter 11, but the problems still persist right below the surface. Just this week, Elizabeth Warren's Congressional Oversight Panel released a damning report which stressed the need to address the issue of toxic assets. According to the COP's report:

"Financial stability remains at risk if the underlying problem of toxic assets remains unresolved.... If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix....

“Changing accounting standards helped the banks temporarily by allowing them greater leeway in describing their assets, but it did not change the underlying problem. In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem.

“The problem of troubled assets is especially serious for the balance sheets of small banks. Small banks‘ troubled assets are generally whole loans, but Treasury‘s main program for removing troubled assets from banks‘ balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans.

“Given the ongoing uncertainty, vigilance is essential. If conditions exceed those in the worst case scenario of the recent stress tests, then stress-testing of the nation‘s largest banks should be repeated to evaluate what would happen if troubled assets suffered additional losses."

To sum up: There will be no real recovery until the toxic assets problem is resolved. Unfortunately, the Treasury and Fed have shown that they intend to sweep this issue under the rug for as long as possible.

Toxic assets, falling home prices, widespread malaise in the credit markets are just part of the problem. The deeper issue is the dismal condition of the US consumer who has seen his home equity dissipate, his retirement funds sawed in half,his access to credit curtailed, and his job put at risk. Ordinary working class Americans now face what David Rosenberg calls, "the era of consumer frugality---new paradigm of savings, asset liquidation and debt repayment ." Life styles will have to be toned-down and living standards lowered to meet the new deflationary reality. More and more people will be forced to jettison their credit cards and live within their means. It's not the end of the world, but it does foreshadow a protracted period of negative growth, social unrest and persistent high unemployment. Stock market euphoria can last a long time, but the laws of gravity still apply. Things will shake out eventually---and when they do--stocks will return to earth, debts will be written down, and a new era of thriftiness will ensue. Until then, it looks like we'll just keep faking it.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

http://counterpunch.org/whitney08142009.html

The Fed on the Defensive

by Gary North

I do not recall this in my lifetime. A majority in the House of Representatives has co-signed H.R. 1207, a bill introduced by Ron Paul to have the Federal Reserve System audited by an independent government agency, the Comptroller General's office.

The bill has been bottled up in committee by Barney Frank, who has insisted that he is doing this in order to better coordinate consideration of the best way to gain greater transparency from the Federal Reserve. He has not said that he favors an independent audit of the FED.

It would be easy for Congressman Frank to hold hearings on the bill. This would allow Dr. Paul to bring in expert witnesses on the FED to make the case for an independent audit. It would get a lot of YouTube play. It would be the first time since the replacement of eccentric Congressman Wright Patman in 1975 as the chairman of the House Banking Committee that the FED has been exposed to anything like serious criticism in Congress. (Patman, an inflationist and a greenbacker, hated the FED. He was chairman of the House Banking Committee, 1965–75.) Congressman Frank has yet to announce hearings.

There was a posting on the DailyPaul site that Frank will hold hearings soon. Someone heard it on the radio. I will believe it when I see the YouTube videos.

The FED in June hired a public relations expert, Linda Robinson, to deal with Congress. She was formerly a lobbyist for Enron. I have little doubt that it was H.R. 1207 that forced the FED into this move.

Now Ron Paul's book, End the Fed, is about to be published. It is expected to become a best-seller. Think about this. There have been books attacking the Federal Reserve System for over ninety years, but they have been written by obscure people who no one in the general public has heard of. They have not sold well. They have not been written by someone who persuaded over half of the House of Representatives to support a bill to audit the FED. They have not been written by someone who once raised over $30 million in a run for President.

This is unprecedented. For the first time in the history of the Federal Reserve System, there are literally millions of people who have heard of the FED and who would like to see it shut down.

There have been academic and investment critics of this or that policy of the FED, most notably Milton Friedman, who criticized the FED for not inflating enough, 1930–33. But there has never been a serious audience ready to listen to arguments on why a system of 12 private banks should oversee monetary policy, and why one of them, the New York Federal Reserve Bank, should execute this policy without having to answer to anyone.

[much more thru link]
http://www.lewrockwell.com/north/north750.html

Assessing What Ron Paul Has Accomplished

Gary North

Aug. 31, 2009

I began my article on "The FED on the Defensive" with these words:

I do not recall this in my lifetime. A majority in the House of Representatives has co-signed H.R. 1207, a bill introduced by Ron Paul to have the Federal Reserve System audited by an independent government agency, the Comptroller General's office.

A reader sent me a suggested correction.

So if my realization is typical, framing discussion of the current crisis in terms of the U.S.A. repeating its own history could greatly facilitate comprehension of the vast majority who still do not perceive the present crisis clearly and otherwise won't until long after it has buried them. Because it is common to hear comments like "we're in uncharted territory" and your "I do not recall in my lifetime". While undoubtedly true in a sense, the more important other truth is that the nation has traveled this territory repeatedly in the past 300 years but apparently does not recognize it: we repeatedly failed to learn from the past. Why not hammer on the point that this crisis is the old recurring problem? Nothing new here. We should know what we've got coming to us as we've been "corrected" in the past so many times for the same contest between avaricious motives and libertarian ideals.

The critic means well, but he does not understand the magnitude of what Ron Paul has accomplished.

To suggest that, once upon a time, meaning before 1913, there were criticisms of central banking is like saying that, once upon a time, before Keynes' General Theory, there were criticisms of government budget deficits. Quaint, but irrelevant.

In the 19th century -- a century of the international gold standard and free trade -- there were critics of central banking. The economists debated this issue in sophisticated treatises. That, of course, is what economists do: debate. What is remarkable in retrospect is the high level of sophistication of the debates in the popular press.

Central banking was a hot topic in the Jackson era, especially in the key year of 1832, when the Whigs made it a political issue by introducing the bill to recharter the Second Bank of the United States four years before the charter would automatically expire. They did this in an election year. They thought they would win in November. Instead, they lost big.

Jackson won the bank war in 1832. The central bankers and the academic Establishment have never forgiven him for this. His position on the Second Bank is universally excoriated in economic history textbooks and monographs. This story even gets into lower division history textbooks. Students who are told about central banks only twice in the textbooks are told that Jackson was a narrow-minded bigot on central banking. The only other reference to central banking in the textbooks is the story -- carefully sanitized -- of the establishment of the Federal Reserve System, a victory described, though never explained, as a triumph of the American people over the political control of money. It was, of course, a triumph of the big bank cartel over competitive banks that offered greater safety. The bankers feared bank runs on overleveraged banks, meaning large New York City banks.

As an historian by training, I can think of no cartelization of any industry that has been more successfully concealed by academia. This is by far the largest, richest, and most successful cartel in American history. Yet there is almost no criticism of the system and its enforcement tool, the Federal Reserve System. Whatever mild technical quibbles the academic community has had with the FED, the central issue of central banking is never even mentioned, let alone refuted. What is the central issue? That all central banking is a government-licensed enforcement arrangement of a well-organized, well-funded cartel. As with all cartels, it operates at the expense of competitors who would otherwise offer better opportunities to the public.

For almost a century, criticisms of this arrangement have been confined to fringe groups. The most articulate of these critics have been members of the Austrian School of economics, most notably Ludwig von Mises and Murray Rothbard. No school of academic opinion opposes central banking, other than the Austrians. The success of academia and the mainstream media in suppressing the story of central banking has been almost total. Anyone with first-hand knowledge of the battle to break through this blackout knows how little success critics have had. They have been almost completely marginalized.

This is true in every nation. Central banking is today universal, excluding Andorra, Monte Carlo, and Panama.

That a Congressman who is regarded by his peers as a highly principled eccentric could get a bill to audit the Federal Reserve accepted by a substantial majority in the House of Representatives is nothing short of sensational. He was the right man at the right time.

The timing was created by Alan Greenspan, whose policies created the bubbles, followed by Ben Bernanke, who had no clue that his stabilization of the monetary base in 2006 and 2007 would create a near-collapse of the banking system.

There was Ron Paul, running for President, saying that this would happen. He was dismissed as a crank. Then it happened in one 60-day period: early September to early November, 2008. He is now perceived as a kind of prophet.

He targeted the FED. Millions of people heard him. They had not previously heard of the FED, let alone its threat to the economy. Then the crisis came, before the election. He had seen it coming. No one else with a public presence had.

Ron Paul analyzed things accurately. He had warned about the Federal Reserve ever since his first term in 1976. He stuck to his guns for 32 years. Then . . . boom! The FED's policies blew up in plain sight . . . and plain sites.

The FED is on the defensive for the first time. Three men made this possible: Greenspan Bernanke, and Paul. Only Paul has profited from this.

He really did create a revolution in the literate public's perception of the Federal Reserve System. The FED will never get the anti-FED toothpaste back in the tube. Not with YouTube.

For a 42-minute video on the Federal Reserve System produced by the Ludwig von Mises Institute, click the PLAY button.

http://www.garynorth.com/public/5389.cfm

In some ways, North is a fraud, by he writes often and well on this stuff. Use his ideas and expressions, and diffuse the knowledge they contain among our own.

[This is great stuff.]

Jackson won the bank war in 1832. The central bankers and the academic Establishment have never forgiven him for this. His position on the Second Bank is universally excoriated in economic history textbooks and monographs. This story even gets into lower division history textbooks. Students who are told about central banks only twice in the textbooks are told that Jackson was a narrow-minded bigot on central banking. The only other reference to central banking in the textbooks is the story -- carefully sanitized -- of the establishment of the Federal Reserve System, a victory described, though never explained, as a triumph of the American people over the political control of money. It was, of course, a triumph of the big bank cartel over competitive banks that offered greater safety. The bankers feared bank runs on overleveraged banks, meaning large New York City banks.

As an historian by training, I can think of no cartelization of any industry that has been more successfully concealed by academia. This is by far the largest, richest, and most successful cartel in American history. Yet there is almost no criticism of the system and its enforcement tool, the Federal Reserve System. Whatever mild technical quibbles the academic community has had with the FED, the central issue of central banking is never even mentioned, let alone refuted. What is the central issue? That all central banking is a government-licensed enforcement arrangement of a well-organized, well-funded cartel. As with all cartels, it operates at the expense of competitors who would otherwise offer better opportunities to the public.

I think that's the most memorable way I've seen the Fed arrangement + context described.

Good example for writers: it's not just that you provide an accurate description and explanation, it's that you make it as memorable as you possibly can. So it sticks.

In some ways, North is a fraud, by he writes often and well on this stuff. Use his ideas and expressions, and diffuse the knowledge they contain among our own.

He never gets into specifics does he? "The Fed" is some nameless, faceless giant banking cartel "that's been screwing us since Jackson". May be one of the reasons why the fed is so reluctant to open its books. Actual people might revealed and North does his usual job of not naming them.

Btw, has anyone ever conclusively documented the fed being controlled by the Rothschild banking/crime family? Ive read articles on the subject but the fed won't tell us who owns what and in what amount. The books are closed to the public so isn't ownership of the fed mostly just conjecture?

He never gets into specifics does he? "The Fed" is some nameless, faceless giant banking cartel "that's been screwing us since Jackson". May be one of the reasons why the fed is so reluctant to open its books. Actual people might revealed and North does his usual job of not naming them.

Btw, has anyone ever conclusively documented the fed being controlled by the Rothschild banking/crime family? Ive read articles on the subject but the fed won't tell us who owns what and in what amount. The books are closed to the public so isn't ownership of the fed mostly just conjecture?

North never gets deeper than that, that I've seen. Of course, North is big on selling information, so it's possible he goes deeper in his private stuff. My guess is he doesn't cares about the specifics of ownership and control, he cares about the fact of the cartel and its economic effects on the economy and country. North is a jew fan, and a member of a particularly jewy Protestant sect.

I'm not really aware of anyone else who goes into that stuff much deeper. Maybe LaRouche. You can find the historical personages in The Creature from Jekyll Island.

"Gary North, in his reckless and illegitimate campaign to smear me with falsehoods, ignores the fact that I republish several such Zionist texts in my book The Jewish Genocide of Armenian Christians which can be found at: http://www.jewishracism.com/JewishGenocide.htm, including the works of the American Jew Mordecai Manuel Noah in their entirety from pages 441 to 526, and lengthy extracts from the work of David Hartley and Isaac Newton on pages 109-120. One can also find articles reproduced in my book on pages 231-236, etc. More such reproductions are found in another of my books, The Manufacture and Sale of Saint Einstein.

North's statement that I present no factual basis for my claims is, not to put too fine a point on it, vicious nonsense. Mr. North is the first Christian theologian I have yet to encounter who is so ignorant of this significant body of literature, that he would dare to question the nature of the works I cite. I recommend that he read B. W. Tuchman, Bible and Sword: England and Palestine from the Bronze Age to Balfour, New York University Press, New York, (1956); before again making an ass of himself in this way. There are so many other less obvious ways for him to show his ignorance.

For example, Mr. North finds it extraordinary that I should state the well documented fact that Jewry was behind the Armenian Genocide. Gary North goes so far in his hateful campaign to smear me as to equate this widely held and thoroughly proven view with madness drawn from hatred. If he has read my book, which Gary North presumes to criticize, then he must have read the vast body of factual evidence I reproduce in it, including what the British Ambassador to the Ottoman Empire, Gerard Lowther, wrote to the British Foreign Office, (cont.)"

http://jewishracism.blogspot.com/2008/01/libertarian-goldbug-gary-north-jumps-in.html

North was also a Y2K hoax profiteer; I'm not recommending him for anything other than his column, which is pretty good.

"So now we know why the site exists. He wants to spread the word about Christian Reconstructionism. Not a bad thing in itself, until you dig a little deeper and get closer to the roots of North's beliefs. In this quote he talks about religious freedom, which is the entire basis for the existence of this country. His words are shocking and horrifying to me, and, I think, to any US citizen.

So let us be blunt: we must use the doctrine of religious liberty to gain independence for Christian schools until we train up a generation of people who know that there is no religious neutrality, no neutral law, no neutral education, and no neutral civil government. Then they will get busy in constructing a Bible-based social, political and religious order which finally denies the religious liberties of the enemies of God.

--Gary North, quoted in Albert J. Menendez, Visions of Reality: What Fundamentalist Schools Teach (Prometheus Books, 1993)"

http://www.sweetliberty.org/garynorth.htm

>>Yes, what he wrote is very good, and must stand alone.

Chart of who "owns" the Federal Reserve:

http://www.save-a-patriot.org/files/view/whofed.html

Priceless: How The Federal Reserve Bought The Economics Profession

by Ryan Grim

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.

Despite all this, Bernanke has been nominated for a second term by President Obama.

In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.

Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

So who seduced them?

The Fed did it.

Three Decades of Domination

The Fed has been dominating the profession for about three decades. "For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s," says University of Texas economics professor -- and Fed critic -- James Galbraith. "The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn't a culture of consulting, and it wasn't the same vast network of professional economists working there."

But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and "officers" -- who are generally also economists -- the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.

Just how dominant is the Fed today?

The Federal Reserve's Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship." A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.

Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, "Deception and Abuse at the Fed". A chapter in that book, excerpted here, provided the impetus for this investigation.

Auerbach found that in 1992, roughly 968 members of the AEA designated "domestic monetary and financial theory and institutions" as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it's fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed -- or who hope to one day soon -- and you've accounted for a very significant majority of the field.

Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."

[much more at link]
http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html?view=screen

But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.


Kosher parasites, every last one of them.

The kikes have really created a paradise for themselves, or should I say, the goyim have really created a paradise for the kikes.

The Third Rail of Academia

by Gary North

The Social Security system has long been described as the third rail of American politics. "Touch it, and you die." You get electrocuted. If you should somehow survive, the next subway train will cut you in pieces.

There is such a rail in academia: the Federal Reserve System.

A fascinating article appeared on the Huffington Post on September 10. Its title was good, and its content was better: "Priceless: How the Federal Reserve Bought the Economics Profession." The title is a veiled reference to a popular series of MasterCard TV ads. The author began with this, and never looked back.

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

It is a long article and well worth reading. It presents evidence that the Federal Reserve for three decades has had almost the entire profession of monetary economists on its payroll, one way or another.

He offers this example. In 1993, Greenspan informed the House Banking Committee that 189 economists worked for the Board of Governors (a government operation) and 171 worked for the 12 regional Federal Reserve banks (privately owned). Then there were 703 support staff and statisticians. These came from the ranks of economists.

This was only part of the story: the proverbial tip of the iceberg. From 1991–1994, the FED handed out $3 million to over 200 professors to conduct research.

This is still going on. There has been growth. The Board of Governors now employs 220 Ph.D.-level economists. But the real growth has been in contracts.

Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That is a great deal of money. This amount of money, the author implies, is sufficient to buy silence. He adds that there are fewer than 500 Ph.D.-level members of the American Economic Association whose specialty is either money and interest rates or public finance. In the private sector, about 600 are part of the National Association of Business Economists' Financial Roundtable.

If you count existing economists on the payroll, past economists on the payroll, economists receiving grants, and those who want in on the deal, "you've accounted for a very significant majority of the field."

In addition, the FED has editors of the academic journals on its payroll or grants list.

"It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.

This suggestion is dismissed as "silly" by Robert King, editor-in-chief of The Journal of Monetary Economics, who is a visiting scholar at the Federal Reserve Bank of Richmond.

Just plain silly. Nothing to it.

If you do not get published in an academic journal, you do not gain tenure at the top three-dozen universities in the United States.

The author cites a 1993 letter from Milton Friedman, which was sent to a critic of the FED, Robert Auerbach.

"I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results."

How many economists who sit on the seven top journals as editors are connected to the FED? Almost half: 84 of 190.

Nothing to it. Silly. It's just one of those things, just one of those crazy things.

The author cites testimony from Alan Greenspan before the House Banking Committee in 2008. This quotation is all over the Web. I will use the version cited in the Wikipedia article on Greenspan.

Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."

Mr. Waxman pressed the former Fed chair to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Mr. Waxman said.

"Absolutely, precisely," Mr. Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

And yet, and yet. . . .

The author did not ask what I thought should have been an obvious question. "Why was the Federal Reserve System immune to criticism from 1914 to 1975?"

Ask that question, let alone answer it, and you will not get your article published in anything but a conspiracy journal or LewRockwell.com.

IMMUNITY FROM 1914 TO EARLY 2009

The Federal Reserve System has been untouchable from the day that the Senate passed the Federal Reserve Act late in the afternoon of the day before Christmas recess in 1913, when only a handful of Senators remained on the floor to vote, and Woodrow Wilson signed it that evening.

There have been a few critics in Congress. In the Wilson years, there was Congressman Charles A. Lindbergh (the father of the flyer). He laid it on the line. His statement appears in his Wiki entry.

This Act establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized, the people may not know it immediately but the day of reckoning is only a few years removed. . . . The worst legislative crime of the ages is perpetrated by this banking bill.

In the 1930's, there was Congressmen Louis McFadden, a former banker. He was the author of the 1927 law that prohibited interstate banking. (It was repealed in 1994.) He was a hard-liner. He moved to impeach Herbert Hoover in 1932. For a Republican, this was unique for his era. Seven House members voted with him. He even introduced a resolution to bring conspiracy charges against the FED's Board of Governors. It also failed. He was hard-core. He was a fringe figure, as hard-core people usually are.

In the 1940's, there was Jerry Voohis, a fiat money greenbacker whose claim to fame was that he lost to Richard Nixon in 1946. In the 1950's and 1960's, there was Wright Patman, the eccentric populist from Texas, who chaired the House Banking Committee. For the last three decades, there has been Ron Paul.

That is pretty much it, 1914 to 2009. This is why Ron Paul's bill to audit the FED is such a breakthrough. For the first time since 1914, the FED is being called into question.

That is why the Huffington Post article misses the point. The economics profession, the American political system, and the media have been silent about the FED until the last year. This is what needs explaining.

ACADEMIA'S SILENCE

Back in my graduate school years, a generation ago, there was only one thoroughly critical book on the FED that was written by an academic free market economist: Fifty Years of Managed Money. The author was Elgin Groseclose, who was an advocate of the gold standard. The book did not go down the memory hole. It never got out of it. In 1980, it was republished under a new title, America's Money Machine. It stayed in the memory hole. The good news is that it is now available on-lime for free.

All this is to say that the FED received a free ride from academia and everyone else long before it began doling out hundreds of millions of dollars a year to academic economists.

How was this possible? I offer these suggestions, each of which would make a great rejected doctoral dissertation topic.

1. The advisory cartels that shape public opinion and politics in every nation, without exception has always favored central banking.
2. The methodologies of all schools of economic opinion except Austrianism and Marxism favor central banking.
3. Politicians of all parties want a lender of last resort to buy government debt at below-market prices.
4. Investors and their brokers want a floor for stock prices.
5. A conspiracy of bankers has pursued a cartel protected by central banking ever since 1694: the Bank of England.

But, you may respond, some of these topics are suitable for a dissertation topic in a history department. Political science, too. Quite true, and the dissertation will be rejected on the day the ABD (all but dissertation) student proposes it. Yet the FED does not fund historians and political scientists.

The protected status of central banking is universal. This is not unique to the United States. Central banking is by far the most protected anti-democratic institution in the modern world. The supporters of no other institution publicly defend the institution on this basis: a necessary means of protecting the nation from its legislature.

"IT'S THE METHODOLOGY, STUPID!"

Modern economics, except for Austrians and Marxists, teach that economics is a true science. Its model is physics. The economists are unwilling to accept the fact that human beings, unlike rocks, make decisions. These decisions make economics a realm of human action rather than physical cause and effect.

The Austrians begin with acting individuals to explain economic causation. The Marxists (all eight of them) begin with the mode of production. The Marxists are collectivists in every sense, but they view economics as a science based on dialectical materialism, not physics.

There is a third group, behavioral economists, who also break with the mainstream. But they do not break with the mathematical formulation of their theories of human action.

The supply-siders have yet to develop their theories into a consistent system. There is no college-level textbook based on their views. Their main pitch is that the government can and should cut marginal tax rates so that the government can and should collect more revenue.

The methodology of Keynesians, neoclassical economists, monetarists, behavioral economists, public choicers, and even rational expectationists are united: it is possible for central bankers to create economic growth and avoid recessions by increasing the money supply. They argue about the correct rate of fiat money growth. None of them concludes: "Shut down every central bank and let the free market decide the correct supply of money, given the right of non-fraudulent contract."

This is a legal question: What constitutes the right of contract in monetary affairs? This has been answered comprehensively and in great detail by Prof. J. H. de Soto. No other legal theorist-economist has ever presented anything comparable to his 874-page book, Money, Bank Credit, and Economic Cycles. It is on-line for free.

The economics profession favors either central banking or else, in the case of strict monetarists, believe the central bank can keep the economy working smoothly by a constant increase of the money supply by 3% to 5% per annum.

CONCLUSION

Until Ron Paul's H. R. 1207, Congress had remained comatose with regard to the FED ever since 1914. Bernanke is the first Chairman to face skepticism regarding the independence of the FED. This has to do with politics. Politicians want to find out which big banks got how much. This has nothing to do with the fundamental question, namely, the theoretical case for a bankers' cartel enforced by a central bank.

That question has not been raised by 99.9% of academia, the media, and politicians since 1914.

The Powers That Be will keep the public bamboozled for as long as the economy does not collapse, either through mass inflation, mass depression, or both.

They have had a free ride for a long time. The central banks' bad policies have resulted in what Austrian School economists had said would happen. Only they have provided a highly developed theory of how central banking necessarily distorts supply and demand, and why this distortion will inevitably be corrected by economic crisis. They do not say when, only that it must take place when the market vetoes the plans of entrepreneurs and politicians who believed in central bank central planning.

The bills are coming due. The crash will come. The consumers' veto will come. The FED's free ride will end.

In the meantime, audit the FED.

September 16, 2009

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

http://www.lewrockwell.com/north/north757.html

All this is to say that the FED received a free ride from academia and everyone else long before it began doling out hundreds of millions of dollars a year to academic economists.

How was this possible? I offer these suggestions, each of which would make a great rejected doctoral dissertation topic.

1. The advisory cartels that shape public opinion and politics in every nation, without exception has always favored central banking.
2. The methodologies of all schools of economic opinion except Austrianism and Marxism favor central banking.
3. Politicians of all parties want a lender of last resort to buy government debt at below-market prices.
4. Investors and their brokers want a floor for stock prices.
5. A conspiracy of bankers has pursued a cartel protected by central banking ever since 1694: the Bank of England.


Take one and five, replace "advisory cartel" with "jew media" and "bankers" with "jew bankers", and you've got the answer.

Not that North would ever say so in public.

The central bank could be called the Central Wank. Wank is English slang for masturbate. It is also a town in Austria.

http://img.thesun.co.uk/multimedia/archive/00860/CEN_TownOfWank_01_3_860653a.jpg

Ron Paul: Fed Threatens Depression, $100 Bills Worthless
DateSep 15, 2009

Reviewed by David M. Kinchen

Ron Paul Wants to 'End the Fed': Bring Back Sound Monetary Policies Backed by Something More Substantial Than Printing Presses

Don't Steal, the Government Hates Competition. -- Plaque on the desk
of Rep. Ron Paul

Judging by the plaque on the desk of Ron Paul, R-TX, the so-called (by his detractors) "Doctor No" of the Congress, one would think he hates government. But, as he shows in his latest book, End the Fed (Grand Central Publishing, 224 pages, $21.99) he doesn't hate government, he just wants it to do what the Constitution says it should do -- nothing more and nothing less.

One institution that he thinks is not only unconstitutional, but philosophically, economically and morally wrong is the Federal Reserve System, established in 1913 -- the same year as the federal income tax -- as a backdoor approach to a central bank. It was developed -- like the various czars, Troubled Asset Rescue Program (TARP) and bailouts of car companies and banks -- in response to a financial depression, one that occurred in 1907.

In the post-meltdown world, Paul says it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve. Throughout the book -- and especially in the last chapter, "The Way Out," Paul shows how the nation functioned just fine without a central bank. The states don't have central banks and must rely on tax revenue to live within their means, he says. He would like to see a return to the gold standard, but even without this ideal situation we shouldn't wait for one before we end the Fed. Too, arguments that a central bank would prevent financial panics certainly haven't come true in the almost 100 years we've had the Fed. In his view, the Great Depression was at least partially caused by the actions of the Fed.

Questioning the Fed is like questioning Mom, apple pie and the American way to most people who are unaware of its genesis at a meeting at Jekyll Island, Georgia in 1910. Most people think of the Fed as an indispensable institution without which the country's economy could not properly function. But in End the Fed, Ron Paul, a 2008 GOP Presidential contender and the 1988 Libertarian Party Presidential candidate, draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional. It is inflating currency today at nearly a Weimar Republic (Germany from 1919-1933) or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless.

What most people don't realize is that the Fed -- created by the Morgans and Rockefellers at a private club off the coast of Georgia -- is actually working against their own personal interests. Paul's urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America's economic policy for future generations.

Paul, a physician, is a dedicated follower of the Austrian school of economics -- he's a distinguished counselor to the Ludwig von Mises Institute, keeper of the flame for the Austrian school -- and he quotes many of that school's economists in his arguments against the Fed.

One of them is the late Murray N. Rothbard, who argued in his book History of Money and Banking, that the Fed did not originate as a policy response to national need. It wasn't erected for any of its stated purposes. It was founded by two groups of elites: government officials and large financial and banking interests. Rothbard adds a third critical element: economists hired to give the scheme a scientific patina.

Opposition to the Fed has come from the Left and the Right. An AlterNet story on the Left quotes a study by Huffington Post's Ryan Grim makes the same point Rothbard made in his book: That the Fed has dedicated itself to marginalizing economists who question the Fed.

Grim writes that "The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found."

Like Paul, Grim says that "this dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too."

Grim quotes Joshua Rosner, a Wall Street analyst who correctly called the meltdown: "The Fed has a lock on the economics world. There is no room for other views, which I guess is why economists got it so wrong."

Grim says, backing up Ron Paul's assertion that Keynesian economics has dominated the field, that one "critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past."

The timing is eerie, with the Huffington Post story coming two days before the Sept. 16 publication of End the Fed: Both Grim and Paul cite the failure of the Fed to see the housing bubble as it happened, with former Federal Reserve Chairman Alan Greenspan saying that "a national severe price distortion [is] most unlikely." His successor, current Fed Chairman Ben Bernanke said that the housing boom "largely reflects strong economic fundamentals.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect[s] strong economic fundamentals."

Despite all this, Bernanke has been nominated for a second term by President Barack Obama, convincing many observers that Obama's first term is becoming George W. Bush's third.

In a July 19, 2009 interview with Politico, the interviewer notes that "Dr. No" -- a nickname invented by his detractors -- is finding that "With the economy in the tank, the same cable news shows that spurned him during the election now keep asking him on to talk monetary policy. Republican House members are finally voting with him on spending measures."

Politico notes that "following his exhilarant, if quixotic, quest for the presidency, Paul finds himself simultaneously gratified and frustrated by his return to the friendlier-than-before confines of the House of Representatives. He thinks he’s well situated in Congress to push for his Libertarian causes, but then claims he doesn't "pay a whole lot of attention" to the activity on the House floor these days, adding, "I don't think it's relevant to the big picture: “A lot of this is just tinkering, bailing out, more money, more spending, no shift of direction and it's a little bit frustrating."
Ron Paul manages to unite those on the Left and the Right of the political spectrum. The book's jacket has this endorsement from liberal Arlo Guthrie: "Rarely has a single book not only challenged, but decisively changed my mind."

And, on the Right, actor Vince Vaughn says: "Everybody must read this book -- Congressmen and college students, Democrats and Republicans -- all Americans." Vaughn is a Libertarian who concluded after reading an advance copy of End the Fed that "the Federal Reserve, which serves private banks, has compromised our economy and is undermining our freedom. It can and must be stopped now."

Whether you agree with Ron Paul or not, End the Fed is must reading for everyone, especially those who've accepted the conventional wisdom about the Fed.

http://www.basilandspice.com/financial-well-being/ron-paul-fed-threatens-depression-100-bills-worthless.html

September 16, 2009, 11:00 AM ET

Ron Paul Q&A: Audit the Fed, Then End It

By Sudeep Reddy

For three decades, Rep. Ron Paul has waged a lonely battle in Congress to abolish the Federal Reserve. But he has more foot soldiers across the nation today, particularly after the financial crisis, who are leading the drive for wider congressional audits of the central bank. (See today’s Journal story for more on their movement.)
Rep. Ron Paul speaks to a growing group of followers. (Getty Images)

In his new book — “ End the Fed” — released today, Rep. Paul walks through his critique of the central bank and lays out a strategy (briefly) for eliminating it. We sat down with the congressman to hear his views on a money system backed by gold, the Fed’s challenge of withdrawing its stimulus and his legislation to audit the central bank. Excerpts of the interview:

What would a world without the Fed look like?

You’d go back to the day that if you wanted to borrow money to build a house, somebody would’ve had to save some money. You wouldn’t have zero savings and all the credit in the world. That’s just a total distortion of capitalism. Capital comes from savings. The part you don’t use for everyday living which you have left over, you reinvest and you save or you loan it out. We were living with something absolutely bizarre that had nothing to do with capitalism. We had no savings whatsoever yet there was all the credit in the world.

So without the Fed, there wouldn’t be as much credit.

Yeah, it would be different. If you were selling me a car and the car was worth $10,000 and I didn’t want to pay cash, you could take credit from me. You’ve got to have something to measure it by. What is a dollar? We don’t even know what a dollar is. There’s no definition for a dollar. There’s never been a time in law that said a Federal Reserve note is a dollar. That’s the basic flaw. There’s no definition for money. We’ve built a worldwide economy on a measuring rod that varies every single day. That’s why it was fragile, and that’s why it collapsed. There was no soundness to it. So that’s why you have to have a stable unit of account.

If you live in a primitive society, you’d trade goods. And if you wanted to advance, then you would trade a universal good, which would be a coin. But we’ve become sophisticated and smart and say, ‘Oh, you don’t have to go through that. We’ll just print the money. And we’ll trust the government not to print too much, and distribute it fairly.’ That’s often just a total farce. People are realizing that it is.

Don’t you think the Fed has moderated the business cycle over the past century?

Yes, I think they did smooth things out. The market’s always demanding the correction of the malinvestment and the excessive debt. … Since Bretton Woods broke down, I think every recession has been moderated by the Fed. That’s why the trust kept being built. That’s all a negative. You have to get rid of the mistakes. Moderating it means that we have slowed up the correction. The fact that they have been successful is probably the worst part about it. They’re moderating the rapidity of the crash and the correction by holding the mistakes in place.

What if, years from now, we see that the Fed has returned its balance sheet to its old size and pulled that money back from the system? Would that not be a validation of its approach?

There has only been one time that I know of where they have done that significantly, to withdraw anything of significance. That was after the Civil War. They withdrew greenbacks to a degree, they quit printing greenbacks, and they balanced the budget. I don’t think you can find any other time in our history and probably the history of the world. Because it’s an addiction, and the withdrawal is always much more serious than the continuation. The immediate problem of continuing the inflation is always more acceptable than withdrawal symptoms. Politically there will be continued inflation until it self-destructs.

So you don’t think it’s possible to pull it off?

They might try a little bit. With a weak economy, they’ll say it’s better for the economy to have low interest rates. If we didn’t have a Federal Reserve today, interest rates might be market driven. A lot of people would go bankrupt, but it would benefit the people who save. Capitalism is supposed to benefit the people who save. Even though they’re cheating the people who save, they’re cheating those on fixed income and the elderly, they will not quit inflating. The pain will be too great. They’re smart enough to know? They weren’t smart enough to know when they printed. They created the bubble. All of a sudden they’re going to get smart enough to know when to withdraw this? There’s not one chance in a million that’s going to happen.

But if the Fed were to pull this off and return its balance sheet to a normal size, where would that leave you?

If they were able to shrink their assets by 50%, to a trillion dollars or so … I would say it would challenge a lot of people. But I think the economic laws are in place. It’s only going to be temporary. It’s not going to happen. The only way you could do that is what I’ve been advocating for these last several years. You’ve got to cut spending, you’ve got to balance the budget, you’ve got to stop fighting these wars, you’ve got to bring our troops home, you’ve got to quit expanding the welfare state here at home … But I just don’t think the conditions exist. In theory you could, but if you do that without shrinking the size of the government and shrinking the deficit, it will be disastrous. It won’t work.

How would an audit lead to ending the Fed?

It’s a stepping stone. I think what’s going to lead to the next step is the destruction of the dollar, just like economic events moved further ahead than my legislative process. I wasn’t getting anywhere. But the economic events demanded that we look into it. So even if this bill passes and we have more information and we’re talking about monetary policy reform, I don’t think that’s the way this system is going to be ended. I think it’ll be ended when it’s a total failure and then it’ll have to be replaced by something. It could be replaced with a more authoritarian government, a more socialistic government.

Do you think the Fed will be abolished during your career?

I always thought the day would come… This economy is going to get worse and this dollar is going to get a lot worse. It’ll take care of itself. My real goal is educating people to the nature of money so that when this system fails, that they’ll know what to do and not just say ‘Well, we need a better manager.’

http://blogs.wsj.com/economics/2009/09/16/ron-paul-qa-audit-the-fed-then-end-it/

[Doltish WN repeat jewsmedia lies that the problems with banking come from lack of regulation. In fact, the problems are because of regulation.]

Jim Rogers Says Bank Regulators Should be in Jail For Not Allowing Banks to Fail

September 15th, 2009

There is a lot to say on the consequences of the policies of the regulators and the Federal Reserve from outrageous and irresponsible bailouts of big banks and some big businesses, and we’ll continue to talk about and expose that at American Banking News. But Jim Rogers gets to a very simple core principle of free market capitalism, and that is that allowing businesses and banks to fail has been part of the risk inherent in going into business in the first place, and is a end result of the quality and skill of those running those businesses.

So when the government uses and leverages taxpayers’ dollars to shore up poor management, they’ve interfered in the market in ways that they will never admit to and with results that will be difficult to lay blame at their doorstep as the years go on. They know that, and so continue on their merry way, understanding they may never be held accountable for their actions, nor their actions understood by most.

Jim Rogers and others will have none of that though, and Rogers said recently at the CNBC Wordwide Exchange that he not only wished that Lehman Brothers had failed, but 10 other banks as well. He even adds that the government was thrilled that Lehman Brothers failed because it gave them an excuse to “jump in and support banks.”

Here’s how Rogers sees the current problem and its source:

“The real problem over the past 10-15 years has been that regulators have not let people fail. Had they let people fail we would have solved this problem a long time ago. I don’t know why they’re not in jail.”

When Rogers says this, understand he’s identifying the problem as it is today, not attacking the ultimate root of the problem, which is the Federal Reserve and the need to abolish it. But to wonder why they’re not in jail for their actions is a powerful statement by Rogers as to what their practices have brought about, and the consequences of those actions across a wide sphere of our social makeup.

Rogers has been accurately hitting hard for some time on the foolishness of propping up any business by the government which has obviously been run poorly. He rightly exposed the stupidity of supporting businesses and banks which aren’t able to compete with better run companies, and although dead, are allowed to live, not based on improved practices, but on the infusion of taxpayer money which they think will be offered in endless supply. That’s why Rogers always uses the term “zombie” when referring to businesses and banks this type of artificial life support.

When you follow this line of reasoning and use zombie as a metaphor, think of those monster movies you’ve watch. It’s not natural to have something come back from the dead and walk around the streets feeding off of that which is alive. But that’s exactly what the Federal Reserve and regulators have allowed to happen. And every time they do it, the terribly run banks get bigger and are allowed to continue operating, doing business as usual, knowing every time they’re bailed out it’s one more step toward always being bailed out because they’re “too big to fail.” This is truly monstrous and a waste of assets.

Rogers takes the practices of the Federal Reserve with the blessing of the government and extends them to their logical conclusion, which is zombie banks will end up with zombie capitalism. By that he means the system is being fought from being allowed to cleanse itself and the quality companies emerge even stronger after the bad companies have been removed from the system. He now expects ‘zombie capitalism’ to run rampant over the next 15-20 years, with many large companies that should have been left to die, resuscitated by mortgaging the futures of our children and grandchildren.

In the end, no matter how much money you throw at at problem, if the business and banking practices are wrong, you’re doing nothing but wasting money and extending the problem by not allowing the genious of the free market system to cleanse itself of the impurities of managments that don’t know what they’re doing.

On top of all these problems and the usual unintended consequences, Rogers adds that we’ll enter into either a full currency crisis, or at minimum a semi-crisis, sometime with the next year or so.

It’s as simple as allowing banks and business to fail when others are run better than they are. How hard can that be for the Federal Reserve and regulators to understand?

http://www.americanbankingnews.com/2009/09/15/jim-rogers-says-bank-regulators-should-be-in-jail-for-not-allowing-banks-to-fail/

Lehman Died So TARP and AIG Might Live

by Mike Whitney

"Lehman's fate was sealed not in the boardroom of that gaudy Manhattan headquarters. It was sealed downtown, in the gloomy gray building of the New York Federal Reserve, the Wall Street branch of the U.S. central bank."

~ Stephen Foley, UK Independent

Stephen Foley is on to something. Lehman Bros. didn't die of natural causes; it was drawn-and-quartered by high-ranking officials at the US Treasury and the Federal Reserve. Most of the rubbish presently appearing in the media, ignores this glaring fact. Lehman was a planned demolition (most likely) concocted by ex-Goldman Sachs CEO Henry Paulson, who wanted to create a financial 9-11 to scare Congress into complying with his demands for $700 billion in emergency funding (TARP) for underwater US banking behemoths. The whole incident reeks of conflict of interest, corruption, and blackmail.

The media have played a critical role in peddling the official "Who could have known what would happen" version of events. Bernanke and Paulson were fully aware that they playing with fire, but they chose to proceed anyway, using the mushrooming crisis to achieve their own objectives. Then things began to spin out of control; credit markets froze, interbank lending slowed to a crawl, and stock markets plunged. Even so, the Fed and Treasury persisted with their plan, demanding their $700 billion pound of flesh before they'd do what was needed to stop the bleeding. It was all avoidable.

Lehman had potential buyers – including Barclays – who probably would have made the sale if Bernanke and Paulson had merely provided guarantees for some of their trading positions. Instead, Treasury and the Fed balked, thrusting the knife deeper into Lehman's ribs. They claimed they didn't have legal authority for such guarantees. It’s a lie. The Fed has provided $12.8 trillion in loans and other commitments to keep the financial system operating without congressional approval or any explicit authorization under the terms of its charter. The Fed never considered the limits of its "legal authority" when it bailed-out AIG or organized the acquisition of Bear Stearns by JP Morgan pushing $30 billion in future liabilities onto the public's balance sheet. The Fed's excuses don't square with the facts.

Here's how economist Dean Baker recounts what transpired last September 15:

"Last September, when he (Bernanke) was telling Congress that the economy would collapse if it did not approve the $700 billion TARP bailout, he warned that the commercial paper market was shutting down.

This was hugely important because most major companies rely on selling commercial paper to meet their payrolls and pay other routine bills. If they could not sell commercial paper, then millions of people would soon be laid off and the economy would literally collapse.

What Mr. Bernanke apparently forgot to tell Congress back then is that the Fed has the authority to directly buy commercial paper from financial and non-financial companies. In other words, the Fed has the power to prevent the sort of economic collapse that Bernanke warned would happen if Congress did not quickly approve the TARP. In fact, Bernanke announced that the Fed would create a special lending facility to buy commercial paper the weekend after Congress voted to approve the TARP." ("Bernanke's bad Money," Dean Baker, CounterPunch)

The reason Bernanke did not underwrite the commercial paper market was, if he had, he wouldn't have been able to blackmail congress. He needed the rising anxiety from the crisis to achieve his goals.

Here's a clip from an editorial in the New York Times (admitting most of what has already been stated) that tries to put a positive spin on the Fed's behavior:

"Mr. Nocera says that almost everyone he’s ever spoken to in Hank Paulson’s old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about. In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe. In retrospect, if you had to choose one firm to throw under the bus to save everyone else, you would choose Lehman.... it is quite likely that the financial crisis would have been even worse had Lehman been rescued. Although nobody realized it at the time, Lehman Brothers had to die for the rest of Wall Street to live. ("Lehman Had to Die So Global Finance Could Live," Sept. 14, 2009, New York Times)

So, according to the muddled logic of the NY Times, everything worked out for the best so there's no need to hold anyone accountable. (Tell that to the 7 million people who have lost their jobs since the beginning of the meltdown.) This latest bit of spin is pure cover-your-ass journalism, an attempt to rewrite history and absolve the guilty parties. The fact is, Paulson and Bernanke deliberately created the crisis in order to jam their widely-reviled TARP policy down the public's throat. The Times thinks the public should be grateful for that because, otherwise, the crooked insurance giant, AIG, would not have been bailed out and Goldman Sachs and other Wall Street heavies would not have been paid off.

The reason panic spread through the markets after Lehman filed for bankruptcy, was because the Reserve Primary Fund, which had lent Lehman $785 million (and received short-term notes called commercial paper) couldn't keep up with the rapid pace of withdrawals from worried clients. The sudden erosion of trust triggered a run on the money markets. Here's an excerpt from a Bloomberg article, "Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion":

"On Tuesday, Sept. 16, the run on Reserve Primary continued. Between the time of Lehman’s Chapter 11 announcement and 3 p.m. on Tuesday, investors asked for $39.9 billion, more than half of the fund’s assets, according to Crane Data.

“Reserve’s trustees instructed employees to sell the Lehman debt, according to the SEC.

“They couldn’t find a buyer.

“At 4 p.m., the trustees determined that the $785 million investment was worth nothing. With all the withdrawals from the fund, the value of a single share dipped to 97 cents.

“Legg Mason, Janus Capital Group Inc., Northern Trust Corp., Evergreen and Bank of America Corp.’s Columbia Management investment unit were all able to inject cash into their funds to shore up losses or buy assets from them. Putnam closed its Prime Money Market Fund on Sept. 18 and later sold its assets to Pittsburgh-based Federated Investors.

“At least 20 money fund managers were forced to seek financial support or sell holdings to maintain their $1 net asset value, according to documents on the SEC Web Site.

“When news that Reserve Primary broke the buck hit the wires at 5:04 p.m. that Tuesday, the race was on." (Bloomberg)

This is what a run on the shadow banking system looks like. Bernanke and Paulson pinpointed the trouble in the commercial paper market and used it to put more pressure on Congress to approve their bailout bill.

Bloomberg again:

"It was commercial paper and the $3.6 trillion money market industry that traded the notes that came close to sinking the global economy – not a breakdown in credit-default swaps or bank-to-bank lending....

“Like ice-nine, the fictitious substance in Kurt Vonnegut Jr.'s 1963 novel Cat’s Cradle, a single seed of which could harden all the world’s water, commercial paper was the crystallizing force that froze credit markets, choking off the ability of companies and banks to borrow money and pay bills." (Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion, Bob Ivry, Mark Pittman and Christine Harper, Bloomberg News)

Bernanke could have fixed the problem in an instant. All he needed to do was provide explicit government guarantees on money markets and commercial paper. That would have ended the bank-run pronto. But he chose not to. He chose to wait until Congress capitulated so he could net $700 billion for his banking buddies.

According to the UK Telegraph:

"On Thursday night, the Treasury went literally down on his knees before Nancy Pelosi, speaker of the House of Representatives, begging her to agree taxpayer money to bail out the financial system. Bernanke, a scholar of the financial panic that caused the Great Depression, told fearful lawmakers there wouldn't be a banking system in place by Monday morning if they didn't act. Paulson talked openly about planning for martial law, about how to feed the American people if banking and commerce collapsed."

Despite their dire warnings, on Monday morning, the banking system was still intact, just as it was a full month later when the first TARP funds were handed out to the big banks. It was all a hoax. The problem wasn't the banks toxic assets at all, but the commercial paper and money markets. The Fed and Treasury knew that they could count on Congress's abysmal ignorance of anything financial; and they weren't disappointed. On October 3, 2008, Congress passed the Financial Rescue Plan (TARP). Paulson's fear-mongering had triumphed.

Here's a quick look at the Lehman chronology:

On Sept. 15, 2008, Lehman Bros. filed for bankruptcy sending the Dow plummeting 504 points.

On Sept. 17, the Dow falls 449 points in reaction to AIG bailout.

On Sept. 29, the Dow tumbles 777 points after House votes "No" on TARP.

On Oct. 3, the House passes Financial Rescue Plan (TARP). The Dow falls 818 points.

On Oct. 7, the Fed creates the Commercial Paper Funding Facility to backstop the commercial paper market. Two weeks later, Bernanke announces the Money Market Investor Funding Facility to make loans of longer maturities.

These are the two facilities which relieved the tension in the markets, not the TARP funds. It's clear that Bernanke knew exactly how to fix the problem, because he did so as soon as the TARP was passed. Here's economist Dean Baker in The American Prospect:

"Bernanke was working with Paulson and the Bush administration to promote a climate of panic. This climate was necessary in order to push Congress to hastily pass the TARP without serious restrictions on executive compensation, dividends, or measures that would ensure a fair return for the public's investment.

“Bernanke did not start buying commercial paper until after the TARP was approved by Congress because he did not want to take the pressure off, thereby leading Congress to believe that it had time to develop a better rescue package. ("Did Ben Bernanke Pull the TARP Over Eyes?", Dean Baker, The American Prospect)

The American people have been ripped off by industry reps working the policy-levers from inside the government. That's the real lesson of the Lehman bankruptcy. Happy anniversary.

September 18, 2009

Mike Whitney [send him mail] lives in Washington state.

http://www.lewrockwell.com/whitney/whitney13.1.html

Lehman Died So TARP and AIG Might Live

by Mike Whitney

"Lehman's fate was sealed not in the boardroom of that gaudy Manhattan headquarters. It was sealed downtown, in the gloomy gray building of the New York Federal Reserve, the Wall Street branch of the U.S. central bank."

~ Stephen Foley, UK Independent

Stephen Foley is on to something. Lehman Bros. didn't die of natural causes; it was drawn-and-quartered by high-ranking officials at the US Treasury and the Federal Reserve. Most of the rubbish presently appearing in the media, ignores this glaring fact. Lehman was a planned demolition (most likely) concocted by ex-Goldman Sachs CEO Henry Paulson, who wanted to create a financial 9-11 to scare Congress into complying with his demands for $700 billion in emergency funding (TARP) for underwater US banking behemoths. The whole incident reeks of conflict of interest, corruption, and blackmail.

The media have played a critical role in peddling the official "Who could have known what would happen" version of events. Bernanke and Paulson were fully aware that they playing with fire, but they chose to proceed anyway, using the mushrooming crisis to achieve their own objectives. Then things began to spin out of control; credit markets froze, interbank lending slowed to a crawl, and stock markets plunged. Even so, the Fed and Treasury persisted with their plan, demanding their $700 billion pound of flesh before they'd do what was needed to stop the bleeding. It was all avoidable.

Lehman had potential buyers – including Barclays – who probably would have made the sale if Bernanke and Paulson had merely provided guarantees for some of their trading positions. Instead, Treasury and the Fed balked, thrusting the knife deeper into Lehman's ribs. They claimed they didn't have legal authority for such guarantees. It’s a lie. The Fed has provided $12.8 trillion in loans and other commitments to keep the financial system operating without congressional approval or any explicit authorization under the terms of its charter. The Fed never considered the limits of its "legal authority" when it bailed-out AIG or organized the acquisition of Bear Stearns by JP Morgan pushing $30 billion in future liabilities onto the public's balance sheet. The Fed's excuses don't square with the facts.

Here's how economist Dean Baker recounts what transpired last September 15:

"Last September, when he (Bernanke) was telling Congress that the economy would collapse if it did not approve the $700 billion TARP bailout, he warned that the commercial paper market was shutting down.

This was hugely important because most major companies rely on selling commercial paper to meet their payrolls and pay other routine bills. If they could not sell commercial paper, then millions of people would soon be laid off and the economy would literally collapse.

What Mr. Bernanke apparently forgot to tell Congress back then is that the Fed has the authority to directly buy commercial paper from financial and non-financial companies. In other words, the Fed has the power to prevent the sort of economic collapse that Bernanke warned would happen if Congress did not quickly approve the TARP. In fact, Bernanke announced that the Fed would create a special lending facility to buy commercial paper the weekend after Congress voted to approve the TARP." ("Bernanke's bad Money," Dean Baker, CounterPunch)

The reason Bernanke did not underwrite the commercial paper market was, if he had, he wouldn't have been able to blackmail congress. He needed the rising anxiety from the crisis to achieve his goals.

Here's a clip from an editorial in the New York Times (admitting most of what has already been stated) that tries to put a positive spin on the Fed's behavior:

"Mr. Nocera says that almost everyone he’s ever spoken to in Hank Paulson’s old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about. In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe. In retrospect, if you had to choose one firm to throw under the bus to save everyone else, you would choose Lehman.... it is quite likely that the financial crisis would have been even worse had Lehman been rescued. Although nobody realized it at the time, Lehman Brothers had to die for the rest of Wall Street to live. ("Lehman Had to Die So Global Finance Could Live," Sept. 14, 2009, New York Times)

So, according to the muddled logic of the NY Times, everything worked out for the best so there's no need to hold anyone accountable. (Tell that to the 7 million people who have lost their jobs since the beginning of the meltdown.) This latest bit of spin is pure cover-your-ass journalism, an attempt to rewrite history and absolve the guilty parties. The fact is, Paulson and Bernanke deliberately created the crisis in order to jam their widely-reviled TARP policy down the public's throat. The Times thinks the public should be grateful for that because, otherwise, the crooked insurance giant, AIG, would not have been bailed out and Goldman Sachs and other Wall Street heavies would not have been paid off.

The reason panic spread through the markets after Lehman filed for bankruptcy, was because the Reserve Primary Fund, which had lent Lehman $785 million (and received short-term notes called commercial paper) couldn't keep up with the rapid pace of withdrawals from worried clients. The sudden erosion of trust triggered a run on the money markets. Here's an excerpt from a Bloomberg article, "Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion":

"On Tuesday, Sept. 16, the run on Reserve Primary continued. Between the time of Lehman’s Chapter 11 announcement and 3 p.m. on Tuesday, investors asked for $39.9 billion, more than half of the fund’s assets, according to Crane Data.

“Reserve’s trustees instructed employees to sell the Lehman debt, according to the SEC.

“They couldn’t find a buyer.

“At 4 p.m., the trustees determined that the $785 million investment was worth nothing. With all the withdrawals from the fund, the value of a single share dipped to 97 cents.

“Legg Mason, Janus Capital Group Inc., Northern Trust Corp., Evergreen and Bank of America Corp.’s Columbia Management investment unit were all able to inject cash into their funds to shore up losses or buy assets from them. Putnam closed its Prime Money Market Fund on Sept. 18 and later sold its assets to Pittsburgh-based Federated Investors.

“At least 20 money fund managers were forced to seek financial support or sell holdings to maintain their $1 net asset value, according to documents on the SEC Web Site.

“When news that Reserve Primary broke the buck hit the wires at 5:04 p.m. that Tuesday, the race was on." (Bloomberg)

This is what a run on the shadow banking system looks like. Bernanke and Paulson pinpointed the trouble in the commercial paper market and used it to put more pressure on Congress to approve their bailout bill.

Bloomberg again:

"It was commercial paper and the $3.6 trillion money market industry that traded the notes that came close to sinking the global economy – not a breakdown in credit-default swaps or bank-to-bank lending....

“Like ice-nine, the fictitious substance in Kurt Vonnegut Jr.'s 1963 novel Cat’s Cradle, a single seed of which could harden all the world’s water, commercial paper was the crystallizing force that froze credit markets, choking off the ability of companies and banks to borrow money and pay bills." (Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion, Bob Ivry, Mark Pittman and Christine Harper, Bloomberg News)

Bernanke could have fixed the problem in an instant. All he needed to do was provide explicit government guarantees on money markets and commercial paper. That would have ended the bank-run pronto. But he chose not to. He chose to wait until Congress capitulated so he could net $700 billion for his banking buddies.

According to the UK Telegraph:

"On Thursday night, the Treasury went literally down on his knees before Nancy Pelosi, speaker of the House of Representatives, begging her to agree taxpayer money to bail out the financial system. Bernanke, a scholar of the financial panic that caused the Great Depression, told fearful lawmakers there wouldn't be a banking system in place by Monday morning if they didn't act. Paulson talked openly about planning for martial law, about how to feed the American people if banking and commerce collapsed."

Despite their dire warnings, on Monday morning, the banking system was still intact, just as it was a full month later when the first TARP funds were handed out to the big banks. It was all a hoax. The problem wasn't the banks toxic assets at all, but the commercial paper and money markets. The Fed and Treasury knew that they could count on Congress's abysmal ignorance of anything financial; and they weren't disappointed. On October 3, 2008, Congress passed the Financial Rescue Plan (TARP). Paulson's fear-mongering had triumphed.

Here's a quick look at the Lehman chronology:

On Sept. 15, 2008, Lehman Bros. filed for bankruptcy sending the Dow plummeting 504 points.

On Sept. 17, the Dow falls 449 points in reaction to AIG bailout.

On Sept. 29, the Dow tumbles 777 points after House votes "No" on TARP.

On Oct. 3, the House passes Financial Rescue Plan (TARP). The Dow falls 818 points.

On Oct. 7, the Fed creates the Commercial Paper Funding Facility to backstop the commercial paper market. Two weeks later, Bernanke announces the Money Market Investor Funding Facility to make loans of longer maturities.

These are the two facilities which relieved the tension in the markets, not the TARP funds. It's clear that Bernanke knew exactly how to fix the problem, because he did so as soon as the TARP was passed. Here's economist Dean Baker in The American Prospect:

"Bernanke was working with Paulson and the Bush administration to promote a climate of panic. This climate was necessary in order to push Congress to hastily pass the TARP without serious restrictions on executive compensation, dividends, or measures that would ensure a fair return for the public's investment.

“Bernanke did not start buying commercial paper until after the TARP was approved by Congress because he did not want to take the pressure off, thereby leading Congress to believe that it had time to develop a better rescue package. ("Did Ben Bernanke Pull the TARP Over Eyes?", Dean Baker, The American Prospect)

The American people have been ripped off by industry reps working the policy-levers from inside the government. That's the real lesson of the Lehman bankruptcy. Happy anniversary.

September 18, 2009

Mike Whitney [send him mail] lives in Washington state.

http://www.lewrockwell.com/whitney/whitney13.1.html

We really should have a massive jews-in-Fed/finance/TARP scandal, with pictures and connections, showing how it all fits together. Not that I fully understand myself, I don't. I have a decent general idea, that's it.

The American people have been ripped off by industry reps working the policy-levers from inside the government. That's the real lesson of the Lehman bankruptcy. Happy anniversary.

This is why regulation is not the answer: the regulated parties will have a revolving door with the government. The answer is not to regulate. Let (banks) fail. Let consumers cry. The short-term pain for some beats long-term pain for all caused by the religious faith in regulation and the illusionary safety it is supposed to afford.

We really should have a massive jews-in-Fed/finance/TARP scandal, with pictures and connections, showing how it all fits together. Not that I fully understand myself, I don't. I have a decent general idea, that's it.

That's what keeps Average Joe from exploding in rage over the most gigantic hosing in history: if even people with brains can't fully grasp all the nuances of such an incredibly - and deliberately - complex scam, how can he?

It's called "baffling 'em with bullshit".

Lefty Taibbi does the best job of explaining what it's all about I've yet seen.

That's what keeps Average Joe from exploding in rage over the most gigantic hosing in history: if even people with brains can't fully grasp all the nuances of such an incredibly - and deliberately - complex scam, how can he?

It's called "baffling 'em with bullshit".

Lefty Taibbi does the best job of explaining what it's all about I've yet seen.

Yeah, he's good.

You can say that "the jews running the government printed a trillion dollars and used it to bail out a bunch of their superrich banker jew friends. The meaning to you is that your money is going to lose a lot of purchasing power due to inflation."

But if there is no inflation or obvious, felt negative to the actions, no matter how theoretically odious, it's hard to get people fired up.

That's what keeps Average Joe from exploding in rage over the most gigantic hosing in history: if even people with brains can't fully grasp all the nuances of such an incredibly - and deliberately - complex scam, how can he?

It's called "baffling 'em with bullshit".

Lefty Taibbi does the best job of explaining what it's all about I've yet seen.

As you say the crimes are so complex and so layered and apparently all pervasive that it boggles the mind. Take Madoff for example. 50 billion. It's such a huge number that it overwhelms and you ask yourself...how can that happen? How much did congress sell us out to the fed in taxpayer bailout money that the big jew banks received? Is it 800 billion or has it reached a trillion yet?

Isn't this how revolutions start?

Isn't this how revolutions start?

When the middle-class women have to turn tricks for bread, and wheelbarrows are needed to move the notes to buy that bread - that is when revolutions begin. When the Olive Garden neverending pasta bowl comes to an end, that's when the bourgeois lift their selfish heads up and for once listen. If the System's filling their gut and their wallet, they don't want to hear anything.

This is why regulation is not the answer: the regulated parties will have a revolving door with the government. The answer is not to regulate.

You're still not explaining the inconvenient fact that under the old (moderate to me) regulatory regime, the financial sector was far more stable than under deregulation.

You're still not explaining the inconvenient fact that under the old (moderate to me) regulatory regime, the financial sector was far more stable than under deregulation.

What you don't like you call deregulation, but there has never been deregulation in the last 100 years. Anytime you have the feds backing up banks and individual accounts you have regulation. You're using words loosely, in order to attack people you don't like, which is the regular practics of the jewsmedia. Any failure they attribute to not enough regulation. That's what you're doing.

Originally Posted by Mike Parker
"You're still not explaining the inconvenient fact that under the old (moderate to me) regulatory regime, the financial sector was far more stable than under deregulation."

I don't favor deregulation- I favor no regulation. The entire banking setup is a series of cartels, established by legislation, mainly the Federal Reserve Act. Under real deregulation, all the banking privileges would have been stripped away. There would be NO banking laws at all- no Federal Reserve. There would be enforcement of contracts.

When they "deregulated" electricity in California a few years ago, price controls were left in place. This goes against econ 1A. And who was in charge of the "deregulation"? The Public Utilities Commission, which is the head regulatory agency!

Yeah, he's good.

You can say that "the jews running the government printed a trillion dollars and used it to bail out a bunch of their superrich banker jew friends. The meaning to you is that your money is going to lose a lot of purchasing power due to inflation."

But if there is no inflation or obvious, felt negative to the actions, no matter how theoretically odious, it's hard to get people fired up.

Yep. I mentioned politics in general with a female cousin a few weeks ago, trying to instill a little kike-savvy resentment. She said "Whenever people start talking politics, I don't want to hear it. There ain't a damn thing I can do about anything, so why bother? It's hard enough for me to work these 12-hour shifts....."

That's the evil beauty of this system: as kids, make 'em ignorant with jew-jiggered skools; as adults, keep 'em hustling for just enough zogbux to keep their heads above water; when they collapse exhausted onto the couch in the evening, pacify 'em with Flava o' Love jootoob poison . T.J.B.

What you don't like you call deregulation, but there has never been deregulation in the last 100 years. Anytime you have the feds backing up banks and individual accounts you have regulation. You're using words loosely, in order to attack people you don't like, which is the regular practics of the jewsmedia. Any failure they attribute to not enough regulation. That's what you're doing.

I'm using the word in its common meaning. You're right that deregulation is itself a regulatory regime--call it less regulation. The fact remains that this crisis happened under the regime of less regulation, not more regulation, and therefore the crisis itself isn't attributable to regulation per se. I think it shows there's better regulation and worse regulation.

Under real deregulation, all the banking privileges would have been stripped away. There would be NO banking laws at all- no Federal Reserve. There would be enforcement of contracts.


That's the banker's biggest privilege. Why should the banker get the benefit of government (sheriff) when it comes time to foreclose? Privatize that.

I'm using the word in its common meaning. You're right that deregulation is itself a regulatory regime--call it less regulation. The fact remains that this crisis happened under the regime of less regulation, not more regulation, and therefore the crisis itself isn't attributable to regulation per se. I think it shows there's better regulation and worse regulation.

Here's the way I look at it.

There are three basic problems:

- counterfeiting
- self-serving, self-dealing corrupt Tribesters
- regulators tying deadbeats and deadbanks to the solid and upstanding

Always through America, as the government exands, we see the same pattern: self-interested jew-heavy corrupt elite using socialist bullshit words to weigh down the sober, responsible and trustworthy with the bills of the defective.

Even with no jews in society, and no muds, there would be whites trying to do this. The only way around it, since the corrupt and immoral have a much stronger interest in working together than the good guys, is to take government out of the picture altogether. That means NO regulation of banking. Let different banks and monies flourish as private people see fit, and if they go bad, let the people who used them pay price rather than the entire country. That is a better way of doing things than what we have now, where the CRA muds and the kosher superbankers are protected and normal whites get screwed.

Many folks want to use the state for selfish purposes. What would have happened if they openly admitted to being pigs? It wouldn't fly. Legislation HAD to be asserted as being "for the people"- to get the people to accede.

In 1963, a jew marxist named Gabriel Kolko wrote The Triumph of Conservatism. Here is Kolko's partial introduction:

"Assuming that the burden of proof is ultimately on the writer, I contend that the period from approximately 1900 until the United States' intervention in the war, labeled the "progressive" era by virtually all historians, was really an era of conservatism. Moreover, the triumph of conservatism that I will describe in detail throughout this book was the result not of any impersonal, mechanistic necessity but of the conscious needs and decisions of specific men and institutions.

There were any number of options involving government and economics abstractly available to national political leaders during the period 1900-1916, and in virtually every case they chose those solutions to problems advocated by the representatives of concerned business and financial interests. Such proposals were usually motivated by the needs of the interested businesses, and political intervention into the economy was frequently merely a response to the demands of particular businessmen. In brief, conservative solutions to the emerging problems of an industrial society were almost uniformly applied. The result was a conservative triumph in the sense that there was an effort to preserve the basic social and economic relations essential to a capitalist society, an effort that was frequently consciously as well as functionally conservative.

I use the attempt to preserve existing power and social relationships as the criterion for conservatism because none other has any practical meaning. Only if we mechanistically assume that government intervention in the economy, and a departure from orthodox laissez faire, automatically benefits the general welfare can we say that government economic regulation by its very nature is also progressive in the common meaning of that term. Each measure must be investigated for its intentions and consequences in altering the existing power arrangements, a task historians have largely neglected.

I shall state my basic proposition as baldly as possible so that my essential theme can be kept in mind, and reservations and intricacies will be developed in the course of the book. For the sake of communication I will use the term progressive and progressivism, but not, as have most historians, in their commonsense meanings.

Progressivism was initially a movement for the political rationalization of business and industrial conditions, a movement that operated on the assumption that the general welfare of the community could be best served by satisfying the concrete needs of business. But the regulation itself was invariably controlled by leaders of the regulated industry, and directed toward ends they deemed acceptable or desirable. In part this came about because the regulatory movements were usually initiated by the dominant businesses to be regulated, but it also resulted from the nearly universal belief among political leaders in the basic justice of private property relations as they essentially existed, a belief that set the ultimate limits on the leaders' possible actions.

It is business control over politics (and by "business" I mean the major economic interests ) rather than political regulation of the economy that is the significant phenomenon of the Progressive Era. Such domination was direct and indirect, but significant only insofar as it provided means for achieving a greater end-political capitalism. Political capitalism is the utilization of political outlets to attain conditions of stability, predictability, and security-to attain rationalization �in the economy. Stability is the elimination of internecine tion and erratic fluctuations in the economy. Predictability is the ability, on the basis of politically stabilized and secured means, to plan future economic action on the basis of fairly calculable expectations. By security I mean protection from the political attacks latent in any formally democratic political structure. I do not give to rationalization its frequent definition as the improvement of efficiency, output, or intemal organization of a company; I mean by the term, rather, the organization of the economy and the larger political and social spheres in a manner that will allow corporations to function in a predictable and secure environment permitting reasonable profits over the long run. My contention in this volume is not that all of these objectives were attained by World War I, but that important and significant legislative steps in these directions were taken, and that these steps include most of the distinctive legislative measures of what has commonly been called the Progressive Period.

Political capitalism, as I have defined it, was a term unheard of in the Progressive Period. Big business did not always have a coherent theory of economic goals and their relationship to immediate actions, although certain individuals did think through explicit ideas in this connection. The advocacy of specific measures was frequently opportunistic, but many individuals with similar interests tended to prescribe roughly the same solution to each concrete problem, and to operationally construct an economic program. It was never a question of regulation or no regulation, of state control or laissez faire; there were, rather, the questions of what kind of regulation and by whom. The fundamental proposition that political solutions were to be applied freely, if not for some other industry's problems then at least for one's own, was never seriously questioned in practice. My focus is on the dominant trends, and on the assumptions behind these trends as to the desirable distribution of power and the type of social relations one wished to create or preserve. And I am concerned with the implementation and administration of a political capitalism, and with the political and economic context in which it flourished."

The pro-regulation folks need to learn that special interests hide under "public legislation." The FDA was not created by Ralph Nader types- it was created by drug companies (and other buddies).

Let's say a meat packer wants to inject a marginal (dangerous) hormone. They get an edict from the USDA, allowing, or even mandating the hormone. If a researcher blows the whistle, the meat packer can say the government made us use the hormone! It was the tobacco companies who demanded the warnings on labels.

The article points out the irony:

- the folks who favor regulation think regulators are drawn from the ranks of angels rather than the industries they fear

By pretending that certain practices were "forced" upon them by the government, they become immune to lawsuits.

By pretending that certain practices were "forced" upon them by the government, they become immune to lawsuits.

There's no pretense if the laws exist, regardless of who argued for them in the first place.

The introduction of jews to America led to their taking over the law schools, which in turn led to ridiculous distortions of tort law, from which the business community, as the medical community, naturally seeks to protect itself.

Maybe this South Park episode can explain the bailout:

http://www.southparkstudios.com/episodes/220760

Maybe this South Park episode can explain the bailout:

http://www.southparkstudios.com/episodes/220760

Nope. The courtier satirists take the government party line, which is that the way out of our economic problems, and unprecedented personal debt, is to...

...go out and buy things.

Nope. The courtier satirists take the government party line, which is that the way out of our economic problems, and unprecedented personal debt, is to...

...go out and buy things.

They're also sure to ridicule those who blame the kikes.

You can watch the hearings on Ron Paul's bill to audit the fed, this friday (sept. 25) at 9am here:

H.R. 1207, the Federal Reserve Transparency Act of 2009

9 a.m., Friday, September 25, 2009, 2128 Rayburn House Office Building
Full Committee

http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchr_092509.shtml

The Federal Reserve System Repays the Treasury Most of the Interest It Collects From the Treasury

by Gary North
]
Most critics of the Federal Reserve believe that the central bank earns enormous profits as a result of its legal authority to create money. I have tried to correct this misconception for almost 40 years. I keep trying.

The Federal Reserve System does create money to buy U.S. Treasury debt. The Treasury does pay interest to the Federal Reserve on this debt. But the FED does not keep most of this money. It repays the Treasury, after deducting operating expenses: a few billion dollars per year. In 2008, this was a little over $4 billion, or 13% of revenues.

Here is the latest document from the FED: The Federal Reserve Banks: Combined Financial Statements as of and for the Years Ended December 31, 2008 and 2007 and Report of Independent Auditors. The columns appear on page 2. The 2008 figures are in the left-hand column. The 2007 figures are in the right-hand column. According to this audited report, the FED paid the Treasury over $31 billion in 2008.

Yes, the FED is audited. It is audited each year by a large accounting firm. This job rotates each year to another firm. The FED determines what the firms are shown and what they are not shown, e.g., the actual gold held by the FED on behalf of the U.S. government. (The firms are not shown the gold. No agency is ever shown the gold, including Congress.)

The author of the typical anti-FED article does not know this. He assumes that the FED pockets all the money. It doesn't.

Some of the articles insist that the Rothschilds own the FED. They don't. Member banks do.

Almost none of the authors analyze the FED as (1) the enforcing arm of a huge cartel and (2) lender of last resort to the largest banks. Yet this is the heart of the Federal Reserve System's function. It protects the largest banks. It always has.

It restricts entry into the field. This is another feature of every cartel: government-restricted entry. This protects above-market returns for members of the cartel.

This means that the Federal Reserve System is a government agency. Anyhow, the Board of Governors is. Look at its site. Its suffix is .gov. The regional banks are all .org.

Turn to any first-year college textbook in economics. Read the chapter on the economics of cartels. Then read the chapter on the Federal Reserve System. There is a total disconnect. The chapter on cartels describes the cartel as benefiting the members by reducing competition. The more free market–oriented textbooks will describe the cartel as reducing efficiency by reducing consumer choice. It may even dispute the claim of every cartel, that it furthers the public good.

The chapter on the FED describes it as an agency favoring the public good. It does not mention the analysis on the chapter on cartels. Yet the analysis of the chapter on cartels fits the FED quite well.

There is widespread ignorance regarding the FED. If you want to understand how the FED works, and what the economic implications are, read these free books on the FED, written by Murray Rothbard, a free market economist who really did understand the FED. Begin here: The Case Against the FED. Then read his textbook on money and banking, The Mystery of Banking. Then read his history of the origins of the FED. See Part 2 of his History of Money and Banking in the U.S.

Finally, read the booklet published by the Federal Reserve Bank of Chicago, Modern Money Mechanics. The booklet shows how the fractional reserve process works. It's straight from the horse's mouth! (It has been out of print for many years. Hooray for the Web!)

October 26, 2009

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

http://www.lewrockwell.com/north/north775.html

Debt
November 12, 2009

The well known economist John Williams, told World Net Daily recently, "The Fed is monetizing U.S. Treasury debt in order to debase the dollar, to create inflation, in hopes of avoiding deflation. This move also sets the precedent for the Fed acting as a lender of last resort to the US Treasury, if foreign and other investors in US Treasuries balk at upcoming auctions or look to dump existing holdings. The record federal deficits ahead, mean record Treasury borrowings. Fed monetization of debt eventually means surging money supply growth and much higher inflation." In other words, suppose they had an auction, and no one bid?


Not as dense as Sir Alan would have put it, but in plain words, the government has been unable to sell its debt in sufficient quantities to China, India, and sucker John Q. public, and in order to keep on spending, they have bought their own debt. Nice trick, huh? Robbing Peter to pay Paul? Not quite. How about robbing the populace (Peter) to pay for all the crud, earmarks, welfare, warfare, handouts, bureaucracy, regulations, et al (Paul) in order to stay in office? How much debt do you, the reader have? I'll bet not much. If you have debts, you have to budget your income and expenses to pay that debt. Not so in D.C. All they have to do is vote to raise the national debt, which currently, and 'officially' is over $12 trillion, and will soon be 'officially' at $13 trillion. I use the quotes around 'officially,' because it's a damned lie as is most figures emanating from D.C. are. Do you actually believe that the unemployment rate is 10.2%? Do you really and truly believe the inflation rate is 2%? I don't. Throughout history, all governments have lied to their citizenry to cover up their mistakes. The Obama gang is no different.


The debt which Uncle Sam is committed to pay in the form of Social Security, Medicare, and the like over the years, was $65.5 trillion in 2008, and with the Obama gang in residence, it will soon be $100,000,000,000,000. That's twelve zeros, an amount incomprehensible to me.


Williams continued, "Because of the U.S. government's effective insolvency with $65.5 trillion in obligations, even before the Obama administration deficits, the higher inflation caused by the Fed buying Treasury debt has the early potential of evolving into an uncontrolled hyperinflation, in which the US dollar becomes totally worthless." The $65.5 trillion in debt is accounted for by "Generally Accepted Accounting Principles," (GAAP) which all businesses use, and it means that by GAAP rules, the U.S. Government has a negative net worth of $65.5 trillion as of a year ago, and climbing.


Of course, no one in their right mind would buy anything from, use a bank, or trust a business that was trillions in the hole or which had a negative net worth. Why do China and India still buy any US debt? They almost have to, in order to keep the whole thing from collapsing and crashing like Humpty Dumpty. They own so much of our debt, that they have to play it safe to preserve their wealth. They buy ever less and less, and sell more and more, till they are rid of it, while at the same time continuing to sell their stuff to the remaining US citizens who can afford to buy anything at all. China has hundreds of thousands of unemployed also, thanks to reduced buying all over the world from them.


The entire world's economy is hanging by a thread! It would take but a few little glitches to take the whole thing down. The UK is in terrible shape, as is France, Italy, Germany, and even Russia. Everyone in government is scared to death, but they keep on spending. Is Congress that stupid? Are they so dumb, that they can't stop spending? It appears to be so, or they would cease and desist. Shouldn't they all be ousted, with the exception of Ron Paul?


The stock market is doing almost an exact repeat of the 1929 crash. The stock market didn't actually reach the bottom till July 8,1932, when the Dow sunk to 41.22 "Black Thursday," occurred on October 29, 1929, when a record 16.3 million shares were sold. After the crash, many businesses and factories went broke and fired their employees. The unemployment figures grew and grew, just like they are growing now, till the unemployment rate reached 23.6% in 1932. Ours, is "officially" at 10.2% and rising. You decide if it will hit the 1932 level. When Roosevelt took office, like Obama, rather than reducing taxes, he raised them, thereby exacerbating the situation. Obama is in lock step with FDR...doing everything wrong. FDR got America out by getting us into WW II. Will Obama do the same in Afghanistan, Iran, or who knows where? The markets went up and down erratically until FDR took office, and then the Great Depression really began. George Bush preceded Obama with stupid moves, such as TARP, which the Republicans and Democrats grabbed on to with a great enthusiasm, even though 95% of the American citizens begged, wrote, and called their representatives, telling them a big NO. They voted for it anyway, and I can still hear John McCain telling voters that he had to rush back to DC to vote "yes.'


Are there any Republicans who might just be smart enough, forceful enough, young enough, and appealing enough to the voters, to capture the White House in 2012? So far, I'd take Texas Governor Perry and Sarah Palin. If Republicans are smart enough to change their voting habits and reform themselves, it is possible that both Houses could be re-captured in 2010. Will it happen, or should we just forget about politics, and concentrate on protecting ourselves? I'm ever an optimist maybe, but I am ordering "Perry/Palin in '12" bumper strips and will send out one with each order till the thousand run out, and then maybe I'll order more. Perry is a young, handsome guy, deep voice, excellent speaker, a conservative who has threatened to take Texas out of the union if they don't behave, and Sara is just great. There simply has to be a light at the end of this dark, Democratic tunnel.


P.S. to show the utter ignorance of the general public, a client sent me a you-tube of a fellow trying to sell an $1100 one ounce, gold Maple Leaf to people for $50. He tried over and over again, and no one would buy a one ounce gold coin for $50. He tried to sell it for $5 several times, and there were no takers. The economic ignorance is appalling.

http://www.coloradogold.com/archive/Debt-906.html

Debt
November 12, 2009

The well known economist John Williams, told World Net Daily recently, "The Fed is monetizing U.S. Treasury debt in order to debase the dollar, to create inflation, in hopes of avoiding deflation. This move also sets the precedent for the Fed acting as a lender of last resort to the US Treasury, if foreign and other investors in US Treasuries balk at upcoming auctions or look to dump existing holdings. The record federal deficits ahead, mean record Treasury borrowings. Fed monetization of debt eventually means surging money supply growth and much higher inflation." In other words, suppose they had an auction, and no one bid?


Not as dense as Sir Alan would have put it, but in plain words, the government has been unable to sell its debt in sufficient quantities to China, India, and sucker John Q. public, and in order to keep on spending, they have bought their own debt. Nice trick, huh? Robbing Peter to pay Paul? Not quite. How about robbing the populace (Peter) to pay for all the crud, earmarks, welfare, warfare, handouts, bureaucracy, regulations, et al (Paul) in order to stay in office? How much debt do you, the reader have? I'll bet not much. If you have debts, you have to budget your income and expenses to pay that debt. Not so in D.C. All they have to do is vote to raise the national debt, which currently, and 'officially' is over $12 trillion, and will soon be 'officially' at $13 trillion. I use the quotes around 'officially,' because it's a damned lie as is most figures emanating from D.C. are. Do you actually believe that the unemployment rate is 10.2%? Do you really and truly believe the inflation rate is 2%? I don't. Throughout history, all governments have lied to their citizenry to cover up their mistakes. The Obama gang is no different.


The debt which Uncle Sam is committed to pay in the form of Social Security, Medicare, and the like over the years, was $65.5 trillion in 2008, and with the Obama gang in residence, it will soon be $100,000,000,000,000. That's twelve zeros, an amount incomprehensible to me.


Williams continued, "Because of the U.S. government's effective insolvency with $65.5 trillion in obligations, even before the Obama administration deficits, the higher inflation caused by the Fed buying Treasury debt has the early potential of evolving into an uncontrolled hyperinflation, in which the US dollar becomes totally worthless." The $65.5 trillion in debt is accounted for by "Generally Accepted Accounting Principles," (GAAP) which all businesses use, and it means that by GAAP rules, the U.S. Government has a negative net worth of $65.5 trillion as of a year ago, and climbing.


Of course, no one in their right mind would buy anything from, use a bank, or trust a business that was trillions in the hole or which had a negative net worth. Why do China and India still buy any US debt? They almost have to, in order to keep the whole thing from collapsing and crashing like Humpty Dumpty. They own so much of our debt, that they have to play it safe to preserve their wealth. They buy ever less and less, and sell more and more, till they are rid of it, while at the same time continuing to sell their stuff to the remaining US citizens who can afford to buy anything at all. China has hundreds of thousands of unemployed also, thanks to reduced buying all over the world from them.


The entire world's economy is hanging by a thread! It would take but a few little glitches to take the whole thing down. The UK is in terrible shape, as is France, Italy, Germany, and even Russia. Everyone in government is scared to death, but they keep on spending. Is Congress that stupid? Are they so dumb, that they can't stop spending? It appears to be so, or they would cease and desist. Shouldn't they all be ousted, with the exception of Ron Paul?


The stock market is doing almost an exact repeat of the 1929 crash. The stock market didn't actually reach the bottom till July 8,1932, when the Dow sunk to 41.22 "Black Thursday," occurred on October 29, 1929, when a record 16.3 million shares were sold. After the crash, many businesses and factories went broke and fired their employees. The unemployment figures grew and grew, just like they are growing now, till the unemployment rate reached 23.6% in 1932. Ours, is "officially" at 10.2% and rising. You decide if it will hit the 1932 level. When Roosevelt took office, like Obama, rather than reducing taxes, he raised them, thereby exacerbating the situation. Obama is in lock step with FDR...doing everything wrong. FDR got America out by getting us into WW II. Will Obama do the same in Afghanistan, Iran, or who knows where? The markets went up and down erratically until FDR took office, and then the Great Depression really began. George Bush preceded Obama with stupid moves, such as TARP, which the Republicans and Democrats grabbed on to with a great enthusiasm, even though 95% of the American citizens begged, wrote, and called their representatives, telling them a big NO. They voted for it anyway, and I can still hear John McCain telling voters that he had to rush back to DC to vote "yes.'


Are there any Republicans who might just be smart enough, forceful enough, young enough, and appealing enough to the voters, to capture the White House in 2012? So far, I'd take Texas Governor Perry and Sarah Palin. If Republicans are smart enough to change their voting habits and reform themselves, it is possible that both Houses could be re-captured in 2010. Will it happen, or should we just forget about politics, and concentrate on protecting ourselves? I'm ever an optimist maybe, but I am ordering "Perry/Palin in '12" bumper strips and will send out one with each order till the thousand run out, and then maybe I'll order more. Perry is a young, handsome guy, deep voice, excellent speaker, a conservative who has threatened to take Texas out of the union if they don't behave, and Sara is just great. There simply has to be a light at the end of this dark, Democratic tunnel.


P.S. to show the utter ignorance of the general public, a client sent me a you-tube of a fellow trying to sell an $1100 one ounce, gold Maple Leaf to people for $50. He tried over and over again, and no one would buy a one ounce gold coin for $50. He tried to sell it for $5 several times, and there were no takers. The economic ignorance is appalling.

http://www.coloradogold.com/archive/Debt-906.html

[Gary North]

The Treasury will either renege on its debt or else the government will pass laws cutting expected benefits. Perhaps a combination of these will be the most politically acceptable approach.

http://www.lewrockwell.com/north/north787.html

[Gary North]

The Treasury will either renege on its debt or else the government will pass laws cutting expected benefits. Perhaps a combination of these will be the most politically acceptable approach.

There is no way that the Treasury's debt will be repaid. Everyone knows this, including Chinese central bankers and politicians. When Saturday Night Live opens with a skit on Obama's visit to China, where Obama keeps telling President Jintao that China will get its money back, and President Jintao asks him how, exactly, and Obama cannot say, we know that the world knows that America's debt is not going to be repaid. The live SNL audience gets it. The audience at home gets it. Everyone gets it. China is not going to get its money back. While the skit utilizes some crude humor, the message is clear. The economic data in the skit are factually accurate. When the details of America's foreign trade disaster can be turned into an SNL skit, the word is out.

Nothing changes. Nothing will change until China and other Asian nations cease playing kick the can.

http://www.lewrockwell.com/north/north787.html

Here's the SNL skit mocking US indebtedness, it's not bad actually.

http://www.nbc.com/saturday-night-live/video/clips/china-cold-open/1178451/

"Are there any Republicans who might just be smart enough, forceful enough, young enough, and appealing enough to the voters, to capture the White House in 2012? So far, I'd take Texas Governor Perry and Sarah Palin. If Republicans are smart enough to change their voting habits and reform themselves, it is possible that both Houses could be re-captured in 2010. Will it happen, or should we just forget about politics, and concentrate on protecting ourselves? I'm ever an optimist maybe, but I am ordering "Perry/Palin in '12" bumper strips and will send out one with each order till the thousand run out, and then maybe I'll order more. Perry is a young, handsome guy, deep voice, excellent speaker, a conservative who has threatened to take Texas out of the union if they don't behave, and Sara is just great. There simply has to be a light at the end of this dark, Democratic tunnel."

On YouTube at her most embarrassing: YouTube- Palin: Jewish Settlements Should Be Allowed to Expand, Because More Jews Are 'Flocking' to Israel

_______________________________

The Goddess of Implicit Whiteness: A Review of Going Rogue
Richard Hoste
November 25, 2009


The Sailer worldview:
Sarah Palin’s intelligence = blank slate
Every other person in the entire world’s intelligence: biologically determined.
-Annonymous commentato (http://isteve.blogspot.com/2009/11/what-nobody-says-about-sarah-palin.html?showComment=1258757149652#c3786557521035624797)r (http://isteve.blogspot.com/2009/11/what-nobody-says-about-sarah-palin.html?showComment=1258757149652#c3786557521035624797)at Steve Sailer’s blog

It has been suggested (http://pajamasmedia.com/blog/the-sarah-palin-rorschach-test/) that Sarah Palin is a sort of Rorschach test for Americans. The attractive, religious and fertile White woman drove the ugly, secular and barren White self-hating and Jewish elite absolutely mad well before there were any questions about her qualifications. The loyalty she inspires in the White masses is similarly based on gut feelings rather than rational analysis.

The latest chapter in the Palin saga is her book Going Rogue. I usually don’t like to read these kinds of ghostwritten works by politicians who still have ambitions for higher office. You’re not hearing the candidate speak about what he believes or getting a sense of his own style, but reading what he thinks he should say to be politically acceptable to the masses filtered through the diction of a nobody.


Indeed, there is much in this book that would be hard to imagine coming out of the author’s mouth. Take the second sentence.


With the gray Talkeetna Mountains in the distance and the first light covering of snow about to descend on Pioneer Peak, I breathed in an autumn bouquet that combined everything small-town America with rugged splashes of the Last Frontier.


At other points the author quotes Plato and Aristotle. Near the end, she even discusses economics with Bristol, the kid who got knocked up. We're informed that this daughter dreams of opening a coffee shop with her cousin. After Palin explains to the teenager that Obama is destroying capitalism, Bristol the economist replies:



"You're always preaching that government 'can't make you happy, healthy, wealthy, or wise.' Business owners are smarter than politicians give them credit for, and President Obama is wrong to think more government control is the answer. Pay attention to the tea parties, Mom. You're not alone in this. That's what they're saying."


Bristol's barista wage: $7.25 an hour.

Her advice to the president (and her mom): priceless.


Despite the drawbacks inherent in a book like this, the Palin phenomenon says so much about modern day America that ignoring her autobiography would be to miss a major cultural event. And combing through Rogue may shed light on who has the ear of the lady who may very well be our president in a few years.



Not a Typical National Politician


The first three chapters tell the story of Sarah Palin’s life up until she was selected to be John McCain’s running mate. Chapter four is the 2008 campaign and five is what has happened since. Chapter six is a short fourteen pages that sum up the author’s political philosophy.


Sarah Heath was born in Idaho. Her father was a schoolteacher and the Alaskan gold rush had created a demand for professionals to serve the growing population of the 49th state. She arrived in Skagway, population at the time 650, as a three-month-old. From then on she had a typical American upbringing.


Sarah met Todd when she was a senior in high school. He had come to Wasilla for his last year of school to play on the basketball team. Sarah admired his work ethic and was impressed by how polite he was to her parents. But then she tells us that he chewed tobacco, didn’t go to church and cussed. When Todd informs Sarah that he’d been baptized at a sports camp a few years before meeting her, she knows that he’s the right man for her.



Sarah graduated from high school with the goal of being a sports journalist. She took five years to finish college not because she was dumb, as some have suggested, but because she had to pay her way and would occasionally take a semester off. At eighteen she supposedly read the platforms of both the major political parties and decided to become a Republican due to her love of America, beliefs in individual rights and capitalism, and her “respect for equality.”



According to Sarah, Todd was the first and only boy she ever kissed. When he tried to put the moves on her for the first time she jumped out of the car. The Palins got married at a courthouse and had their wedding dinner at Wendy’s. Unlike the Obamas, as young adults they had real jobs. Finding one that paid $14 an hour would be a cause for celebration. Years later when accused of having a conflict of interest because her husband was employed by the oil industry, Governor Palin would explain to her state that “Todd’s not in management. He actually works.”



As a politician, Palin claims to always have been looking out for the best interests of her constituents. She rose to become the mayor of her hometown and from there went on to the governorship of the state. The way she tells it, Palin was a completely disinterested public servant who fought corruption wherever she found it.



There seems to be some truth in her account. In 2006 the FBI served almost twenty search warrants on the offices of state legislators, most of whom were Republicans. Palin herself would be untouched during the corruption investigations and no impropriety was found after she came back to Alaska after the 2008 campaign. This is despite the fact that she and her family would go $500,000 in debt defending herself against ethics complaints, which could be filed at no cost to the accuser.



Less believable are Palin’s claims that when her family moved into the Governor’s Mansion they fired the private cook to save the state money. If this is true and it wasn’t a gimmick, the woman is a saint.
It’s quite charming to hear accounts of how Palin balanced her numerous pregnancies and the needs of her children with her political duties. When Frank Murkowski was elected governor of Alaska in 2002, he had to resign his Senate seat and pick a replacement. Mayor Palin was on the short list. Todd drove her out to Anchorage to interview for the position and rode around the parking lot to keep the Ford Bronco warm as his wife met with the governor. She didn’t get the job, but the parents got home in time to watch Bristol's basketball game and Track’s hockey practice. Governor Palin had an approval rating in the 80s when she joined the McCain team.



The Disastrous McCain Campaign


Palin went to Arizona in the summer of 2008 to interview for the number two spot of the Republican ticket. She met with senior campaign strategist Steve Schmidt,[1][ (http://www.theoccidentalobserver.net/authors/Hoste-Rogue.html#_edn1#_edn1)[1]i] (http://www.theoccidentalobserver.net/authors/Hoste-Rogue.html#_edn1#_edn1) who had also worked for W. His favorite issue was the Iraq war and he would give Palin books and videos on the subject. There was an assumption that the conflict would be the center of the McCain campaign. The only thing more disturbing than the fact that the McCain team thought they could win on this issue is that they actually believed in the war.
Schmidt asked her about gay marriage. Palin said that her college roommate was a lesbian and that even though she thought that marriage was between a man and a woman, she loved her friend dearly. Then they asked about evolution. Palin replied that she believed that although there was evidence for microevolution, there was none for macroevolution.



I didn’t believe in the theory that human beings ... originated from fish that sprouted legs and crawled out of the sea. Or that human beings began as single-celled organisms that developed into monkeys who eventually swung down from the trees; I believed we came about through a random process, but were created by God.



The last sentence makes absolutely no sense, but then again, it’s coming from a woman that doesn’t believe in evolution.



Palin's reputation would take its biggest hit in her interview with Katie Couric. Someone on the campaign convinced the governor to do it by explaining that Couric had low self-esteem and simply wanted to be liked.



Palin throws cheap shots like this throughout the book at those that have crossed her. Here’s some more: The McCain people were completely cynical and scared to death of unscripted moments. An Alaskan Democratic state legislator was laughed at by soldiers for claiming to have had experience in the army after taking a few weeks’ military course. Schmidt wore sunglasses on the top of his bald head in the middle of the night.



As for the famous CBS interview, Couric and her team shot hours of footage and then unfairly decided what fraction went on TV. Palin would accuse them of picking the worst of the worst to broadcast. It sounds like a just criticism until you realize that twenty minutes out of a few hours is a pretty significant portion. If you picked out the worst sixth of my writing, it wouldn't be representative but at the same time it wouldn’t be the disaster that was the Palin interview. Granted, if you took my worst sentence I may look like a fool, but CBS News didn’t do anything close to that.



Couric famously asked Palin which newspapers she read that formed her worldview. Here’s how Palin explains her humiliating answer.


It’s not that I didn’t want to — or as some have ludicrously suggested, couldn’t — answer her question; it was that her condescension irritated me. It was as though she had suddenly stumbled on a primitive newcomer from an undiscovered tribe.



You can watch the segment for yourself YouTube- Palin: I Read All the News and decide if Palin’s characterization of Couric’s tone is correct. The question isn’t unreasonable and the interviewee’s answer says more about her insecure and paranoid nature than anything else.



Palin is like a Black person who responds to normal human interactions with “It’s because I’m Black, right?” Except with her, it goes “It’s because I’m not from New York and don’t have an Ivy League degree, isn’t it?”



This isn’t to absolve the McCain campaign of anything. I have nothing but contempt for people who would work for that disgusting and horrible man. Nor do I have any love for the liberal elite.



But Palin doesn’t have the IQ to run an effective political campaign or be a passable representative for White America. In fact, part of the reason that the proles relate to her is that they’re also resentful of those smarter than themselves. Sure, they dislike the liberalism of the ruling class, but there’s still old fashioned jealousy.



Intelligence Is Overrated in a President



Picking a president isn’t like choosing a doctor or an engineer. A political leader decides what his agenda is going to be. You don’t have to be a genius to read and believe in the 10th amendment. Palin mentions it twice favorably in her book.



On the other hand, it does take some intelligence to not consistently embarrass and discredit the ideology you represent. After eight years of a Republican president who couldn’t put a grammatical sentence together, the last thing conservatism needs is a creationist with an IQ a standard deviation below those she disagrees with ideologically and must debate.



Sarah Palin writes that the media picked on her and her family. She asks us to



imagine if your family were the subject of relentless attention from a hostile press. Surely there is at least one person or incident the press could seize on to embarrass your loved ones... If your extended family doesn’t fit that description, count your blessings. I’ve never met anyone like you.



The reason that she hasn’t is because everybody she knows is a prole. They didn’t need to go to the extended family to find disgraced relatives either. Bristol was pregnant at 17. Her sister’s husband tasered his 11-year-old stepson. Palin takes John Kerry to task for his joke about those who don’t study getting “stuck in Iraq,” but the story of her own son proves that he was right (or would’ve been, if insulting soldiers was actually his intention). Track joined the military after deciding that he didn’t want to bum around after high school like his friends. This implies that he wasn’t smart enough for college. He got two tattoos before he left: a Jesus fish and the state of Alaska. Maybe this sounds heartwarming at a town hall meeting in Wasilla, but to the educated public it’s trashy.
As far as Palin’s ideology goes, she does embrace the too-many-loans-to-poor-people explanation for the housing crash, without the racial aspect of course. And in the final chapter she names Thomas Sowell’sA Conflict of Visionsas a work that influenced her.



But the most important thing of all is that there isn’t a word about either legal or illegal immigration in the book. And even if she managed to have her way on taxes and welfare, it would eventually be repealed by the soon-to-be majority of Mexicans and other NAMs.



She says we have a responsibility to “complete our missions” in foreign lands and ensure America remains the strongest military power in the world. And the always innocent and wonderful state of Israel is singled out twice as a foreign country that especially deserves American support.(Here’s YouTube- Sarah Palin: Obama Wrong on Israel of Palin saying that Israel should build even more settlements on Palestinian land because, after all, Israel has a rapidly growing population. If only we had politicians to consider the demographic future of the majority people of America!)


Although one would have a hard time telling from this review, I really like Sarah Palin. She is as good a person as can get on a presidential ticket in today’s America. But that isn’t enough. There will never be a rising up of “Middle American Radicals” who seize power. If the American elite is ever to be replaced, it will have to be done by people of comparable ability.


Palin takes the McCain campaign to task for not emphasizing Jeremiah Wright during the campaign. She was told to be quiet on the subject. The girl has guts and unlike McCain would’ve cared more about winning than not being called racist.



But the end result of a Palin victory in 2012 would simply be a globalist that the masses relate to instead of one whom they resist. That’s the problem with hoping for the “Joe the Plumbers” to save the White race. Being deficient in intelligence, they’re easily led in any direction . Whites voted for the Bush that promised a humble foreign policy in 2000 and they died for him in the sands of Iraq from 2003 on.



If there’s one lesson from the last Republican president, it’s that if someone has the loyalty of conservative Whites, it’s important that he actually carry out policies that are good for Whites. It’s too easy to fall under the spell of a pretty face and then wake up to find that your country is gone. Not for nothing did Sam Francis refer to the failure of conservatism (http://books.google.com/books?id=9VGdzQAgkCYC&dq=Francis+failure+of+conservatism+under+reagan&printsec=frontcover&source=bn&hl=en&ei=mDQMS_SYNImqMtrl1DI&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBYQ6AEwAw#v=onepage&q=&f=false)under Reagan.


Sarah Palin would make a wonderful neighbor or midlevel manager. But a Palin presidency would give us little more than [B]“invade the world, invite the world.” (http://www.vdare.com/sailer/invite_the_world.htm)


And when the country goes under thanks to these foreign wars and increasing number of low-IQ welfare dependents, “conservatism” and maybe even nativism will be blamed.



In the end though, I’ll be rooting for Palin just so I can watch liberals’ heads explode after the goddess of implicit Whiteness (http://www.takimag.com/sniperstower/article/sarah_the_sisterhood/) beats their messiah. Anyone who thought seeing Kerry lose to Bush was tough on the Left hasn't seen anything yet.


If it's going to be a long time until a White awakening, we may as well be entertained while we wait.

[B][1][i] (http://www.theoccidentalobserver.net/authors/Hoste-Rogue.html#_ednref1#_ednref1)Schmit would go on to say that a Palin candidacy would be disastrous for the Republican party in 2012. She likewise bashes him in Rogue as unprincipled and incompetent.


Richard Hoste (email (rhoste1@yahoo.com) him) writes on race, immigration, political correctness and modern conservatism. His articles have appeared at VDARE.com (http://www.vdare.com/misc/091109_hoste.htm), The Occidental Observer (http://www.theoccidentalobserver.net/archives/Hoste-Archives.html), The Occidental Quarterly (http://www.toqonline.com/author/rhoste/)and TakiMag (http://www.takimag.com/blogs/richardhoste)among other places. His blog is HBD Books (http://hbdbooks.com/), where he regularly reviews classic and modern works on these topics.


Permanent URL:http://www.theoccidentalobserver.net/authors/Hoste-Rogue.html

Rewarding failure at the Fed

While millions of Americans have lost their jobs, Washington allows Federal Reserve chairman Ben Bernanke to keep his

http://www.guardian.co.uk/commentisfree/cifamerica/2009/dec/21/ben-bernanke-fed-chairman-reappointment

The Senate finance committee overwhelmingly voted to approve Ben Bernanke for another four-year term as Federal Reserve board chairman. This is a remarkable event since it is hard to imagine how Bernanke could have performed any worse during his last four-year term. By Bernanke's own assessment, his policies brought the US economy to the brink of another Great Depression. This sort of performance in any other job would get you fired in a second. But for the most important economic policymaker in the country it gets you high praise and another term.

There is no room for ambiguity in this story. Bernanke was at the Fed since the fall of 2002. (He had a brief stint in 2005 as chair of President Bush's council of economic advisors.) At a point when at least some economists recognised the housing bubble and began to warn of the damage that would result from its collapse, Bernanke insisted that everything was fine and that nothing should be done to rein in the bubble.

This is worth repeating. If Bernanke knew what he was doing, he should have been able to see as early as 2002 that there was a housing bubble and that its collapse would throw the economy into a recession. It was also entirely predictable that the collapse could lead to a financial crisis of the type we saw, since housing was always a highly leveraged asset, even before the flood of subprime, Alt-A and other nonsense loans that propelled the bubble to ever greater heights. Of course as the bubble expanded, and the financial sector became ever more highly leveraged, the risks to the economy increased enormously.

Through this all, Bernanke just looked the other way. The whole time he insisted that everything was just fine.

To be clear, there was plenty that the Fed could have done to deflate the bubble before it grew to such dangerous proportions. First and foremost the Fed could have used its extensive research capabilities to carefully document the evidence for a housing bubble and the risks that its collapse would pose to the economy.

It then should have used the enormous megaphone of the Fed chairman and the platform of the institution to publicise this research widely. The Fed could have ensured that every loan officer who issued a mortgage, as well as all the banks officers who set policy, clearly heard the warnings of a bubble in the housing market, backed up by reams of irrefutable research. The same warnings would have reached the ears of every potential homebuyer in the country. It's hard to believe that such warnings would have had no impact on the bubble, but it's near criminal that the Fed never tried this route.

The second tool that the Fed could have pursued was to crack down on the fraudulent loans that were being issued in massive numbers at the peak of the bubble. It is absurd to claim that the Fed didn't know about the abuses in the mortgage market. I was getting emails from all over the country telling me about loan officers filling in phony income and asset numbers so that borrowers would qualify for mortgages. If the Bernanke and his Fed colleagues did not know about these widespread abuses, it is because they deliberately avoided knowing.

Finally, the Fed could have had a policy of interest rate hikes explicitly targeted to burst the bubble. Specifically, it could have announced that it will raise rates by half a percentage point at every meeting, until house prices begin to fall and it will keep rates high until house prices approach their pre-bubble level.

This is what a responsible Fed policy would have looked like. But Ben Bernanke did not pursue a responsible Fed policy. He insisted that everything was just fine until he had to run to Congress last September, saying that if it didn't immediately give $700bn to the banks through the Tarp programme then the economy would collapse.

How on earth can you do worse in your job as Fed chair than bring the economy to the brink of a total collapse? If this is success, what does failure look like?

But, in Washington no one is ever held accountable for their performance. The economic collapse is treated like a fluke of nature – a hurricane or an earthquake – and not the result of enormous policy failures.

So, it is the 15 million unemployed that go without work, not Ben Bernanke. Instead, many of the senators praise Bernanke to the sky and thank him for his service. The running line in the Senate is: "It could have been worse."

That is the way Washington works these days. And, everyone should be very very disgusted.

It’s going to be much worse than what happened in Germany or Zimbabwe. This is a couple orders of magnitude greater seriousness and it seems to me that this is almost certain to happen with a monumentally stupid person like Bernanke steering the ship of state into a reef.

http://www.lewrockwell.com/casey/casey35.1.html

[Much worse? Than wheelbarrows full of worthless notes and starvation?]

[A different take on the future of the US dollar.]

http://exiledonline.com/reverse-repo-man-bernankes-plan-to-re-rob-the-last-1-trillion-from-ordinary-americans-and-hand-it-to-the-oligarchs/

It is all about taking care the already-mega-rich Wall Street bankers and foreign investors who want to protect the value of all the money they plundered from America. They want to ensure that the trillions they were handed by Paulson and Bernanke and Summers are still worth the same trillions next year…and to do that, they’re going to apply a simple law of supply and demand: drain out $1 trillion from us, and the value of their trillions holds its value.

But, in Washington no one is ever held accountable for their performance. The economic collapse is treated like a fluke of nature – a hurricane or an earthquake – and not the result of enormous policy failures.

So, it is the 15 million unemployed that go without work, not Ben Bernanke. Instead, many of the senators praise Bernanke to the sky and thank him for his service.

Being total failures themselves at everything except getting re-elected, those whores can always be relied upon to support a "financial genius" Fed kike, no matter how many millions of real Americans he ruins. If one of those Empty Suits dared to utter the word "accountability", it would be considered a far greater affront than if he'd jumped up and screamed "MOTHERFUCKERS!!"

Is the Fed Too Big To Fail?

by Gary North


The mark of political sovereignty is legal immunity from failure. For example, the government of the United States cannot be sued without its consent. It is above the law. It must consent to expose itself to the possibility of failure in a court.

In school, we are taught about an ancient idea that is long out of favor: the divine right of kings. What did it mean? I think most people would find it difficult to say. It meant that there was no earthly court of appeal above the king. The king's judicial word was law, because no higher authority could lawfully overturn his word.

The two revolutions of the seventeenth century brought that doctrine to an end in England and the colonies. First Cromwell (1649), then Parliament (1688) removed kings from their thrones. Over the next century, the West substituted a new doctrine: the divine right of legislatures. This sovereignty was never called divine right, because in the era of the Enlightenment, intellectuals have been hostile to the idea of a God who interferes in history. Civil governments have claimed autonomy, which is another word for divinity. Maybe we can say that divinity abhors a vacuum.

Officially, there is a right of revolution. The People – capital P – are said to be sovereign. This is a convenient legal fiction. It keeps the citizenry satisfied and subdued. All civil governments have made armed revolution illegal. Every revolutionary movement claims the right of revolution. In all cases, when a revolutionary movement topples the previous regime, the right of revolution officially ceases within the formerly revolutionary camp.

Maybe you think this: "If the sovereignty of the citizens is a legal fiction, then why are they allowed to vote?" Answer: for the same reason they were allowed to vote in the Soviet Union. Voting provided the Communist government with a bogus sense of legitimacy. In Western political theory, the process of voting supposedly legitimizes the despotic regime. The choices on the ballot were screened by the Communist Party. So, the citizens' votes counted for only one thing: to provide a religious sanction from the official god who then submitted, namely, the People. The People was a phony collective god without meaningful sanctions.

Conclusion: the agency that imposes final sanctions in terms of its own final word is the god of a society.

This brings me to the topic at hand: central banking.

CENTRAL BANKING

The advent of the Bank of England in 1694, just six years after Parliament's "Glorious Revolution," added a new factor to the doctrine of political sovereignty. To what extent is a central bank sovereign? That is, to what extent is it immune from lawsuits? To what extent is it its own court of final appeal? To what extent can it impose autonomous sanctions?

Over the last three centuries, battles have raged between central banks and legislatures for the title of "final sovereign." Central banks have usually won the war over the last century.

The Bank for International Settlements is the representative institution of this victory. It was established in 1930. It operated during World War II as a way for central banks to conduct business with each other despite the deaths of 60 million people. The cause of central banking triumphed over the competing causes of the battlefields.

We are seeing this battle being played out in the United States. This is the first surfacing of the battle ever since the Federal Reserve System was created by the government in the last days of December 1913. Ron Paul persuaded a majority of the House of Representatives to demand that the Government Accountability Office audit the Federal Reserve System. The FED resisted. The senior members of Congress resisted. The bill was killed. The new financial reform bill gutted the original bill.

Here is another example. Last year, Bloomberg LLC sued the Board of Governors of the Federal Reserve to produce evidence of which banks received TARP loans. The FED refused to comply. A Federal judge last August told the FED to comply. The FED appealed the case. On March 19, the appeals court told the FED to comply. The FED has not complied. I have been unable to find out what the status of the case is today. Bloomberg has not mentioned it as far as I can discover on Google. The FED has hired Lawyer Delay. He seldom loses a case. Bloomberg has hired Lawyer Silence. He rarely wins one.

This is functional sovereignty. Legally, the Board of Governors is a Federal agency and is therefore under the provisions of the Freedom of Information Act. Yet in fact, it is almost as sovereign as the CIA or the NSA ("No Such Agency"). The latter have guns. The FED does not. This is most peculiar.

How can this be? Because the FED has the authority to make or break a bank that gets into trouble. The FED holds the hammer over the economy, because the big banks are at the center of the economy. It is the lender of last resort.

The FED is not legally required to buy Treasury debt. It does, or rather used to. These days, it sits on old Treasury debt – not much – and Fannie Mae and Freddie Mac debt: lots. It sits on toxic assets that it swapped at face value for Treasury debt in order to restore the big banks' balance sheets to official solvency. The FED answers to no one about its balance sheets. It keeps all assets at whatever price it chooses. Gold is held at $42.22 per ounce. Toxic assets are held at face value.

The Federal Reserve System possesses so much sovereignty that it holds the U.S. Government's gold in trust. Anyway, it says it does. There has been no government audit of the gold since 1951. No one in government knows how much gold there is in Fort Knox and the vault of the Federal Reserve Bank of New York, a private bank. The government does not assert its right to know.

The FED reigns supreme over commercial banks. It is going to be granted far more authority if the proposed bank reform bill passes. Bernanke recently praised the bill in a June 16 speech.

The Federal Reserve System is universally regarded as too big to fail. Put another way, it is beyond negative sanctions. It therefore possesses what was once called divine right. It is beyond legal constraints. It is beyond market constraints. It answers to no one. It is autonomous.

Nice work if you can get it. The Board of Governors got it.

Also, only 12 private entities in the United States possess comparable sovereignty: the regional Federal Reserve Banks. They are under the legal umbrella of the Board of Governors. Nice work if you can get it.

Federal Reserve sovereignty is premised on two things: (1) the government's refusal to exercise Constitutional authority over the FED, which was created by the government; (2) the FED's ability to create money. It decides who is too big to fail and who isn't. This is the mark of sovereignty.

WHO WINS? WHO LOSES?

Year after year, decade after decade, century after century, we hear warnings about banking institutions that are too big to fail. This goes back decades before British author Walter Bagehot wrote "Lombard Street" (1873). He argued that the Bank of England should serve as a lender of last resort. In an economic crisis, the Bank should make credit available.

As it turned out, no such policy was adopted by the Bank for over 50 years, yet there were no major financial crises until after World War I. That was when the Bank began serving as the lender of last resort. The result was the suspension of the gold standard in 1931. Without the threat of a drain of gold, the Bank could then function as the lender of last resort by creating fiat money at will.

This is what the phrase "lender of last resort" really means: the creation of fiat money by the central bank. It means breaking the normal rules of the fiat money game. It means bailouts.

The problem of moral hazard was seen by Bagehot. If the central bank stays in the background as the lender of last resort, the commercial bankers' need for prudence and restraint is reduced. They will get bailed out if their investment portfolios shrink due to unforeseen conditions.

Then there is the question of questions: Which banks or institutions will get bailed out? The answer in both theory and practice is the same: big banks. Why? Because they could take down the fractionally reserved banking system if they were to suspend payment and default on their contractual obligations.

With the central bank ready to bail out the big banks, the senior managers of these banks can put their banks' capital at risk by investing in high-return, high-risk investments. Think "derivatives." Then think "toxic assets." Then think "exchange our toxic assets at face value for liquid T-bills." This is what the Federal Reserve did for the major banks.

The result? The six largest American banks have been highly profitable in 2010 – far more so than in 2009. But they have made their money through trading, especially high-risk derivatives. They did not make it by lending to businesses. In short, they are back to the pre-2008, pre-TARP world. Happy days are here again! For them.

This is why Wall Street is on the fast track to Easy Street, while Main Street remains on the detour. The FED decided who would win and who would lose. Main Street is losing. But this is nothing new. This is as old as the Federal Reserve System.


THE POWER TO DESTROY

In the case that established the sovereignty of central banking in the United States, "McCulloch v. Maryland" (1819), Chief Justice John Marshall wrote the famous words, "The power to tax is the power to destroy." Because historians have never read the actual trial documents, they are unaware of the context.

The state of Maryland was trying to tax a branch of the Second Bank of the United States. The Bank was refusing to pay, on this legal basis: its sovereignty as an agency of the government. Its lawyer was the ever-indebted Daniel Webster.

The following never makes it into the textbooks. The state's attorney argued that the Bank did not possess Federal sovereignty, because it was a private agency. The Court rejected this argument, 7 to 0. We still live under the burden of that decision.

John Marshall stole Webster's slogan: "The power to tax is the power to destroy." He saw his opportunity, and he took it. It is his most famous aphorism. Yet it came from the lawyer who was defending the sovereignty of the central bank.

Here are some additional powers to destroy:

The power to inflate is the power to destroy.

The power to deflate is the power to destroy.

The power to subsidize members of one group by transferring wealth from members of another group is the power to destroy.

The power to keep large bankrupt institutions from failing, yet let other institutions just like it fail, is the power to destroy. In short, anything that places the power to manipulate the economy into the hands of salaried bureaucrats who do not personally bear the consequences of their actions is the power to destroy.

Such power will eventually be used.

The Federal Reserve System has created the boom-bust cycle, just as Ludwig von Mises described it in 1912. The FED's prior policies of monetary inflation created the boom. Its policies of monetary stabilization created the bust. It then doubled its balance sheet (the nation's monetary base) in October 2008. The only thing keeping this from doubling the money supply and possibly doubling consumer prices is the fear of commercial bankers. They refuse to lend the money they are legally entitled to create. They are hoarding digital money at the FED. To put this in terms even a central banker can understand:

Commercial bankers, acting on their depositors' behalf, are hiding the depositors' digital money under the mattress: the FED's excess reserve account.


FUNDING THE FEDERAL DEFICIT

At some point, lenders will refuse to lend money to the Treasury at low rates. At some further point, the Federal debt will have to be funded by the FED in order to keep rates from rising.

If the FED keeps funding the Treasury, this will produce monetary inflation. This will go to mass inflation: over 20% per annum. If it continues, this will go to hyperinflation.

That will destroy the dollar. The power to inflate is the power to destroy. The FED will transfer massive, comprehensive destruction to the general population.

To stop this from happening, it will have to cease buying Treasury debt. It will stabilize the money supply. That will create the great depression.

At that point, we will see who is sovereign: Congress or the FED. If Congress nationalizes the FED and inflates, then the FED will have failed. It will be proven for all to see that it was not too big to fail.

On the other hand, if the FED refuses to buy the Treasury's debt, the Federal government will default. It will be proven as not too big to fail.

CONCLUSION

For freedom's sake, both should be allowed to fail: the FED's fiat money and the Federal debt. The very concept of too big to fail rests on the idea of coercive wealth redistribution by the state. Such power is the power to destroy.

The problem is this: to get people to act like the People will take a lot of failures of very large banks. The big banks will fight this outcome. The FED will fight on their behalf. Central banks have won this battle for over 300 years.

This is why there is going to be a great deal of economic destruction.

June 26, 2010

http://www.lewrockwell.com/north/north859.html

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.

Despite all this, Bernanke has been nominated for a second term by President Obama.
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In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.

Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

So who seduced them?

The Fed did it.

Three Decades of Domination

The Fed has been dominating the profession for about three decades. "For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s," says University of Texas economics professor -- and Fed critic -- James Galbraith. "The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn't a culture of consulting, and it wasn't the same vast network of professional economists working there."

But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and "officers" -- who are generally also economists -- the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.

Just how dominant is the Fed today?

The Federal Reserve's Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship." A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.

Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, "Deception
and Abuse at the Fed". A chapter in that book, excerpted here, provided the impetus for this investigation.

Auerbach found that in 1992, roughly 968 members of the AEA designated "domestic monetary and financial theory and institutions" as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it's fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed -- or who hope to one day soon -- and you've accounted for a very significant majority of the field.

Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."

Gatekeepers On The Payroll

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank's money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.

"Try to publish an article critical of the Fed with an editor who works for the Fed," says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.

The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it's just the Fed.

Being on the Fed payroll isn't just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.

Affiliations with the Fed have become the oxygen of academic life for monetary economists. "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.

Robert King, editor in chief of the Journal of Monetary Economics and a visiting scholar at the Richmond Federal Reserve Bank, dismisses the notion that his journal was influenced by its Fed connections. "I think that the suggestion is a silly one, based on my own experience at least," he wrote in an e-mail. (His full response is at the bottom.)

Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.

They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.

Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.

And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality -- as it did with the Fed's incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed's unchallenged assumptions about the way the market worked.

Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote.

Greenspan told Congress in October 2008 that he was in a state of "shocked disbelief" and that the "whole intellectual edifice" had "collapsed." House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: "In other words, you found that your view of the world, your ideology, was not right, it was not working."

"Absolutely, precisely," Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

But, if the intellectual edifice has collapsed, the intellectual infrastructure remains in place. The same economists who provided Greenspan his "very considerable evidence" are still running the journals and still analyzing the world using the same models that were incapable of seeing the credit boom and the coming collapse.

Rosner, the Wall Street analyst who foresaw the crash, says that the Fed's ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.

He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.

"What you're doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views," says Rosner. "The only way you can actually get in a journal is by subscribing to the views of one of the journals."

When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.

"You don't believe that markets are efficient?" he says they asked, telling him the paper was "outside the bounds" of what could be published. "I would say 'Markets are efficient when there's equal access to information, but that doesn't exist,'" he recalls.

The CDO and MBS markets froze because, as the housing market crashed, buyers didn't trust that they had reliable information about them -- precisely the case Rosner had been making.

He eventually found a co-author, Joseph Mason, an associate Professor of Finance at Drexel University LeBow College of Business, a senior fellow at the Wharton School, and a visiting scholar at the Federal Deposit Insurance Corporation. But the pair could only land their papers with the conservative Hudson Institute. In February 2007, they published a paper called "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?" and in May posted another, "How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions."

Together, the two papers offer a better analysis of what led to the crash than the economic journals have managed to put together - and they were published by a non-PhD before the crisis.

Not As Simple As A Pay-Off

Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn't be looked at "like it's a payoff, like money. I think it's more being one of, part of, a club -- being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck."

The Fed's hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. "You can look at it from a telescope, either direction. One, you can say well they're reaching out, they've got a big budget and what they're doing, I'd say, is canvassing as broad a range of talent," he says. "You might call that the 'healthy hypothesis.'"

The other hypothesis, he says, "is that they're essentially using taxpayer money to wrap their arms around everybody that's a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality."

To get a mainstream take, HuffPost called monetary economists at random from the list as members of the AEA. "I think there is a pretty good number of professors of economics who want a very limited use of monetary policy and I don't think that that necessarily has a negative impact on their careers," said Ahmed Ehsan, reached at the economics department at James Madison University. "It's quite possible that if they have some new ideas, that might be attractive to the Federal Reserve."

Ehsan, reflecting on his own career and those of his students, allowed that there is, in fact, something to what the Fed critics are saying. "I don't think [the Fed has too much influence], but then my area is monetary economics and I know my own professors, who were really well known when I was at Michigan State, my adviser, he ended up at the St. Louis Fed," he recalls. "He did lots of work. He was a product of the time...so there is some evidence, but it's not an overwhelming thing."

There's definitely prestige in spending a few years at the Fed that can give a boost to an academic career, he added. "It's one of the better career moves for lots of undergraduate students. It's very competitive."

Press officers for the Federal Reserve's board of governors provided some background information for this article, but declined to make anyone available to comment on its substance.

The Fed's Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was
disrupted."

It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.

And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him," Krugman said of Greenspan in a 2007 interview with Pacifica Radio's Democracy Now! "Nobody really wants to cross him."

An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you're a certified member of the club. Even Krugman seems a bit burned by the slight. "And two years ago," he said in 2007, "the conference was devoted to a field, new economic geography, that I invented, and I wasn't invited."

Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.

One Journal, In Detail

The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.

HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.

At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.

After the top editor, King, comes senior associate editor Marianne Baxter, who has written papers for the Chicago and Minneapolis banks and was a visiting scholar at the Minneapolis bank in '84, '85, at the Richmond bank in '97, and at the board itself in '87. She was an advisor to the president of the New York bank from '02-'05. Tim Geithner, now the Treasury Secretary, became president of the New York bank in '03.

The senior associate editors: Janice C Eberly was a Fed visiting-scholar at Philadelphia ('94), Minneapolis ('97) and the board ('97). Martin Eichenbaum has written several papers for the Fed and is a consultant to the Chicago and Atlanta banks. Sergio Rebelo has written for and was previously a consultant to the board. Stephen Williamson has written for the Cleveland, Minneapolis and Richmond banks, he worked in the Minneapolis bank's research department from '85-'87, he's on the editorial board of the Federal Reserve Bank of St. Louis Review, is the co-organizer of the '09 St. Louis Federal Reserve Bank annual economic policy conference and the co-organizer of the same bank's '08 conference on Money, Credit, and Policy, and has been a visiting scholar at the Richmond bank ever since '98.

And then there are the associate editors. Klaus Adam is a visiting scholar at the San Francisco bank. Yongsung Chang is a research associate at the Cleveland bank and has been working with the Fed in one position or another since '01. Mario Crucini was a visiting scholar at the Federal Reserve Bank of New York in '08 and has been a senior fellow at the Dallas bank since that year. Huberto Ennis is a senior economist at the Federal Reserve Bank of Richmond, a position he's held since '00. Jonathan Heathcote is a senior economist at the Minneapolis bank and has been a visiting scholar three times dating back to '01.

Ricardo Lagos is a visiting scholar at the New York bank, a former senior economist for the Minneapolis bank and a visiting scholar at that bank and Cleveland's. In fact, he was a visiting scholar at both the Cleveland and New York banks in '07 and '08. Edward Nelson was the assistant vice president of the St Louis bank from '03-'09.

Esteban Rossi-Hansberg was a visiting scholar at the Philadelphia bank from '05-'09 and similarly served at the Richmond, Minneapolis and New York banks.

Pierre-Daniel Sarte is a senior economist at the Richmond bank, a position he's held since '96. Frank Schorfheide has been a visiting scholar at the Philadelphia bank since '03 and at the New York bank since '07. He's done four such stints at the Atlanta bank and scholared for the board in '03. Alexander Wolman has been a senior economist at the Richmond bank since 1989.

Here is the complete response from King, the journal's editor in chief: "I think that the suggestion is a silly one, based on my own experience at least. In a 1988 article for AEI later republished in the Federal Reserve Bank of Richmond Review, Marvin Goodfriend (then at FRB Richmond and now at Carnegie Mellon) and I argued that it was very important for the Fed to separate monetary policy decisions (setting of interest rates) and banking policy decisions (loans to banks, via the discount window and otherwise). We argued further that there was little positive case for the Fed to be involved in the latter: broadbased liquidity could always be provided by the former. We also argued that moral hazard was a cost of banking intervention.

"Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other economics major journals would certainly publish exciting articles that fell between these two distinct perspectives: no intervention and extensive intervention. An upcoming Carnegie-Rochester conference, with its proceeding published in JME, will host a debate on 'The Future of Central Banking'.

"You may use only the entire quotation above or no quotation at all."

Auerbach, shown King's e-mail, says it's just this simple: "If you're on the Fed payroll there's a conflict of interest."

UPDATE: Economists have written in weighing in on both sides of the debate. Here are two of them.

Stephen Williamson, the Robert S. Brookings Distinguished Professor in Arts and Sciences at Washington University in St. Louis:
Since you mentioned me in your piece on the Federal Reserve System, I thought I would drop you a note, as you clearly don't understand the relationship between the Fed and some of the economists on its payroll. I have had a long relationship with the Fed, and with other central banks in the world, including the Bank of Canada. Currently I have an academic position at Washington University in St. Louis, but I am also paid as a consultant to the Federal Reserve Banks of Richmond and St. Louis. In the past, I was a full-time economist at the Bank of Canada and at the Federal Reserve Bank of Minneapolis.

As has perhaps become clearer in the last year, economics and the science of monetary policy is a complicated business, and the Fed needs all the help it can get. The Fed is perhaps surprisingly open to new ideas, and ideas that are sometimes in conflict with the views of its top people. One of the strengths of the Federal Reserve System is that the regional Federal Reserve Banks have a good deal of independence from the Board of Governors in Washington, and this creates a healthy competition in economic ideas within the system. Indeed, some very revolutionary ideas in macroeconomics came out of the intellectual environment at the Federal
Reserve Bank of Minneapolis in the 1970s and 1980s. That intellectual environment included economists who worked full-time for the Fed, and others who were paid consultants to the Fed, but with full-time academic positions. Those economists were often sharply critical of accepted Fed policy, and they certainly never seemed to suffer for it; indeed they were
rewarded.

I have never felt constrained in my interactions with Fed economists (including some Presidents of Federal Reserve Banks). They are curious, and willing to think about new ideas. I am quite willing to bite the hand that feeds me, and have often chewed away quite happily. They keep paying me, so they must be happy about the interaction too.


A former Fed economist disagreed. "I was an economist at the Fed for more than ten years and kept getting in trouble for things I'm proud of. I hear you, loud and clear," he said, asking not to be quoted by name for, well, the reasons laid out above.

Elyse Siegel, Julian Hattem, Jeff Muskus and Jenna Staul contributed to this report

http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html

http://blockyourid.com/~gbpprorg/obama/nytimes_ww2/jewish_tyranny.jpg

Just listened to a lunch meeting, where Ben Bernanke spoke.

Ben Bernanke: "Our [US] economy is overheated".

I have no words.

OWNERSHIP OF THE FEDERAL RESERVE (http://land.netonecom.net/tlp/ref/federal_reserve.shtml)


Most Americans, if they know anything at all about the Federal Reserve, believe it is an agency of the United States Government. This article charts the true nature of the "National Bank."

The Fed has its first-ever press conference. Ben Shalom Bernanke trotted out to do some "explaining" to the sheep. I am watching it now (er, listening) and he sounds like a street corner kike trying to get someone in to the porn movie or play some three card monte.

http://www.zerohedge.com/article/watch-todays-215-pm-fomc-press-conference-live-and-interruption-free-here

Now it's called "quanitative easing". Before it was called printing money. It's the main reason behind soaring gas and commodity prices.

'"........................You would have to be stone dumb not to recognize the rampant inflation in the US, England and Europe. Gasoline and petroleum derivative products and food costs have gone up substantially. Not only in the regions but also worldwide. As a result inflation will be 14% in the UK and US by yearend and 8% on the Continent.

It is not only the federal government that is broke, but so are the states and municipalities in the US. Europe and England have the same problems. More than 40 states are struggling to balance their budgets. Most will, some will not and they’ll default on the interest payment on their bonds and probably have to pay vendors with IOU’s.

There could be another federal bailout but we doubt it due to the battle over budget cuts in Washington. As these problems stand in the forefront the government’s debt dilemma is not going to go away anytime soon and over the next two years the US could experience a downgrade in its credit rating. Unfunded liabilities are $105 trillion and they are unfunded. Although stretched over years they still have to be paid unless benefits are adjusted.
"

http://www.theinternationalforecaster.com/International_Forecaster_Weekly/The_Fed_Behind_The_Greatest_Fraud_In_History

6/27/2012
quote
Audit the Fed Bill Passes CommitteeHistoric Legislation Set for House floor vote in July

On Wednesday, the U.S. House Oversight and Government Reform Committee passed Congressman Ron Paul's H.R. 459, the Federal Reserve Transparency Act, by a bipartisan voice vote. Republican leadership has promised a vote on the bill, more popularly known as "Audit the Fed," on the House floor this July.

Audit the Fed would require the Government Accountability Office (GAO) to conduct the first thorough audit of the Federal Reserve in the central bank's nearly 100-year history. A Rasmussen poll conducted in late 2010 showed almost 80% of the American people supported requiring such transparency from the Fed.

http://www.marketwatch.com/story/audit-the-fed-bill-passes-committee-2012-06-27

End the Fed! Whether Congress Wants Us To or Not!

by Michael Boldin
Tenth Amendment Center

Today was a big day for supporters of Sound Money – as Ron Paul’s Audit the Fed Bill passed the House 326-99. But, it still needs to get through a very hostile Senate, where it will likely never see the light of day. So in closing tonight, a new approach – Ending the Fed. Whether Congress Wants us to or Not!

Since its inception, the Federal Reserve’s monetary policies have led to a decline of over 95% in the purchasing power of the U.S. dollar. As a result, there have been several attempts to reduce or even eliminate the Federal Reserve’s powers.

Louis T. McFadden led efforts in the 1930s. Wright Patman pressed again in the 1970s. Henry Gonzalez got things moving in the 1990s. And, Ron Paul has led the charge for more than twenty years now. In nearly eighty years, though, none of these efforts have succeeded.

And, even with House passage of Ron Paul’s Audit the Fed bill earlier today, it’s highly unlikely that the imperial Senate would ever allow light to be shed on the actions of its financial backer. Resistance to these efforts is seriously entrenched.

But yet, a large number of people across the political spectrum want to know what goes on behind the Fed’s curtain. And with calls to audit the federal reserve reaching a fevered pitch, it’s a good time to ask the basic question – is this even a worthy effort?

Not to say that you should want a secret national bank, but rather – is this kind of activism the best place for you to put your energy...and hope? Will lobbying the Senate get Harry Reid to allow a vote? Will calling Mitch McConnell change anything? Will Barack Obama or Mitt Romney allow such a bill to pass without their veto?

I believe the answer to all these questions is a big, fat NO.

PULLING THE RUG OUT

On the other hand, in contrast to attempts to put a stop to the Fed at the national level, a paper that William Greene presented at the Mises Institute’s “Austrian Scholars Conference” proposes an alternative approach to ending the Federal Reserve’s monopoly on money. The “Constitutional Tender Act” is a bill template that can be introduced in every State legislature in the nation. Passage would return each of them to the Constitution’s “legal tender” provisions of Article I, Section 10:

“No State Shall...make any Thing but gold and silver Coin a Tender in Payment of Debts”

Such a tactic would achieve the desired goal of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the State and local level.

Under the Constitutional Tender Act, the State would be required to use only gold and silver coins – or their equivalents, such as checks or electronic transfers – for payments of any debt owed by or to the State. This includes things like taxes, fees, contract payments, and the like.

All such payments would be required to be denominated in legal tender gold and silver U.S. coins, including Gold Eagles, Silver Eagles, and pre-1965 90% silver coins. The market would then require that all State-chartered banks – as well as any other bank acting as a depository for State funds – offer accounts denominated in those types of gold and silver coins, and to keep such accounts segregated from other types of accounts such as Federal Reserve Notes.

But that’s not all! Not only would the use of Federal Reserve Notes by the State be made illegal; the use of legal tender U.S. gold and silver coins would be encouraged amongst the general population too – by eliminating sanctions against its use.

HOW IT PLAYS OUT

Passage of the Constitutional Tender Act would introduce currency competition with Federal Reserve Notes by outlawing their use in transactions with the State. Ordinary people, being required to pay their State taxes in gold and silver coins, would find it necessary to conduct some transactions with metal – including the use of checks and debit cards based on bank accounts denominated in such coins

All businesses operating within the State, being required to pay their State sales taxes and license fees in gold and silver coins, would need to do the same. Most importantly, though, in order for businesses to acquire the amount of gold and silver needed, they find it necessary to offer their goods and services in “dual currency” denominations, where customers could choose to pay in Federal Reserve Notes or gold and silver coins.

This kind of “bottom up” approach to ending the Fed will have a greater likelihood of success than the “top-down” approaches we’ve seen over the years for two major reasons:

1. The top-down approach has been an utter failure. While it has succeeded greatly in an educational role, it has simply not worked tactically.

2. It’s decentralized. Political opposition won’t be as strong or well-funded on a state level. Strategies and tactics can be adapted much quicker. And, most importantly, success in one state can be a far greater educational tool – and a source of courage – for people of a neighboring state, than endless calls to a Congress which almost never does what’s right.

BYE BYE

Greene tells us that use of sound money would drive further use. He writes:

“Over time, as residents of the State use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the State’s treasury, an influx of banking business from outside of the State – as people in other States carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve Notes for any transactions.”

Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level is what will get us there.

Without a single act of Congress, the Federal Reserve system can be brought to its knees.

EDITOR'S NOTE: Get the model legislation, the Constitutional Tender Act, HERE. Read William Green's full Scholar's Conference paper HERE.

July 27, 2012

Michael Boldin [send him mail] is the founder of the Tenth Amendment Center. He was raised in Milwaukee, WI, and currently resides in Los Angeles, CA. Follow him on twitter – @michaelboldin, on LinkedIn, and on Facebook.

http://www.lewrockwell.com/boldin/boldin22.1.html

[what? jewish bankers not allowed to counterfeit money? how horrible would that be? anti-semitic too!]

At Jackson Hole, a growing fear for Fed's independence

by Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Sun Sep 2, 2012 4:04pm EDT

(Reuters) - Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank's hard-won independence and undermine confidence in the nearly 100-year old institution.

That was the pervasive sentiment among economists gathered at the Fed's annual monetary policy symposium in Jackson Hole, Wyoming. Against the dramatic backdrop of the Grand Teton mountain, many said a closely-contested presidential race has turned the monetary authority into a political football.

"I do fear for it a bit if the election comes out that way, especially if some of the more radical voices, that happen to be Republican voices nowadays, get reelected," said Alan Blinder, Princeton economics professor and a former Fed vice chairman, adding that historically opposition to the U.S. central bank had come predominately from the left.

"There's a lot of hostility," said Blinder, who was appointed to the Fed by former president Bill Clinton.

The primary topic of conversation at the rustic mountainside resort was whether or not Fed Chairman Ben Bernanke and his colleagues would deliver another round of monetary stimulus soon.

But, when probed on the issue on the sidelines of the meeting, many participants voiced concern about the heated political rhetoric aimed at the Fed, including a bill that would audit the conduct of monetary policy that is gaining increasing traction among Republicans.

Republican presidential nominee Mitt Romney has said the Fed should be audited and that he would not reappoint Bernanke, himself a Republican who was originally picked for the job by George W. Bush, to a third term when his current one expires in early 2014. Still, he has pledged to respect central bank independence.

The Fed is already subject to regular audits, but congressman Ron Paul's bill would remove an exemption for monetary policy deliberations.

For some observers, that pressure is already affecting the Fed's behavior, preventing it from pushing more aggressively for stronger economic growth following the sharp blowback received back in 2010, when policymakers announced their last large scale bond purchase program.

Some analysts outside the Fed's inner circle -- the ones that weren't invited to Jackson Hole -- argue top central bank officials brought some of the political heat on themselves. By backing bank bailouts that came with few strings attached and allowing some of the chief culprits of the financial crisis to continue doing business as usual, these critics say, the Fed was seen as too close to Wall Street, making it an easy political target.

LONE RANGERS

Ironically, the complete political gridlock that characterizes U.S. fiscal policy has left the Fed in the difficult position of being "the only game in town."

Both the Fed and the independent Congressional Budget Office have said a looming "fiscal cliff" of spending cuts and expiring tax breaks at the end of this year could shove a fragile economy into a new recession.

In response to the financial crisis and deep recession of 2007-2009, the Fed cut interest rates to effectively zero and bought some $2.3 trillion in government bonds and mortgage debt to keep borrowing costs down and stimulate investment. Despite such aggressive efforts, growth remains subpar, registering an annual rate of just 1.7 percent in the second quarter, a level seen as too tame to bring down the country's 8.3 percent jobless rate.

Bernanke, during his keynote speech here on Friday, spent much time outlining the benefits of recent Fed policies, arguing they prevented a much deeper slump and helped put unemployment on a downward trajectory.

But many Republicans in Washington have cried foul, berating the central bank for risking high inflation in the future -- even if there has been little sign of substantial upward price pressures from the expansion of the Fed's balance sheet five years after officials started cutting rates.

Critics also contend the Fed's loose monetary policy has made it easier for the government to run large deficits.

"Central banks are under a lot of scrutiny right now," said Karen Dynan, a former Fed economist now at Brookings Institution. "It's partly because they are using these unconventional measures that people don't really understand and don't really trust."

Romney's choice of Paul Ryan -- an ardent Fed critic who supports "sound money" -- as his running mate appeared to ratchet up the potential for a possible Romney administration to tighten the screws on the central bank.

Such an attack would most likely come in two forms: support for Texas libertarian Ron Paul's Audit the Fed bill, which Bernanke has said would be a "nightmare" for Fed independence, and an attempt to curtail the Fed's mandate and force it to focus solely on inflation rather than giving equal weight to unemployment.

Fed officials including Bernanke have warned that monetary policy cannot go it alone in supporting the economy, and yet there is little prospect of any resolution to Washington's long-running showdown over fiscal policy and the budget.

"Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve," Bernanke said in his Jackson Hole remarks.

UPSIDE DOWN

Historically, the notion of political interference in monetary affairs boiled down to fears that, if politicians with short-term horizons had their way, they would always have central bankers crank up the printing presses in order to juice up growth -- leading, in extreme cases, to hyperinflation.

In the current case, however, opposition has emerged against a proactive central bank that has been forced to widen its range of policy tools in a zero interest rate environment.

Susan Collins, professor of economics at the University of Michigan's Gerald R. Ford School of Public Policy, stressed the dangers of political interference in monetary policy of either stripe.

"Compromising that (independence), maybe not immediately but over the medium- to longer-term, would have some really unfortunate consequences," said Collins.

These could include a loss of market confidence that perversely pushes borrowing costs higher and tarnishes the central bank's credibility.

"I absolutely hope that some wiser council would prevail should that issue come to the fore," added Collins.

Comments from Romney advisor Martin Feldstein, also attending the Jackson Hole event, suggested a more Fed-friendly tone could yet reemerge from Republican side. Feldstein, a Harvard professor who would likely be on Romney's short-list to replace Bernanke at the Fed, downplayed the Republican push to strip the Fed of its dual mandate.

"I don't think that is a realistic idea," he said, noting that even central banks with single mandates have to pay close attention to growth and employment. "I don't think the dual mandate has handicapped them in their focus on keeping inflation down."

(Additional reporting by Alister Bull; Editing by Theodore d'Afflisio)

http://www.reuters.com/article/2012/09/02/us-usa-fed-politics-idUSBRE88109Q20120902

...
These could include a loss of market confidence that perversely pushes borrowing costs higher and tarnishes the central bank's credibility.


Oh no, wouldn't that be a perverse turn of events? Higher interest rates than the ones we have today? Ridiculous! I mean, what? That it should actually cost money to borrow when adjusted for inflation? Absurd. Ben B and his fellow clever brethren better keep this kind of goyish lunacy in check, with violence if need be!

Comments from Romney advisor Martin Feldstein, also attending the Jackson Hole event, suggested a more Fed-friendly tone could yet reemerge from Republican side. Feldstein, a Harvard professor who would likely be on Romney's short-list to replace Bernanke at the Fed, downplayed the Republican push to strip the Fed of its dual mandate.

Yes, the Fed has sure been treated badly these last years by the conspiracy theorists. First demanding an audit, and now to strip the dual mandate? The audacity... Time to lighten up the tone and leave them to it. Feldstein, Harvard professor :rolleyes: mind you, knows what he is talking about. :jew:

Comments from Romney advisor Martin Feldstein, also attending the Jackson Hole event, suggested a more Fed-friendly tone could yet reemerge from Republican side. Feldstein, a Harvard professor who would likely be on Romney's short-list to replace Bernanke at the Fed, downplayed the Republican push to strip the Fed of its dual mandate.

"I don't think that is a realistic idea," he said, noting that even central banks with single mandates have to pay close attention to growth and employment. "I don't think the dual mandate has handicapped them in their focus on keeping inflation down."

"Oy, relax, ya bastids - it's all just smoke & mirrors ta blind the shtupid goyim at election time. I've got my hand so far up the Mormon puppet's ass I work his lips with my fingas, heh heh!" T.J.B.

Political "interference" with the Fed's "historic independence".....these goddam kikes....

Submitted by Tyler Durden on 10/08/2012 quote


The math of what happens when assumed rates of return go down, driven by a pro-active ZIRP from the Fed, is pretty straightforward. To make up for this, PIMCO notes that those approaching retirement have three choices: a) save more, b) work longer, or c) tighten their belts in retirement. Each of these are clear, individual family choices, but what happens when the whole of society is faced with the same dilemma? What works for one household can be grossly sub-optimal for society.

For now, let us assume that Americans would reject the idea of pre-commitment to significant future belt tightening. They may find that when they get to retirement they have little choice, but this is not something it seems they would rationally choose before having to do so.

If everyone saves more, we consume less, and therefore GDP growth slows down. Anemic growth leads to a Fed on hold for a prolonged period. If expectations for how long the Fed will be on hold are extended, low interest rates – particularly real ones – are the end result.

Given that the personal savings rate is a low 4.2%, significantly below the 6.9% average over the past 50 years, it is hard to argue that we are experiencing the paradox of thrift – at least not yet. We believe that there is a distinct wedge between households’ desired savings and actual savings driven by budget constraints. Less explored is the linkage between “working longer” and interest rates. The right side of Figure 1 shows a possible feedback loop for that cycle – which has the same end result as the Paradox of Thrift, but gets there through a different mechanism.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/09-2/20121008_PIMCO1.png
Here we see low rates leading to longer periods in the work force which would lead to a higher fraction of older Americans continuing employment.

By construction, if labor force participation goes up, unless jobs go up proportionately, unemployment will rise. Given the Fed’s dual mandate – 1) fight inflation, 2) stimulate growth/lower unemployment – the central bank’s natural response will be to keep rates low, thus completing the circle.

The crux of the argument hinges on two things. First, if elderly labor force participation goes up and there is not an offsetting drop among other age groups, and second, whether there is empirical proof that low rates can be linked to higher labor force participation among older Americans.

With respect to the first item, if there were a compensating drop in labor supply among other age cohorts, causing the unemployment rate to be unchanged, that would be unambiguously bad as these individuals are of prime working age.

This would indicate serious structural issues and would likely be paired with slow economic growth. Figures 2 and 3 present support for the argument that low interest rates go hand-in-hand with high labor force participation among the elderly.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/09-2/20121008_PIMCO2.png
Figure 2 shows a 50-year history of 10-year Treasury yields versus labor force participation for those Americans over age 65.
The axis for labor force participation is inverted to highlight the relationship. Over a long period, as yields rise, participation falls, and vice versa.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/09-2/20121008_PIMCO3.png
Figure 3 regresses participation on the level of the 10-year rate and its squared value, as the relationship is distinctly non-linear.

Elderly labor force participation displays a “convexity” of sorts – the lower rates go, the greater the inertia of the elderly to stay in the workforce. Note the relationship is not perfect, and critics of this argument can point to structural issues in social programs that can give explanation to the time series relationship.

It makes sense that elderly participation fell in the 1960s given the passage of Medicare under the Johnson Administration and fell further still given more generous benefits granted in Social Security during the Nixon years. Increases in the Social Security normal retirement age phased in after reform legislation in 1983 induced gradual lengthening of working careers.

Intuitively, low rates leading to longer work lives just makes sense – especially in an era where fewer retirees will draw defined benefit pensions. For those relying more and more on IRAs and 401(k) plans for retirement, the income produced is simply a product of portfolio yield and account balances. They alone bear the risk of market volatility and their own mortality. If anything, we would expect this to tie labor force participation more strongly to yield levels.

This is why some of us are wondering if the Fed is spinning its wheels by sticking to the old model of trying to stimulate growth. Maybe instead of pushing harder on the credit demand side of the ledger by doggedly keeping rates low, central bank policymakers might benefit by looking at other parts of the equation. Specifically, those parts of the puzzle that become more important as America ages.

Work a little longer. Save a little more. Get by with a little less. It’s like each of our numbers is tied to a hot air balloon that seems to rise higher as we get a little closer. Given our outlook for growth and the Fed’s renewed commitment to keeping rates at ”exceptionally low levels” at least through mid-2015, it could be quite a while before those numbers are within reach.


http://www.zerohedge.com/news/2012-10-08/zero-interest-rate-zero-retirement-how-fed-doomed-elderly-americans-endless-work

Money Mistakes

by Thomas E. Woods, Jr.

As I noted not long ago, I find myself in serious disagreement with a portion of the end-the-Fed movement. This is the segment of the movement whose complaints are that the Federal Reserve is “privately owned,” that the Fed does not inflate enough, that interest payments are unjust or inherently unpayable all at once, etc.

This is not nit-picking. I am not interested in replacing the Fed with something as bad or worse. The problem with the Fed is not that it isn’t socialistic enough. The problem with the Fed is that it is a creation of Congress and operates with special privileges granted by the government. If only the Fed were truly private, with no government-granted privileges. Then it could do no damage whatever.

As I also noted, I recently asked an antagonist on Facebook to write out his ten propositions on money, so we could try to get to the bottom of our differences. I posted them last week. Right now I’ll reply to this one:

“Monetary deflation benefits the private bankers who wish the People to default in order to seize collateral with, or without govt force.”

This is clearly incorrect. In addition to not wanting the hassle of trying to unload collateral in a potentially illiquid market, no bank would want to seize collateral during a deflationary period at all! When asset prices are falling, why would banks want to grab assets? Who would want an asset that’s in the middle of seeing its price fall?

Ah, but couldn’t the banks coordinate the deflation together, and then when it hits bottom, grab all the assets at that moment, when their prices have nowhere to go but up? Even assuming that bankers would adopt such a far-fetched strategy, there is no way for them to know at what point in the deflationary process the defaults are going to occur.

If there’s something we’re supposed to fear from banks, this sure ain’t it.

http://lewrockwell.com/woods/woods205.html

"Deflation "... ? It seems the Fed's "QE" has done nothing but enable the "elites" to gather assets and front-run them.

Fed analyst confirms consequences of latest "QE" policy--gross inflation

--------------------------------------------------------------------------------

The Fed Just Guaranteed $6 Gas & $4000 Gold

Link: http://www.wholesaledirectmetals.com...wsmaxHeadlines


Written by Damon Geller



Now that QE3 has arrived, it's more obvious than ever that a few powerful men have hijacked our economic, financial and political structure. And here's a news flash: They aren’t socialists or capitalists. They’re criminals. The latest round of stimulus policy by the head printer-in-chief, Ben Bernanke, and the Fed is stunning in its size (in that it has no limit), stunning in its time-frame (as there is none), and even more stunning in the lie behind what it’s designed to accomplish. The bottom line? The Fed has just guaranteed $6 gas and $4000 gold.

Let me explain. In this latest round of “monetary stimulus,” the Fed will be buying $40 BILLION a month in MBS (Mortgage Backed Securities) until the “labor market improves.” That is on top of the already large treasury purchases they make. That means, assuming the labor market doesn’t improve, the Fed will expand its balance from an already insane $2.8 trillion to an inconceivable $4 trillion by the end of 2013.

Bank of America analysts are saying the Fed’s balance sheet may pass $5 trillion by the end of 2014 sending gold to $3550 and oil $190 a barrel. While that may sound insane, the simple math behind the US treasury’s debt projections also place gold at over $3800 as debt swells to over $28 trillion by 2018, so BofA’s projection of $3500/oz. at that time is right in the ballpark.


So, how do you make sound wealth-preservation decisions in a world of fiscal illusion? It’s a tough question. Reggie Middleton answered it best recently; “You don’t have to an optimist or a pessimist, you have to be a realist.” In order to be a realist, you have to be able to look at real data and real information and then you simply have to use common sense. Numbers don’t lie, politicians do. I will help you with the mathematics of all this because that’s all it is. Then you can decide for yourself if you believe in math, or if you believe in magic.

Let's start with a dose of cold, hard reality. It’s really tough to make good financial decisions when you’re being lied to. And you are being lied to. You are being lied to by our financial leaders. You are being lied to by their media. You can feel it. You can feel it when you listen to politicians and their promises on TV. You can feel it when you watch the government use scripted measures like CPI to gauge inflation that do not include food or energy, just so they can tell you there is none.

You can see it in the policy decisions the powers-that-be come up with under the guise of “helping the people,” when in reality those policies are back-door bank bail-outs. You are being lied to about money and wealth protection. You are being led to financial slaughter by a pack of sociopaths at the Fed whose dual mandate is scripted as “keeping inflation in check and people employed,” but their policies say loud and clear that the dual mandate is instead to “punish savers and save too-big-to-fail banks.”

So, what is the end result of the Fed's latest round of quantitative easing? Every month in 2013, the Fed will increase its balance sheet by $85 billion, consisting of $40 billion in MBS, and $45 billion in 10-30 year treasuries, or the natural monthly supply of longer-dated issuance. The Fed will therefore monetize roughly half of the US budget deficit in 2013.

Putting it all together, the Fed's balance sheet will increase from just over $2.8 trillion currently, to $4 trillion on December 25, 2013.

A total increase of $1.17 trillion.

This is what the Fed's balance sheet will look like:



And here is the price of gold relative to the Fed’s balance-sheet:



As clear as day, these charts illustrate that QE3 is truly the gift that keeps on giving if you are a holder of gold.

They call it “Quantitative Easing.” And this would be round three. The reason QE is like the gift that keeps on giving for a holder of gold is because it blatantly debases the US dollar. Allow me to illustrate:

Round one (QE1) started November 25, 2008 and ended March 31, 2010. During that 17-month period, a gallon of gas rose from $1.75 to $2.75 and gold rose from $725/oz. to $1125/oz.

QE2 was started Nov 3, 2010 and lasted seven months until June 30, 2011. During the seven months of QE2, gas prices rose from $2.80 to $3.60 and gold from $1325 to $1700. QE2 was also marked by massive global food inflation and global riots. QE2 ended June 30, and we have had no further ‘major’ balance sheet expansion until mid-September 2012.

In the last few weeks leading up to QE3 and the week after, gold rose 15%. The proof is in the numbers.

Math or Magic?

Let’s crunch the numbers and do some math, so you can use some useful data to make sound decisions.

During QE1 (17 months) gold rose 55% and gas rose 57%.

During QE2 (7 months) gold rose 28% and gas rose 28.5%.

Quite notably, your wealth in gold buys exactly the same amount of gas at the end of a QE period as it did at the beginning, but your USDs buy far less each time. I don’t think I really need to make the point that both gas and gold will rise in USD as QE3 really starts to kick in, do I? I think it would be much more challenging to try and figure out how much they will rise, as it is a given that they will.

QE1 consisted of $1.7 trillion spent mostly on mortgage-backed securities, and it caused a 55% spike in the price of both gas and real money (gold) over 17 months. That’s an average of $100 billion per month.

QE2 was $600 billion, spent buying US treasuries, and pushed both gold and gas 28% higher in seven months. That’s an average spend of $85 billion per month.

So let’s do the math, because we know exactly how much the Fed will be spending this time, just not for how long (although one can assume it’ll be a long time).

The numbers above tell me that roughly every $85 billion the Fed adds to its balance-sheet will cause a 2-3% rise in the price of gas and gold. If we know that the Fed is going to spend $85 billion a month ($40 billion in MBS purchases and the already $45 billion in treasuries), we can safely assume an approximate increase of over 20% per year in the price of both gas and gold as long as the Fed is adding to his balance sheet at that rate. Again, this latest round of QE-infinity has no spending limit and no time limit, much like the monetary cannon the European Central Bank shot in early September to try and save the deal over there.

QE3 Will Not Improve Labor; It will Ruin The Economy

This policy is complete insanity. It’s simple math puts gas prices in September, 2014 at 25-40% higher than in September, 2012 and well over $6. It puts gold in the $2350-$2500 range and past $1900 pretty quickly. It debases the US dollar significantly, again, and at a time when we need fiscal responsibility more than ever. But here’s the real insanity behind this kind of move and its perceived intentions: How does spending $40 billion a month buying toxic paper from banks even help the labor market anyway? How can the Fed even get away with another huge lie and distortion like this one?

Not that I think it's a good idea to print money and replace debt for credit (as credit dies) to try and resuscitate capital markets. But I don’t understand why, if the Fed is going to spend money to try and help labor, they don’t invest $40 billion a month into the Small Business Association? That money is federally guaranteed and would improve the labor market a whole lot faster.

I think I can answer my own question… because these policies aren’t really aimed at fixing the labor market or improving the real economy at all. These policies are designed to be bailouts for too-big-to-fail banks and to keep rates low so that the Fed can service $16 trillion in debt. This was a move that had complete panic all over it. It's likely to cause gold to go to $3500 an ounce and, for those who like risk, maybe Ben gets the Dow to 15,000. But if there are still no jobs, and a cup of coffee if $5, and it costs over $100 to fill your gas tank, who’s it really helping?

Protecting Your Wealth from the Madness

To actually achieve sound wealth protection at this point, you need to look for true diversification (as opposed to banker diversification), by removing some of your wealth from “the system.” You need to get a portion of your wealth out of the insolvent banking institutions that don’t pay you any yield anyway, and then you need to buy some real money. Some grass-fed, non-GMO, organic, real MONEY. The unprocessed kind. The kind that is not attached to all the political lies and corporate greed. Money free of debt and that can’t be printed by criminals. The kind that has outlasted every paper fiat currency ever invented by man for over 5000 years.

In all honesty, if you can’t see the writing on the wall at this point in the game, and especially after round number QE3 of failed policy that does nothing for the real economy but blow up asset bubbles, you may never see it.

And if you can’t use simple math to uncover the truths of the sleight-of-hand coming from the central-bank magicians, you may just be doomed to a life of fiscal frustration and hardship. "The greatest trick central bankers ever pulled was convincing the world that they work for the public and not for the banks." The Fed may work for the banks and not you, but your wealth exists to serve you, not them. Your wealth must outlast you and, hopefully, they’ll be some to pass to those you love. Your wealth does not exist to support a broken, criminally-run and insolvent system.

If you presently do not own any gold, then you do not have the luxury of time. The foundation and thus the safety of our monetary, banking and financial systems has never been less sound. Never. The move we saw the Fed pull with QE3 is a clear and perfect example of that.

While the media may try and convince you otherwise, I hope you have gained the ammunition to see the truth and make some decisions about how you will prepare for the inevitable math of the future. Again, you don’t have to be an optimist to make money, and you don’t have to be a pessimist to protect it. You need to be a realist.

quote
Oct 23 (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the Nov. 6 election, the New York Times reported.

Republican presidential nominee Mitt Romney has already said he would not re-nominate Bernanke if he wins the presidency. Bernanke's term as chairman ends in January 2014.

Bernanke, who was first appointed to run the U.S. central bank by former president George W. Bush and was given a second term by Obama, has declined to comment publicly on whether
he would accept another four-year term.

The Fed's unconventional efforts to spur growth have been criticized by many Republicans and some economists who argue that they threaten future inflation and abet profligate spending in Washington.

The central bank has promised to keep interest rates near zero until at least mid-2015, but Bernanke told reporters in his last press conference that there was an internal consensus on the latest round of stimulus.

"There is a consensus that even as the personnel change and so going forward, that this is the appropriate approach," he said last month.

http://www.reuters.com/article/2012/10/23/bernanke-chairman-idUSL3E8LN3SU20121023

Hear the exact description of the FRB spoken by a chairman directly.


Today's International Jew - YouTube

"Print our own money just like the Constitution says."

Article I, Section 8, Clause 5: The Kikes shall have the exclusive Power…To print Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Patrick J. Buchanan:Crash of 2008--The Party's Over
Crash of 2008--The Party's Over
By Patrick J. Buchanan

The Crash of 2008, which is now wiping out trillions of dollars of our people's wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.

The new era will see a more sober and much diminished America. The "Omnipower" and "Indispensable Nation" we heard about in all the hubris and braggadocio following our Cold War victory is history.

Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism.

This is nonsense. What we are witnessing is the collapse of Gordon Gekko ("Greed Is Good!")) capitalism. What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great.

A true conservative cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic. He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means.

Is that really what got Wall Street and us into this mess—that we followed too religiously the gospel of Robert Taft and Russell Kirk?

"Government must save us!" cries the left, as ever. Yet, who got us into this mess if not the government—the Fed with its easy money, Bush with his profligate spending, and Congress and the SEC by liberating Wall Street and failing to step in and stop the drunken orgy?

For years, we Americans have spent more than we earned. We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt—all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid.

Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars.

We are going to have to learn to live again without our means.

The party's over

Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.

But this generation decided that was yesterday's bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into "global companies" and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers.

As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad.

At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise. The dollar began to sink, and gold began to soar.

Yet, still, the promises of the politicians come. Barack Obama will give us national health insurance and tax cuts for all but that 2 percent of the nation that already carries 50 percent of the federal income tax load.

John McCain is going to cut taxes, expand the military, move NATO into Georgia and Ukraine, confront Russia and force Iran to stop enriching uranium or "bomb, bomb, bomb," with Joe Lieberman as wartime consigliere..

Who are we kidding?

What we are witnessing today is how empires end..

The Last Superpower is unable to defend its borders, protect its currency, win its wars or balance its budget. Medicare and Social Security are headed for the cliff with unfunded liabilities in the tens of trillions of dollars.

What we are witnessing today is nothing less than a Katrina-like failure of government, of our political class, and of democracy itself, casting a cloud over the viability and longevity of the system.

Notice who is managing the crisis. Not our elected leaders. Nancy Pelosi says she had nothing to do with it. Congress is paralyzed and heading home. President Bush is nowhere to be seen.

Hank Paulson of Goldman Sachs and Ben Bernanke of the Fed chose to bail out Bear Sterns but let Lehman go under. They decided to nationalize Fannie and Freddie at a cost to taxpayers of hundreds of billions, putting the U.S. government behind $5 trillion in mortgages. They decided to buy AIG with $85 billion rather than see the insurance giant sink beneath the waves.

An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators.

What the Greatest Generation handed down to us—the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved—the baby boomers, oblivious and self-indulgent to the end, have frittered away.

COPYRIGHT CREATORS SYNDICATE, INC.




http://www.vdare.com/buchanan/080918_crash.htm
================================================


(Greatest Generation ?) should have told FDR and his NYC cabal of perverted criminals to get to to Japan, and Germany ASAP or put them in jail.

Epic Fail

Fighting For Stalin, and screwing over the Chinese National's for Mao.

http://jewishfaces.com/china.html

This link provides a lot of information about speeches by the Congressman about the Federal Reserve. As well as quotes from other Congressman and people from that time regarding the federal reserve.

Congressman Mcfadden was assassinated by poisoning, which is discussed at the bottom of the page in the link.

http://home.hiwaay.net/~becraft/mcfadden.html



The Federal Reserve-A Corrupt Institution

"Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over.

Sound familiar anyone? Look at all the debt we got today.

"This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it.

Also sounds familiar to current issues. The same debt slavery happening today is just the same old Jew money game.

"Some people who think that the Federal Reserve Banks United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lender. In that dark crew of financial pirates there are those who would cut a man's throat to get a dollar out of his pocket; there are those who send money into states to buy votes to control our legislatures; there are those who maintain International propaganda for the purpose of deceiving us into granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime.

Notice the key words he uses to describe Jews, like moneyed vultures, swindlers, dark crew, pirates. Also the last part of the paragraph sounds a lot like what AIPAC is doing today, but this was before there was an Israel.

"These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this Country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia, and thus drove a wedge between the allies in World War. They financed Trotsky's passage from New York to Russia so that he might assist in the destruction of the Russian Empire. They fomented and instigated the Russian Revolution, and placed a large fund of American dollars at Trotsky's disposal in one of their branch banks in Sweden so that through him Russian homes might be thoroughly broken up and Russian children flung far and wide from their natural protectors. They have since begun breaking up of American homes and the dispersal of American children. "Mr. Chairman, there should be no partisanship in matters concerning banking and currency affairs in this Country, and I do not speak with any.

American Jewry, the driving force behind Communism, who would have ever guessed? :rolleyes:

"In 1912 the National Monetary Association, under the chairmanship of the late Senator Nelson W. Aldrich, made a report and presented a vicious bill called the National Reserve Association bill. This bill is usually spoken of as the Aldrich bill. Senator Aldrich did not write the Aldrich bill. He was the tool, if not the accomplice, of the European bankers who for nearly twenty years had been scheming to set up a central bank in this Country and who in 1912 has spent and were continuing to spend vast sums of money to accomplish their purpose.

European bankers? Reference to the Rothschilds? Who else could it be?

"We were opposed to the Aldrich plan for a central bank. The men who rule the Democratic Party then promised the people that if they were returned to power there would be no central bank established here while they held the reigns of government. Thirteen months later that promise was broken, and the Wilson administration, under the tutelage of those sinister Wall Street figures who stood behind Colonel House, established here in our free Country the worm-eaten monarchical institution of the "King's Bank" to control us from the top downward, and from the cradle to the grave.

The "King's bank" reference is curious, unsure if its just a twist on the federal reserve, or if he is implying that the Rothschilds in Britain had a hand in this?

"The Federal Reserve Bank destroyed our old and characteristic way of doing business. It discriminated against our 1-name commercial paper, the finest in the world, and it set up the antiquated 2-name paper, which is the present curse of this Country and which wrecked every country which has ever given it scope; it fastened down upon the Country the very tyranny from which the framers of the Constitution sough to save us.

Why Central Banks Can't Let Up on Stimulus

By Jeff Cox | CNBC – 17 minutes ago


It's a central bankers' world, and we're all just living in it.

Entities such as the Federal Reserve and the European Central Bank in 2012 took control of global economies like never before. Based on current market and economic behavior it's likely to be years before anything changes.

After all, how can central banks take their foot off the stimulus pedal when there's so much at stake?

In all, 13 other central banks in the world have followed the Fed's lead and set interest rates at or near zero in an effort to keep the liquidity spigots open and prop up their ailing economies. Those 14 economies represent a staggering $65 trillion in combined equity and bond market capitalizations, according to Bank of America Merrill Lynch.

As for the bond-buying programs -- aka quantitative easing -- that dovetail with the low interest rates, the U.S. central bank alone shortly will eclipse $3 trillion on its balance sheet and is expected to end 2013 north of $4 trillion in electronically created money.

Globally, that figure is, well, a lot.

"When you add up all the central banks in the world, it's going to be over $9 trillion," said Marc Doss, regional chief investment officer for Wells Fargo Private Bank. "That's like creating the second-largest economy in the world out of thin air."

Indeed, central banking has become an economy onto itself, a multi-trillion-dollar empire that massages and manipulates markets, which respond to the slightest news out of the respective entities' policy making committees.

And if you're looking for the off-ramp, a point at which the central banks let the free market to its own devices, don't hold your breath.

Fed Chairman Ben Bernanke and the central bank's Open Markets Committee said Wednesday that rates will remain near zero at least until unemployment drops to 6.5 percent and inflation rises to 2.5 percent.

If current trends are any gauge, either occurrence is likely to take years.

In the meantime, equity markets remain tethered to Fed policy, dropping in part on Wednesday's news over fears that the Fed isn't doing enough.

In fact, otherwise bullish Bank of America strategists say the main risk to stocks next year is the economy improving significantly, as that might spur the Fed to dial down the extraordinary measures it is taking to keep the American growth engine purring.

"The most obvious reason for the ongoing rally in risk assets is the largess of major central banks. Policy continues to be a major driver of risk appetite," Michael Hartnett, BofA's chief investment strategist, said in a report. "With so much investment flow predicated on QE-infinity, and the maintenance of zero interest rates, anything that disturbs the liquidity outlook is likely to increase volatility."

"We worry that the strong performance of banks, value, (real estate investment trusts) and bonds and the underperformance of cash make bond and equity markets vulnerable to any upside growth surprises in (the first half of 2013), as this would likely lower liquidity expectations," he added.

The result of such widely shared sentiment is an upside-down world for investors.

Whereas those looking to put money to work in the equity markets could simply look at a company's fundamentals and price action then act accordingly, a world where aggressive central bank policy will be at play indefinitely and immeasurably changes the entire landscape.

Yes, monetary policy always has been important to the markets, but not like this.

"We have never seen investors so nervous after such a strong market. We would have expected greater enthusiasm," Deutsche Bank's strategists said in an analysis. "If the Fed were to leave (policy) alone and let markets decide, then equity markets would probably fall. But, as it is, if real investors can't predict which way markets will go, then they will stay on the sidelines."

Gripe though they may, however, investors are not apt to swim against the tide.

None of the major Wall Street houses is betting against the stock market in 2013, reasoning that equities will be pushed forward by a modestly strengthening economy and continued Fed accommodation.

Hedge fund manager Blackrock is virtually alone in its assessment that Fed tightening actually could send money into equities - in a "dash for trash," the firm said - while most others believe central bank liquidity is key.

JPMorgan Chase, for one, correctly anticipated that the Fed would tie its policy to specific economic targets - in part as an effort to counteract the political and fiscal mess in Washington.

"This change in communications should further cement the view that rates won't be rising for a very long time. We think the first hike won't occur until late 2015, or possibly even later," JPMorgan's chief market strategist Thomas J. Lee said. "The continued gentle posture of monetary policy should keep financial conditions supportive, helping to offset some of the drag imposed by fiscal policy."

The mindset has led managers dangerously up the ladder in risk, particularly in the high-yield area of fixed income. Though they saw outflows in November, junk bond mutual funds have seen assets under management grow 19 percent this year as investors grope for yield in a no-yield environment.

Wells Fargo's Doss said he is afraid of high-yield in corporate debt but favors it in municipal bonds, and otherwise is putting focusing on risk in the equity and commodity markets.

It's all part of the brave new jew central banking world.

"We're in open-ended QE across the globe," Doss said. "I don't know what the end game is."


http://finance.yahoo.com/news/why-central-banks-cant-let-204737141.html

The institutional crazies, village idiots and knee-jerk opportunists who bought shares Wednesday (12/12/12) following a Fed announcement of yet more monetization seem not to have been paying attention, at least initially, to the nasty sell-off in T-Bonds. Well before Dec. 12, any sentient being would have surmised that easing’s impact on the economy had reached the point of diminishing returns. With administered rates pegged at zero and mortgage loans near historical lows, how much more boost are we to expect from yet another gaseous effusion of bank-system credit? Most of it is going unused anyway, other than by banks for the purpose of "buying" - you got it! - Treasury paper

http://maxkeiser.com/2012/12/13/fed-losing-its-grip-on-our-expectations/#more-58070

You know, at some point this has to go exponential , the printing of money. It always has, historically . The only other alternative is to stop the expansion of the money supply, which slams the economy into a plunging depression .

"The besieged consumer gets another whammy from a banking system that thrives on charging usurious fees, while paying you near zero on your saving accounts. With the execution of the Bernanke rescue strategy, the prospects of personal or consumer loans are virtually non-existent. In Helicopter Ben speak; "maintaining monetary accommodation" just does not filter down to the common man. "

Even the most ardent optimist has to confront the consequences of low interest rates. The macro analysis of ivory tower academics seldom reflects the struggle of ordinary consumers or retirees. One such pinhead is Ben Bernanke. Back on October 1, 2012 at the Economic Club of Indiana, the Federal Reserve Chairman employs sophistry of a major order. Such confused and twisted logic defies common sense and real world finance. Robert Romano writes in the article, More monetary alchemy from Bernanke: Low interest rates help savers.
"Many savers are also homeowners," said Bernanke, adding, "indeed, a family’s home may be its most important financial asset. Many savers are working, or would like to be. Some savers own businesses, and — through pension funds and 401(k) accounts — they often own stocks and other assets."

Bernanke explained, "Only a strong economy can create higher asset values and sustainably good returns for savers… [and] [t]he way for the Fed to support a return to a strong economy is by maintaining monetary accommodation, which requires low interest rates for a time."

He said home values would collapse without Fed support, unemployment would rise, and asset values would plummet and "[s]uch outcomes would ultimately not be good for savers or anyone else."

So, admittedly, the Fed’s easy money policies do not in actuality directly help savers. But they will increase home values, asset prices, and create jobs for savers, Bernanke claimed. Okay, but is that even true?"

Such deceptive dishonesty that the Fed fosters beneficial monetary measures, which encourage job growth and a vigorous housing market, defies evidence. The saver watches the evaporation of their money, while prices jump at rates far in excess of the official CPI. This is a fact. This construct is the legacy of the intentional 2007 Wall Street meltdown.

The inability of distinguishing between illiquid assets and the need to pay for cost of living expenses must be a trait that only financially - cash flow secure - magicians master. The perception that the masses benefit from central banking driving down and suppressing interest rates to negative levels is patently absurd. Negative Interest Rates and the Impoverishing of America by Michael R. Winther sums up the self-evident.
"Don’t forget that consumers pay income tax on interest earned regardless of whether real interest rates are positive or negative. The result is that many Americans are paying income tax on a negative real interest rate! This discourages savings and investment, but even worse, it steals from our citizens.

Negative real interest rates hurt all savers, but these rates are especially damaging to the elderly and those on fixed incomes. It is no longer possible for senior citizens to live on the interest of their savings and investments. In fact, our negative interest rates result in a situation in which our seniors must rely on the depletion of their principle for all of their living expenses."

The net effects of an inflationary depression require that privately saved capital must be used to pay for the continued increases in basic costs. It is not just the retired person that is shafted from zeroing out the money market. Anyone who attempts to devise a budget that sets aside a portion of cash flow understands that there is no return on banking funds.

How long will people accept this thief? The options to parking cash in hand with a FDIC insured institution seems worth an examination. However, few alternatives for working class savers exist. Surely, this occurrence is intentional because the real objective of the "New Normal" is to bankrupt Middle America. What other conclusion makes sense?
http://www.batr.org/negotium/020613.html

"...our seniors must rely on the depletion of their principle for all of their living expenses. . ."

If they engage in crime due to low rates, maybe that is a "depletion of principle,"
or maybe it's a survival necessity.

"...our seniors must rely on the depletion of their principle for all of their living expenses. . ."

If they engage in crime due to low rates, maybe that is a "depletion of principle,"
or maybe it's a survival necessity.

Bernanke Signals Continued Fed Support for Low Interest Rates
The Federal Reserve's low interest-rate policies are giving key support to an economy still burdened by high unemployment, Chairman Ben Bernanke told Congress on Tuesday. Bernanke signaled that the Fed's efforts to keep borrowing costs low will continue.

In a statement, Bernanke acknowledged that the Fed's aggressive program to buy $85 billion a month in Treasurys and mortgage bonds to keep rates low could eventually ignite inflation or unsettle investors. Several Fed policymakers said at their most recent meeting that the Fed might have to scale back its bond purchases because of those risks.

But Bernanke, delivering the Fed's semiannual report to Congress, said the risks remained contained for now.

http://www.dailyfinance.com/2013/02/26/bernanke-fed-support-low-interest-rates/

How much worse can things get? At this point the decline has become so steep for J.C. Penney that Jim Cramer of CNBC is declaring that they are in "a true tailspin".

#3 In the United States today, a new car has become out of reach for most middle class Americans according to the 2013 Car Affordability Study...

Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.

The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales. According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year.

#4 The founder of Subway Restaurants, Fred Deluca, says that the recent tax increases are having a noticeable impact on his business...

"The payroll tax is affecting sales. It's causing sales declines," he said, estimating a decline of about 2 percentage points off sales at his restaurants. "There are a lot of pressures on consumers," Deluca said, adding "I think this is on the permanent side, but I think business will adjust to it."
Link: http://www.activistpost.com/2013/02/...igns-that.html

We Have this Little Problem Called the Sequester-Karl Denninger - YouTube

What Is Driving This Market? There is NO VOLUME! By Gregory Mannarino - YouTube

Quote

SonofCastille 34 minutes ago

Y'all see where the Royal Bank of Scotland crashed and 17 MILLION folks got shut out of the accounts?!?

Unquote

Consumer Debt Continues To Rise Thanks To The Fed. By Gregory Mannarino - YouTube

http://i.huffpost.com/gen/1041467/thumbs/r-FISHER-TOO-BIG-TO-FAIL-large570.jpg?6

By Pedro Nicolaci da Costa



NATIONAL HARBOR, Md., March 16 (Reuters) - The largest U.S. banks are "practitioners of crony capitalism," need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday.



Richard Fisher, president of the Dallas Fed, has been a critic of Wall Street's disproportionate influence since the financial crisis. But he was now taking his message to an unusual audience for a central banker: a high-profile Republican political action committee.



Fisher said the existence of banks that are seen as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.



"These institutions operate under a privileged status that exacts an unfair tax upon the American people," he said on the last day of the annual Conservative Political Action Conference (CPAC).



"They represent not only a threat to financial stability but to fair and open competition  (and) are the practitioners of crony capitalism and not the agents of democratic capitalism that makes our country great," said Fisher, who has also been a vocal opponent of the Fed's unconventional monetary stimulus policies.



Fisher's vision pits him directly against Fed Chairman Ben Bernanke,:jew: who recently argued during congressional testimony that regulators had made significant progress in addressing the problem of too big to fail. Bernanke asserted that market expectations that large financial institutions would be rescued is wrong.


http://www.reuters.com/article/2013/03/16/us-usa-fed-fisher-idUSBRE92F09U20130316

Published on VDARE.com (http://www.vdare.com)

Home > February Jobs: Staring Armageddon In The Face But Hiding It With Official Lies

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February Jobs: Staring Armageddon In The Face But Hiding It With Official Lies
By Paul Craig Roberts
Created 03/12/13
Topic:
Off Topic
[See Also: National Data| February Jobs: Immigrant Employment Rose FOUR TIMES FASTER Than Native-born Employment Over Past Year [1], by Edwin S. Rubenstein]

According to the Bureau of Labor Statistics, the US economy created 236,000 new jobs in February. If you believe that, I have a bridge in Brooklyn that I’ll let you have at a good price.

Where are these alleged jobs? The BLS says 48,000 were created in construction. That is possible, considering that revenue-starved real estate developers are misreading the housing situation. [2]

Then there are 23,700 new jobs in retail trade, which is hard to believe considering the absence of consumer income growth and the empty parking lots at shopping malls.

The real puzzle is 20,800 jobs in motion picture and sound recording industries. This is the first time in the years that I have been following the jobs reports that there has been enough employment for me to even notice this category.

The BLS lists 10,900 jobs in accounting and bookkeeping, which, as it is approaching income tax time, is probably correct; 21,000 jobs in temporary help and business support services; 39,000 jobs in health care and social assistance; and 18,800 jobs in the old standby—waitresses and bartenders.

That leaves about 50,000 jobs sprinkled around the various categories, but not in numbers large enough to notice.

The presstitute media attributed the drop in the headline unemployment rate (U3) to 7.7% from 7.9% to the happy jobs report. But Rex Nutting at Market Watch says that [3] the unemployment rate fell because 130,000 unemployed people who have been unable to find a job and became discouraged were dropped out of the U3 measure of unemployment. The official U6 measure which counts some discouraged workers shows an unemployment rate of 14.3%. Statistician John Williams’ measure, which counts all discouraged workers (people who have ceased looking for a job), is 23%.

In other words, the real rate of unemployment is 2 to 3 times the reported rate.

Nutting believes that the U3 unemployment rate has become too politicized to have any meaning. He suggests using instead the work force participation rate. This rate is falling substantially, reflecting the discouragement that occurs from inability to find jobs.

John Williams (shadowstats.com [4]) says that distortions in seasonal factor adjustments overstate monthly payroll employment by about 100,000 jobs. The jobs data that is not seasonally adjusted shows about 1.5 million fewer jobs in the economy.

In a recent communication, statistician John Williams (shadowstats.com [4]) reports that the rigged official annual rate of consumer inflation (CPI) of 1.6% is in fact, as measured by the official US government methodology of 1990, 9.2%. In other words, the rate of inflation is 5.75 times greater than the reported rate. If Williams is correct, the interest rate on bonds is extremely negative.

Over the years the measure of inflation has been altered in two ways. One is the introduction of substitution for what formerly was a constant weighted basket of goods. In the former measure, if a price of an item in the basket (index) rose, the CPI rose by the weight of that item in the basket.

In the substitution-based measure, if a price of an item in the basket goes up, the item is removed from the basket, and a cheaper item is put in its place. For example, if the price of New York strip steak rises, the new CPI will substitute the price of a cheaper cut.

In this new measure, inflation is held down by measuring not a fixed standard of living but a declining standard of living.

The other adjustment used to restrain the measure of inflation is to re-classify many price rises as “quality improvements.” Price rises declared to be quality improvements do not translate into a higher measure of inflation. In other words, if a product rises in price, the price increase or some portion of it can be assigned to improved quality, not to a rise in component or energy costs. As the incentive is to hold down the inflation measure in order to save money for the government on Social Security cost-of-living-adjustments, quality improvements are over-estimated.

Consumers have to pay the higher prices, and as incomes, except for the 1 percent, are not growing, higher product prices, regardless of whether they are or are not quality improvements, mean a lower standard of living for the 99 percent.

The understated new measure of inflation allows the government to show real GDP growth and thus the end of the December 2007 recession, and it allows the government to show in the latest report real retail sales again matching the pre-recession level. However, when measured correctly, as by statistician John Williams, the true picture of retail sales shows a steep decline from 2007 through 2009 and bottom bouncing since.

The reason real retail sales cannot recover is that real average weekly earnings continues its downward path. Earlier in this new century, the lack of income growth for the bulk of the US population was masked by a rise in consumer debt. Americans borrowed to spend, and this kept the economy going until the point was reached that consumers had more debt than they could service.

John Williams report of real average weekly earnings shows that Americans are taking home less purchasing power than they did in the 1960s and 1970s.

Reflecting the dollar’s loss of purchasing power, the price of gold and silver in dollars has risen dramatically during the Bush and Obama regimes.

For the last year or two the Federal Reserve and its dependent banks have operated to cap the price of gold at around $1,750. They do this by selling naked shorts in the paper speculative gold market.

There are two gold markets. One is a market for physical possession by individuals and central banks. The rising demand in the physical bullion market points to a rising price for gold.

The other market is the speculative paper market in which financial institutions bet on the future gold price. By placing large amounts of shorts, this market can be used to suppress price rises in the physical market. The Federal Reserve, which can print money without limit, can cover any losses on its agents’ paper contracts.

It is important to the Federal Reserve’s low interest rate policy to suppress the bullion price. If the prices of gold and silver continue to rise relative to the US dollar, the Fed cannot keep the prices of bonds high and interest rates low. If the dollar is widely perceived to be declining in value in relation to gold, the price of dollar-denominated assets will also decline, including bonds. If the dollar loses value, the Fed loses control over interest rates, and the US financial bubble pops, with hell to pay.

To forestall armageddon, the Fed and its dependent banks cap the price of gold.

The Fed’s fix is temporary, and as the Fed continues to create ever more dollars, the price of gold will eventually escape the Fed’s control as will interest rates and inflation.

The Fed has produced a perfect storm that could consume the US and perhaps the entire Western world.

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week, and the Scripps Howard News Service. He has had numerous university appointments. His latest book is The Failure of Laissez Faire Capitalism and Economic Dissolution of the West. [5]

The articles on VDARE.com are brought to you by the VDARE Foundation. We are supported by generous donations from our readers. Contributions are tax deductible and appreciated.

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Source URL: http://www.vdare.com/articles/staring-armageddon-in-the-face-but-hiding-it-with-official-lies
Links:
[1] http://www.vdare.com/articles/national-data-february-jobs-immigrant-employment-rose-four-times-faster-than-native-born-em
[2] http://www.counterpunch.org/2013/03/08/us-housing-is-the-recovery-real/print
[3] http://www.marketwatch.com/story/why-the-unemployment-rate-is-so-misleading-2013-03-08
[4] http://shadowstats.com
[5] The Failure of Laissez Faire Capitalism and Economic Dissolution of the West: Paul Craig Roberts, Hudson Atwell, Ryan McCullough, Johannes Maruschzik: Amazon.com: Kindle Store

Federal Reserve foresees unemployment remaining high into 2015, suggesting it will keep short-term interest rates near record lows at least until then.
http://www.cbsnews.com/8301-505123_162-57575395/fed-unemployment-to-remain-high-through-2014/


http://3.bp.blogspot.com/-PxO_ToOF7IY/T2SEqamx-HI/AAAAAAAABq4/8tFDpk_e6TA/s1600/jew+bernanke+HATED,+DESPISED,+LOATHED+for+FRAUD+worldwide.jpg

At this afternoon’s FOMC Press Conference in response to a question posed as to whether the Fed would ever impose depositor 'haircuts",

as was attempted this week in Cyprus,

Fed Chairman Ben Bernanke confirmed that Cyprus style depositor "haircut" wealth confiscation is possible here in the U.S. if the Cyprus event or another event in Europe were to become contagious and the people lose confidence in the U.S. dollar.




http://www.silverdoctors.com/bernanke-states-cyprus-style-depositor-haircuts-possible-in-us-if-events-in-europe-become-contagious/


http://www.anunews.net/blog/wp-content/uploads/2013/03/aa-Dees-Bernanke.jpg

WASHINGTON — A Federal Reserve voting member says the Fed's decision to announce details about when it would trim its bond-buying program was "inappropriately timed."

St. Louis Federal Reserve Bank President James Bullard says the Fed should have waited for more "tangible signs" that the economy was strengthening and inflation was closer to the Fed's 2 percent target.

Chairman Ben Bernanke said Wednesday after a two-day policy meeting that the Fed would likely slow its $85 billion-a-month program later this year and end it next year if the economy continued to strengthen. The purchases have helped keep long-term interest rates at record lows.

At the meeting, Bernanke was authorized to make that announcement. Bullard objected to the decision, according to an explanation of his vote posted Friday on the regional bank's website.

http://research.stlouisfed.org/econ/bullard/index.html


http://www.huffingtonpost.com/2013/06/21/bernanke-bond-buying-announcement_n_3479040.html

"WHEAT RECEIPTS" - YouTube

OK people, finally something ALL americans can sink their teeth into and understand once and for all that "The Banking Conspiracy" has moved from just being another speculative conspiracy to being reality. The thing that should unite all of us whether Democrat, Republican/TeaParty, Libertarian or other political preference is that there is now proof that there was indeed collusion at the highest levels of US banking and government to deregulate the entire world banking system in order to decriminalize what they had planned, because at the time they planned it, it was illegal.

Demand your congressman/congresswoman turn down Larry Summers nomination for the Fed. Res. Chair because he is definitely not to be trusted ! Heads should roll over this !


.......The memo in particular, what Summers was engineering--remember, Summers, Rubin, Geithner were the key players in eliminating financial regulation of the banking industry. They eliminated the distinction between gambling houses in the investment banks and our piggy bank banks, the commercial banks. And as you know, that led to financial implosion in the United States and worldwide.

How did it end up bringing down the world financial system just 'cause we had a problem with the United States? The answer goes back to this memo. It was an idea in which they said, look, we can't deregulate into the United States alone; we have to deregulate across the planet. Otherwise, money will shift out of the United States into safer money harbors. So the way to change end that would be to eliminate banking regulations in every nation of the world, 156 nations in one shot.

And it was quite brilliant, the scheme, which was--and it succeeded, that is, in an awful way. We have a world financial collapse, but their plan to succeeded, the end game succeeded, which is to require any nation that wants to do trade with the United States in goods to accept our bads. If you want to sell us--if Ecuador wants to sell America bananas--and this is a real example--if Ecuador wants to sell us bananas, they have to accept in return derivatives, subprime mortgages. They have to accept synthetic collateralized debt obligations. So they're being paid for their real assets with toxic assets.

And every nation but one signed on. A hundred and fifty-five nations agreed to a kind of form of blackmail, which is that you want to sell cars to the U.S., you want to sell, you know, orange juice to the U.S., you're going to have to go along with deregulating your banking system, accepting our derivatives junk, our junk bonds and our junk derivatives, and opening up your sectors to Goldman Sachs and JPMorgan, so that Morgan, Citibank, and others are allowed to operate internationally. The effects, of course, have been disastrous.

And what's important about this document, again, is not just that it tells you how the world fell to its knees and the inside process and the kind of icky revelation that, you know, as a lot of people suspected, that the bankers and the Treasury Department actually secretly put this whole business together. What's particularly relevant this week is that Larry Summers, the center of this scheme of this end game, is Obama's prime choice to be head of the Federal Reserve Board. So I thought that this was the time to get the document out.

Noor: And so you can confirmed the authenticity of the memo with Pascal Lamy, the secretary-general of the World Trade Organization. What was his reaction? Can you share his reaction to the memo? And did he disclose anything to you that wasn't previously known or published?

Palast: Well, I actually spoke to--I traveled all over the world to confirm this. I went to Geneva, Switzerland, and I--you know, 'cause of my position as--I'm pretty well known internationally as a reporter, so I was able to speak with the director-general of the World Trade Organization himself, Pascal Lamy. He's French. He said, oh, the WTO--'cause all this was done through the auspices of trade--the WTO is not some cabal of evil bankers meeting in a room secretly filled with cigar smoke, etc. And then I showed him the memos. So that was--yes, there was no cigar smoke, but there were secret meetings of bankers.

And his reaction was, listen, if the United States--in his wonderful French accent--if the United States doesn't have a real democracy, then you're going to have to file a complaint with the human rights court down the street in Geneva. That's none of his business. It's not his job to make America a democracy if we're being run by bankers, which is pretty awful way of putting it.

I then went and I also spoke with a member of the cabinet at the time. Remember, these are cabinet members, Rubin and Geithner and Summers. Another member of Clinton's cabinet when this was occurring was Joe Stiglitz, who later won the Nobel Prize in economics. He was head of the Council of economic advisers. And Stiglitz has never given me, by the way, inside documents, but he does tend to confirm the documents I show him, just to make sure I know what I'm talking about. And he said something shocking to me. He said that when he was in cabinet meetings, Summers would turn to Rubin and say--and they're in the White House in front of the president. The president would ask them some for policy recommendations, and Summers would say to Rubin, well, what would Goldman think of this? In other words, what would Goldman Sachs think? And he did it several times, until Stiglitz finally said, don't you think it's inappropriate to be asking what Goldman Sachs would think of our policies? Isn't it--it's what happens to the American people, not what happens to Goldman Sachs. And they looked at him like he was a complete naive schmuck. You know? And so he was eventually disinvited from Clinton's cabinet, and Summers was promoted to full secretary of the Treasury.

Now, one of the problems here: it's more than bad that there are secret discussions between our policy chiefs and the banks determining what the policy should be. It had a terrible effect on the world economy. It decriminalized behavior by these banks. It used to be a crime for these bags to be shifting money across borders. It used to be a crime for them to sell products that weren't products, like financial derivatives. The problem is that once these activities were decriminalized--we call it deregulating. It's really decriminalizing previously criminal activity. Once we decriminalized the banking system, we ended up with situations, for example, where Goldman Sachs cut a secret deal for currency default swaps with the government of Greece. When that was uncovered, the Greek economy imploded. So these things have serious consequences.







http://truth-out.org/news/item/18555-revealed-potential-fed-chair-summers-at-heart-of-global-economic-crisis#.Uia2MtMTaa8.facebook
http://truth-out.org/images/images_2013_09/2013_0903ls_.jpg
Lawrence H. Summers speaks during a session at the Annual Meeting 2011 of the World Economic Forum in Davos, Switzerland, January 29, 2011. (Photo: Sebastian Derungs / World Economic Forum

Revealed: Potential Fed Chair Summers At Heart of Global Economic Crisis - YouTube