The Federal Reserve Is A Joke That You Must Take Seriously

We still live with Wilson's folly

Thanks to the socialist Senator from Vermont, Bernie Sanders, we get to see what the Fed is up to. He insisted on learning where the Fed’s bailout money was going. Turns out, not only did billions go to European banks, .billions more went to firms in the U.S that pretended they needed no help.

Goldman Sachs, for example. Goldman went to the Fed 212 times between March 2008 and March 2009, according to Fed documents. It collected nearly $600 billion. Morgan Stanley. GE. Citigroup. They were all in on it.

The Fed put out $3.3 trillion worth of credit, buying up speculators’ bad bets. Not surprisingly, the price of the bad credits rose, so that now the Fed can say it hasn’t lost a penny. What a sense of humor!

Let’s imagine that instead of banking and speculating, Goldman was a cabbage grower. Let’s also say Goldman overdid it. It planted far too much cabbage. The price dropped and Goldman was on the verge of bankruptcy. So, in comes the Fed and buys cabbage by the boatload. What do you know? The price of cabbage goes up. So, the Fed then looks in its warehouse and it finds it owns tons of cabbage. It multiplies the price of cabbage by what it has in inventory. Wow! It hasn’t lost a penny!

Special Offer: Gary Shilling was mocked for predicting a housing crash back in 2006, but he and his subscribers cleaned up in government bonds. Click here for instant access to Shilling’s current investment strategy in his?Insight newsletter.

The feds are supposed to pursue corrupt operators, but now the feds and the Fed are at the center of the racket. Talk about infamy? It’s right here at home.

How does the racket work? It’s very simple. The Fed hands out money to its powerful cronies. Remember, the Fed is a private bank. It serves what is supposedly a public purpose, but it is neither owned nor controlled by the government. Instead, it’s part of the banking industry. Its official role is to give the U.S. a trustworthy currency and (more recently) to promote full employment.

You can see how well it fulfilled the fist part of its mission. Consumer prices are up about 33 times since the Fed was formed in 1913. Or, to look at it another way, a $20 gold piece from pre-Fed days–a one-ounce U.S. gold coin–is now worth about $1,450. How’s that for a stable currency?

As for employment, before 1913, unemployment was virtually unheard of. Why? There was a free market in labor. If you need to work, you took whatever work you could get at the then-prevailing wage. End of? story. There were no subsidies for people who were unemployed. No minimum wages. No safety nets. It was just supply and demand. When demand for labor increased, so did wages. When it decreased, wages went down. Except for brief periods of adjustment, there was no unemployment.

The Fed’s real mission now is to make sure the banks stay in business and make a profit. This it does in the simplest way, by transferring money to the banks. How does it get the money? It just prints it up. Who pays the bill? Eventually, taxpayers and citizens when this new money reduces the value of their old money. Who complains? Who has a cause of action? Who even realizes what is going on?

The European Central Bank is duplicating this trick in the other part of the Old World. It is buying up the debt of Ireland and Greece. ? The more you buy, the more the price goes up. Pretty soon, the ECB, with hundreds of billions of this paper in its vault, will be able to announce that it too has made money just like the Fed!

There’s a strange smell coming from the central bank vaults. Maybe that cabbage isn’t so good after all.

The US Federal Reserve: A Bank that Will Live in Infamy by Bill Bonner originally appeared in the Daily Reckoning.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Federal Reserve Subverts Fiscal Responsibility With Cash Creation Machines Fully Cranked

Quantitative easing removes urgency from austerity moves by Congress

So, this is what life after “QE2” looks like:

• Record gold prices
• Stocks back at pre-Lehman levels
• A dollar cruising toward its 2008 lows.

Everything is rallying in terms of depreciating dollars. Mission accomplished. Ben Bernanke needs George W. Bush’s ol’ “shock and awe” flak jacket.

In case mainstream media coverage made you glaze over, here’s the quick and dirty of the Federal Reserve’s fateful decision:

• The Fed will buy $600 billion in Treasuries over the next 8 months
• The mortgage securities the Fed bought during QE1 now reaching maturity will continue to be rolled over into Treasuries, as they have been since August. That’s another $275 billion, give or take
• There was also the caveat that more of this could be in the works if unemployment stays high and inflation (as defined by core CPI) stays low.

If the federal budget deficit is supposed to run $1.2 trillion during fiscal 2011 (that’s the consensus guess) and the Fed will purchase $875 billion in Treasuries over the next eight months (that’s two-thirds of a year)?then we quickly see the Fed plans to monetize all of all the debt that Treasury plans to spit out from now through the middle of next year and then some.

BEAT STOCKS AGAIN: Click here for instant access to fixed-income model portfolios in?Forbes-Lehmann Income Securities Investor.

This is yet another reason we don’t expect the House Republicans to convert to the gospel of fiscal responsibility any more than they did last time they were in the majority: They can indulge in demon spending unto oblivion and the Fed will have their back.

“If this were Greece or Ireland,” Bill Bonner wrote yesterday before the announcement, “the government would be forced to cut back. With quantitative easing ready, there is no need to face the music. If bond buyers will not finance America’s trip to bankruptcy, the Fed will provide as much brand-spanking-new money as necessary.”

The main difference between QE2 and its predecessor is this: The bulk of the junk the Fed put on its balance sheet during QE1 was mortgage securities, with about $300 billion of Treasuries thrown in for good measure. Now it’s all Treasuries, all the time.?Most of those Treasuries are of medium-term duration: very few 30-year bonds are in the mix. Thus, the yield on the long bond rocketed past 4% yesterday. It sits at 4.05% as we write.

Still, what’s really notable about QE2 is the form it did not take. In August, former Fed vice chair Alan Blinder wrote an Op-Ed in The Wall Street Journal. He tossed out a number of suggestions for QE2 that, for better or worse, would actually goose the economy and not just shore up the banks’ balance sheets:

• The Fed could buy assets beyond the realm of Treasuries and mortgage securities. It could buy corporate bonds, small business loans, or credit card receivables
• The Fed could stop paying interest on excess reserves to member banks. And if that didn’t encourage them to make more loans…
• The Fed could start charging the banks interest to stash their excess reserves.

Yesterday, the Fed chose “none of the above.”

It didn’t even take up Blinder on his suggestion to adopt new language hinting at an even-longer lasting commitment to near-zero rates. We just got the same old blather about “exceptionally low” rates “for an extended period.”

“Today,” Fed chief Ben Bernanke wrote in Thursday’s Washington Post by way of explaining himself, “most measures of underlying inflation are running somewhat below 2%, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.”

Of course, that “underlying” inflation level does not take into account your need to eat, or heat your home or drive to work. It’s only going to get worse. Your neighborhood grocer is seeing his costs rising. “The big challenge,” says the CEO of a California grocery chain to The Wall Street Journal, “will be how much can we swallow and how much can we pass along?”

He’s holding out as long as he can, but skimping on tires for your delivery trucks (seriously, that’s one of his cost-cutting measures) only gets you so far.

Yesterday, we discussed rising food, gold and commodities costs in the context of the Fed decision during this interview with Financial Survival Radio. Have a listen here:

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

The Federal Reserve Stirs Poltergeist Of Hyperinflation, Weimar Collapse

The downside risks of Ben's bold move include wheelbarrows of dollars to buy a Baby Ruth.

There is some disagreement over when the word “jawboning” first entered the English language. Some believe that its initial use characterized Herbert Hoover’s attempt to convince employers to maintain wage levels after the crash of 1929, while others believe it was first used during the Second World War, when officials at the U.S. Office of Price Administration and Civilian Supply attempted to restrain wartime profiteering. Politicians since at least the Johnson administration have engaged in the technique, and while its etymological origins may be in dispute, the term has since entered wide use, referring to a form of moral suasion, usually by government officials attempting to alter behavior or influence markets.

Typically, jawboning efforts have been undertaken by those seeking to lower or moderate price pressures, but Federal Reserve Chairman Ben Bernanke and his cohorts are putting a novel spin on the technique. By speaking regularly and aggressively about a second round of quantitative easing, they have been successfully jawboning inflationary expectations higher, as attested to by the recent dip of TIPS into negative yield territory for the first time. Whether such suasion is moral remains open to question, but it is clear that most market participants have bought into Big Ben’s rhetoric.

Trouble is, after weeks of furiously fanning the flames of those expectations, the Fed now appears to be qualifying their earlier pronouncements regarding the size and timing of QE2. The market reacted yesterday with a volatile session as traders adjusted to the reality that the central bank may not be injecting $2 trillion into treasuries all at once, a prospect which in retrospect may have merely reflected wishful thinking on the part of investors.

Given the price action that accompanied the intimations that the Fed’s entrance into the market may proceed more gingerly than previously anticipated, traders should be operating under the assumption that the benefits of additional quantitative easing are already priced into the market. With so many buying into the inflationary scenario, Fed actions will carry more weight than its words as we move forward and that could pose a danger.? If it turns out that the Fed has no intention of actually allowing inflation to reach the levels it has led others to expect, Chairman Ben will have slain more traders with his jawbone than Samson ever did Philistines.

Special Offer: Get yields of 8% to 15% in fixed-income securities, including bank convertibles, Canadian trusts and preferreds. Click here for instant access to model portfolios and recommended buys in Forbes/Lehmann Income Securities Investor.

Once raised, inflationary expectations tend to burn brightly and are famously difficult to extinguish, but the Fed appears to have decided that the risks of deflation and the overall sluggishness of the economy justify the gamble. For the last two years, we have all been listening as commentator after commentator has warned of an inflationary surge that has yet to arrive. According to those very same pundits, Bernanke and company are leading us down the path of runaway price increases and a devaluation of the dollar that will eventually lead us to the mother of all currency crises.

While, I am not willing to buy into that doomsday scenario just yet, there remains reason for concern. I suspect that we will be able to avoid the hyperinflation predicted by many of the most fervent Rick Santelli acolytes, but the easy money (some would say “free money”) that the Fed is pushing out the door could certainly lead to unanticipated asset bubbles. Because of that potential, I’m betting that QE2 turns out to be more talk than action, due to the inherent risk involved in its execution. After all, if those new bubbles were permitted to inflate to levels sufficient to once again threaten our financial system, Chairman Bernanke would someday be forced to look back on QE2 as the bonehead move of his once-illustrious career.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Reserve Federal Stirs Poltergeist hyperinflation, reduce Weimar

Ben bold downward risks include wheelbarrows of dollars to buy a Baby Ruth.

There is some disagreement about when the word "it" came first in English.Some believe that its initial use characterized attempt to Herbert Hoover to convince employers to maintain levels of salary after the crash of 1929, while others believe that it has been used first during the second world war, when officials in the Office of Price Administration of United States and civil supplies tried to retain in wartime excessifs.Politiciens since at least the Johnson administration engaged in technology, and while its etymological origins may be disputed, the term entered from widely used, referring to a form of moral suasion, usually by officers try to modify the behavior or the influence of markets.

In General, this effort was undertaken by those seeking to lower or moderate pressure on prices, but Federal Reserve Chairman Ben Bernanke and his acolytes are a novel spin on the technique.En speaking regularly and aggressively on a second round of the quantitative easing, they have been successfully jawboning inflationary expectations high, as evidenced by the recent dip tips on the territory of negative performance for the first time.? If this persuasion is moral remains open to question, but it is clear that most market participants were purchased in rhetoric of Big Ben.

Problem is, after weeks of ventilation doggedly the flames of these expectations, the Fed now seems to be qualifying their positions taken earlier concerning the size and timing of QE2.The market responded yesterday with a volatile trading session adjusted to the reality that the Central Bank cannot be injection 2 trillion dollars in bills at the same time, a perspective that, in retrospect, may simply reflect the desires of the part of investors.

Taking into account the price action which accompanied by the particulars entered the Fed on the market may be more precautionary than expected, traders must operate under the assumption that the additional benefits of quantitative easing are priced already on the marché.Avec so much purchase in inflationary scenario, Fed actions will carry more weight than his words as we move forward, which could pose a hazard.If it is the US Federal Reserve has no intention of actually allowing inflation to reach levels that it has led to others expect President Ben have killed more than merchants with jaw as Samson never Philistines.

Special offer: get 8 to 15% of fixed income, including the convertible Bank, Canadian trusts and preferreds yields.Click here for instant access to portfolios of model and recommended buys in Forbes/Lehmann Income Securities Investor.

Once triggered, inflationary expectations tend to burn brightly coloured and famous colors difficult to extinguish, but the Fed seems to have decided that the risks of deflation and the overall slow economy justify the PARI.Pour these past two years, we have all been listening as commentator after commentator has notified an inflationary outbreak which has not yet arrivée.Selon these same experts, Bernanke and company lead us the rampant increases in price path and a devaluation of the dollar, which is eventually we lead to the mother of all crises of currency.

While I'm not ready to buy right away in this scenario disaster, remains préoccupation.Je reason suspect that we are able avoid hyperinflation laid down by a large number of more devotees acolytes Rick Santelli, but easy money (some would say "free money") as the Federal Reserve us shoot door could certainly lead to bubble imprévus.En because of this potential, I bet QE2 proved be more talk to action, due to risks involved in its exécution.Après, if these new bubbles have been allowed to inflate at levels sufficient to threaten once more our financial system, Chairman Bernanke would be forced to look back on QE2 as nazi career once - skinhead movement demonstrates.

This entry transmitted via the service for full-text RSS - if this is your content and you read on someone to another site, please read our FAQ page fivefilters.org/content-only/faq.php
Article five filters features: After Hiroshima - non-rapport Cancer Catastrophe of Fallujah.

View the original article here

Is perhaps the US Federal Reserve sorry he mentioned more QE2?

The US Federal Reserve took stock and Spike or place since early September and the dollar plunges, first tips could consider providing another round of easing quantitative if economic recovery continues to get worse and then practically promising that it is prepared to do so.

It was a complete reversal of the beginning of the year, when the Central Bank said that the recovery came along nicely and it is time to begin to remove some of the programs of stimulation of the year last to prevent the economy from overheating causing inflation. Said that June his statement after the meeting took place, recovery continues and the job market improves progressivement.Les growing household spending.?

Special offer: Gary Shilling was mocked for predicting the crash of a housing in 2006, but he and his subscribers nettoyé.Cliquez here for instant access to the shilling in its perspectives newsletter current investment strategy.

Even in his statement after the meeting August, while he was concerned, "the pace of the recovery in production and employment has slowed in recent months" it did not seem too worried, said: "However the Commission foresees a gradual return to higher levels of resource use in an environment of price stability while the pace of economic recovery is likely to be smaller that had been planned in the short term."

Meanwhile, in all the States took place this year, the Committee had included the insurance that it "will continue to monitor the evolution of the financial situation and economic prospects and will use its tools needed to promote economic recovery and price stability policy."

When the stock market plunged into its August worst years, and economic reports is compounded yet, analysts started asking what "policy tools" the Fed was referring, since he had already lowered interest rates to near zero, and when tools can be utilisés.La response was that if necessary the Fed could engage in another series of "quantitative easing" similar to the program it launched take advantage of the 2007-2009 recession economy.

As reports answered positively to the news and economic markets continued to worsen, the US Federal Reserve has suggested that it would be ready to pursue such a policy change soon more.However, it seems that the US Federal Reserve as soon as assured markets in recent weeks that it engage in another series of quantitative easing (QE2) at its third meeting in November, the economic reports have begun to improve.

Surprise on the growth of the retail, manufacturing shows signs of picking up, unemployment claims fell, economic indicators have increased by 0.3% in September for the month of the third line right and 3rd quarter earnings reports include a number of improved prospects of companies.Monday morning it is that existing home sales rose 10% in September, much better than forecast an increase of 4%.

Thus, it may be that the Fed was correct for the summer expect the economy to slow down, but not in recession and then begin to strengthen encore.Auquel case the Fed may now be wishing he had never mentioned quantitative easing, and in particular that it is almost guaranteed markets that it will provide it.

There is some evidence last week that the Fed is backing away from the size of any program of quantitative easing, which some had already estimated pourrait amounted to more than $1.5 trillion - and possibly support far time where il.Par example, perhaps preparing markets of disappointment, St - Louis Fed President Bullard said last Thursday, "No. decisions have been taken... If we decide to go ahead with the quantitative easing, as we may think about 100 billion monthly supplements... and then I think that we can provide guidance at each meeting were held successive suggesting how probably the Committee believes that it will continue to buy."

Last week in markets which had taken into account in important QE2 flexibilities seem to ask if they could be dé?us.Or tumbling over $ 40 ounce .for the first time since the bottom fell from the dollar at the beginning of September, the hot stock rally was closed for the semaine.Même unusual Ascend and descend the volatility, apparently not what to expect.

This entry transmitted via the service for full-text RSS - if this is your content and you read on someone to another site, please read our FAQ page fivefilters.org/content-only/faq.php
Article five filters features: After Hiroshima - non-rapport Cancer Catastrophe of Fallujah.

View the original article here