Tuesday, November 24, 2009
Quick Cash Creation Review
First, please review:
Can the Fed Print Currency?
Bailouts Will Never End
"When the Federal Reserve creates money which the Treasury then issues Treasury notes, bills and bonds AND the Fed buys back these same Treasuries they are essentially creating monies from thin air - "quantitative easing" - is the euphemism isn't it?"
Yes, of course, assuming there is never any tax collection to pay back principal owed plus interest.
The main point is that you have to primarily consider the REAL cash printers which are the commercial banks printing with 40X speculative leverage on top of Fed reserves. That is, reserves wholesaled to them when Fed rates are BELOW the retail 3-M T bill rate. In other words, when Fed reserves are cheaper than the market rate and any loan, even simple arbitrage or carry, will produce a profit.
Today, Fed reserves are 1200% more expensive than the market rate for short term cash, so the REAL money printers are slamming on the brakes. There is nothing the gov or the Fed can do to arrest deflation. They can pull on the string, but they can't push if there are no commercial borrowers. And there are none.
Bernanke was schooled the hard way over the past two years, M3 has plummeted while he has tried everything his childlike academic theories claimed would work. None of his ideas have worked. Like I said the day he was appointed, that is EXACTLY why Ben was selected for the Fed Gov Chair....
Fed shareholders knew Bernanke was an arrogant die hard inflationist with zero market experience. He published prolifically that he would make the identical mistakes to 1929 (even better--his analysis was that they didn't do ENOUGH). They knew he would wind up crashing the cash supply due to bankruptcy, unemployment and (taxpayer guaranteed) loan defaults. Such a deflation = unlimited profits for them.
The last sentence, above, is the most important one.
The essential mistake people make is that they think the privately held Bank of NY (aka The Federal Reserve) is part of our government, and thus on their side, rather than reality of the situation which is that the Fed is doing everything in their power to ruin the American people.
The Fed wants your wealth. Period. And your childrens' wealth. And your little dog, too.
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Have deflationists overlooked the impact of allowing financial companies to ignore their losses and pretend that they did not exist?
ReplyDeleteIsn't that what caused our current deflation in the first place?
ReplyDeleteGet ONBOARD with RON PAUL !
ReplyDelete"The Fed Wants Your Wealth"
ReplyDeleteYes. That is why before Gold tops, we may see a repeat of the 1933 Gold Confiscation Executive Order. If you have Gold, get it out of the Country. Things are soon going to get real serious.
Thank you for the explanation (again).
ReplyDeleteI realize that your argument is sound - I believe there is a purposeful conspiracy within the Fed/Bank of NY/Goldman-Sachs to control the wealth of our nation.
I do wonder though that the amount of debt has reached a point that even the controllers of our corrupt NY financial institutions have got to realize that NO amount of taxation/confiscation could possibly pay off our accrued debt.
Is the idea then to fleece the American public to the point of total exhaustion (i.e. financial collapse)? - because at this point that seems to be the logical ending.
To that end, it WOULD make sense to have some physical gold and silver - maybe along with citizenship to another country
FDR- What is to stop the dollar from imploding to a worthless piece of paper? And at what point does a decline in the dollar not benefit the stock market. I assume if the DXY trades to 70 then AMZN trades to 200. This crazy logic has to revert in some manner, at some point a dollar decline won't be good for the stock market, correct? What am I missing?
ReplyDelete"If you have Gold, get it out of the Country."
ReplyDeleteAnd isn't that really the problem? If the Fed decided to redo the 1933 Gold Confiscation Act, and they went door to door, from sea to shining sea, they couldn't fill a shoebox with gold bullion.
It's ALL paper, even the "gold" Americans think they own via a few marginally backed paper ETFs with no ownership rights, is only paper. That is exactly why gold follows the paper markets, tick for tick, it is a paper market too.
All the moves of all the major markets are nothing but a gauge of paper liquidity, that goes for 0% down real estate, paper commodities, stock and bonds.
They all move together.
As for the rustle of the paper gold parabola. Somebody blinks. It always happens. Count on it.
ReplyDelete"Federal Reserve System is subject to the Administrative Procedure Act. It is not "owned" by anyone and is "not a private, profit-making institution". It describes itself as "an independent entity within the government, having both public purposes and private aspects". In particular, neither the Federal Reserve System nor its component banks are owned by the US Federal Government."
ReplyDeleteIs this ture? it's difficult to understand "not owned by anyone".
Why are all paper assets moving higher then, at least in the last 6 months? I assume it is because the value of the dollar is getting destroyed and thus things priced in dollars have to compensate tick for tick. Again, what is the trigger for people to realize there is no paper?
ReplyDeleteFed primer:
ReplyDeleteThe Creature
FDR I would be really interested to hear what you think about this article and blogger who seems to have captivated quite a few with his eloquent views:
ReplyDeleteThe Tide of History and The Spirit of Change http://jessescrossroadscafe.blogspot.com/
Regarding:
ReplyDeletehttp://jessescrossroadscafe.blogspot.com/
Thanks for the link. Nothing tremendously new there, right?
I know a lot of people love gold right now. So many, that in a strange way it reminds me of the oddly equivalent, but polar opposite desolation of those of us who were buying gold in 2002 and enjoyed 300% returns.
I'll post more in a Thanksgiving Special Report I'll get out sometime this weekend. Hopefully in time for some casual holiday reading.
Happy thanksgiving to all; a true American holiday. We observe an occasion of thanks, forged by individuals who choose to risk it all before accepting a dominant corporate-government-financial influence over an uncertain, but self-determined fate. To these intrepid men and women, we owe whatever prosperity we've guarded from the spawn of the very same swindlers and thieves by which they were ruthlessly harrassed.
FDR - what is the history of fractional banking as it is practiced here in the US? Did it originate with the creation of the Federal Reserve or does it pre-date the Fed.
ReplyDeletemaybe i'm being dense, but can't a bank borrow at 0.12% in the fed funds market and lend at more than that to someone other than the US govt? the USG is the safest borrower, so it pays a low rate. but why are you concentrating on the IRX -- aren't there other borrowers out there who'd be willing to pay more than 0.12% so the bank could make a spread?
ReplyDelete