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Posts Tagged ‘Federal Reserve’

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Capitalism, except for the capitalists

Posted by M. C. on March 18, 2023

What happened over the weekend is bigger than Silicon Valley Bank; once again the wealthiest, most politically connected companies and executives are proving the rules don’t apply to them.

Eventually these excesses will have to be unwound, gradually or suddenly. When they are, you can bet that all the people who have made fortunes from cheap cash for the last 15 years will be reaching into someone else’s pockets to save themselves – just as they did over the weekend.And the only pockets left will be the federal government’s.

In other words, yours.

https://open.substack.com/pub/alexberenson/p/capitalism-except-for-the-capitalists?utm_source=share&utm_medium=android

Alex Berenson

Back to the banks.

For a few hours on Sunday, they fooled me.

At 6:15 p.m. Sunday, the government and Federal Reserve announced they would guarantee all deposits at the two big banks they’d closed, Silicon Valley Bank and Signature Bank – removing the $250,000 limit on insured accounts to help prevent a bank run.

Taxpayers would not be on the hook for any losses, they said. The banking industry would pay for the extra insurance.

I didn’t think the deposit insurance should be extended at all.

When banks failed in 2008, we didn’t have unlimited deposit insurance, and we didn’t have widespread bank runs on healthy or unhealthy institutions. Very few individuals have more than $250,000 in their plain vanilla bank accounts (as opposed to brokerage accounts where they are saving for retirement).

So extending the limits at taxpayer expense to protect very wealthy depositors and – in the case of Silicon Valley Bank – venture-capital backed companies didn’t seem fair.

And we have limits on government backed deposit insurance for good reason. Without it, large depositors have every reason to chase the highest possible interest rates on their money, even at badly managed banks. Why? They know that even if the bank squanders their deposits on bad loans, they’ll get their money back.

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This risk is not theoretical. In the 1980s, many savings and loans crashed after offering high-yielding deposits. As financial historian and journalist Roger Lowenstein explained yesterday in the New York Times:

When the Federal Reserve, under pressure of rising inflation, began to jack up rates, S.&L.’s had to pay higher rates to attract deposits…

Many switched to riskier assets to juice their returns, but as these investments soured, their problems worsened. Roughly a third, or about 1,000, S.&.L.’s failed.

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But venture capitalists – led by David Sacks, a good friend of Elon Musk – spent the weekend screaming that bank runs would be inevitable if the government didn’t guarantee all depositors.

Many if not most of these folks had not-at-all hidden conflicts-of-interest – either personal deposits at Silicon Valley Bank or investments in companies that had deposits there. Nonetheless, they insisted that they were warning about bank runs solely because they wanted to save ‘Merica from bank runs!

Whether or not they were trying to worsen the crisis, their warnings certainly did. They essentially forced the government’s hand.

My old friend and colleague Jesse Eisinger (I guess he’s now a ex-friend, thanks to my reporting on Covid and the mRNAs, but that’s a story for another day) captured the dynamic nicely:

See the rest here

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The Federal Reserve’s Magic Trick: Big Tech

Posted by M. C. on March 7, 2023

https://rumble.com/v2c03fm-the-federal-reserves-magic-trick-big-tech.html

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The Fed Is a Purely Political Institution, and It’s Definitely Not a Bank. | Mises Wire

Posted by M. C. on January 18, 2023

But whatever its cause, the Fed’s current bankruptcy is simply the latest example of how the Fed is in no way a real bank or a private organization that funds itself through prudent self-management in the marketplace. Even worse, the Fed funds itself while in bankruptcy by printing money and inflating away the value of the dollars held by ordinary people. The Fed is just another tax-funded government agency, except that the tax that funds the Fed is the “inflation” tax,

https://mises.org/wire/fed-purely-political-institution-and-its-definitely-not-bank

Ryan McMaken

Those who know Wall Street lore sometimes recall that Fed chairman William Miller—Paul Volcker’s immediate predecessor—joked that most Americans believed the Federal Reserve was either an Indian reservation, a wildlife preserve, or a brand of whiskey. The Fed, of course, is none of those things, but there’s also one other thing the Federal Reserve is not: an actual bank. It is simply a government agency that does bank-like things.

It’s easy to see why many people might think it is a bank. “Bank” is right there in the name of the twelve regional banks that make up the system: for example, the Federal Reserve Bank of Kansas City. The Fed also enjoys many titles that make it sound like a bank. It’s sometimes called the “lender of last resort.” Or it is sometimes called “a banker’s bank.” Moreover, many people often call the Fed “the central bank.” That phrase is useful enough, but not quite true.

Moreover, even critics of the bank often repeat the myth that the Federal Reserve is “a private bank,” as if that were the main problem with the Federal Reserve. And then there are the economists who like to spread fairy tales about how the Fed is “independent” from the political system and makes decisions based primarily on economic theory as interpreted by wise economists.

The de facto reality of the Federal Reserve is that it is a government agency, run by government technocrats, that enjoys the benefits of being subject to very little oversight from Congress. It is no more “private” than the Environmental Protection Agency, and it is no more a “bank” than the US Department of the Treasury.

It’s a Purely Political Institution

In its early decades, Congress and the Fed went to some pains to make the Fed look like a private organization that was self-funding, economically solvent, and subject to market forces.

For example, the Federal Reserve System was created—at least on paper—as a very decentralized organization. To this day, it has “shareholders,” which are the private “member” banks of the Federal Reserve. In the early years, the Federal Reserve System’s district banks operated fairly independently. Moreover, these shareholders were (and legally still are) supposed to incur losses when the Federal Reserve is in the red. Back in the days of the gold exchange standard, the Fed had gold reserves and its “banknotes” were supposed to be truly tied to those reserves in the banks. The Fed banks made revenue from discounting bills of exchange and from charging interest on government bonds. These relatively simple organizations were supposed to loan reserve funds to ensure banks had enough liquidity to remain solvent and help deal with financial crises.

The idea of ensuring Fed banks had real capital reserves made some sense when there was a domestic gold standard. But that all changed in a big way with the Great Depression. When Franklin Roosevelt ended the gold standard, the Federal Reserve Banks were forced to hand their gold over to the US Treasury. (To this day, the Fed has no gold.) Then came an enormous expansion of the regulatory state’s role in financial matters, and the Fed became a big part of this. Today, the Fed is far more a regulatory agency than it is any sort of “bank.”

It Monetizes Government Debt

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Destroy the Economy, Win a Nobel Prize

Posted by M. C. on October 18, 2022

Therefore, under a fiat monetary system we cannot know the true value of goods and services. This is why to create a sound economy that provides prosperity we should audit then end the fed.

https://mailchi.mp/ronpaulinstitute/bernanke-116313?e=4e0de347c8

Oct. 17 – Former Federal Reserve Chairman Ben Bernanke is a 2022 recipient of the Nobel Prize in economics for his writings on how government should respond to bank failures. Honoring Bernanke for his advice on what government should do when banks fail is like giving a fire safety award to an arsonist.

Bernanke was Fed chairman when the housing bubble, created by his predecessor Alan Greenspan in the wake of the bursting of Greenspan’s tech bubble and the 9-11 attacks, exploded. When the housing market collapsed, Bernanke worked with Congress and the Bush administration to bail out big banks and Wall Street firms.

In the years following the meltdown, the Bernanke-led Fed tried to “stimulate” the economy via massive money creation, near zero interest rates, and “quantitative easing,” where the Fed injects liquidity into the market via purchases of financial assets including Treasury bonds.

The Fed’s post-meltdown policies produced sluggish growth at best, while laying the groundwork for the next bust. A sign that the next crash was around the corner came in September of 2019, when the Federal Reserve began pumping billions of dollars a day into the “repurchasing” market, which banks use to make overnight loans to each other, in order to keep that market’s interest rates from rising above the Fed’s target rate. The covid lockdowns then gave the Fed an excuse to push interest rates to zero and massively expand quantitative easing.

The Fed’s actions are the prime culprit behind the price inflation plaguing America’s economy. The Fed has responded to the price inflation by increasing interest rates, although rates remain much lower than they would be in a free market. The fact that even these relatively small increases helped push the fragile economy into recession shows the instability of our debt-based economic system.

Bernanke, and Congress, should have responded to the meltdown by letting the recession that followed the meltdown run its course. This is the only way the economy can adjust to the market distortions caused when the Fed increases the money supply and lowers interest rates.

Those who worry that this “don’t do something, just stand there” approach would inflict long-term economic pain on the American people should consider the economic depression of 1920. During this depression, the Fed refrained from trying to “stimulate” the economy, and Congress actually cut spending. The result was the downturn was quickly over. Sadly, the lessons of 1920 are largely ignored by mainstream economic historians.

In response to my questioning at a Financial Services Committee hearing, then-Fed Chairman Ben Bernanke admitted he did not consider gold to be money. Of course, gold and other precious metals are money because individuals have selected them whenever they had the freedom to choose a currency. One reason for this is that precious metals are uniquely suited to serve as a stable unit of account. In contrast, government rulers have favored fiat money precisely because it can never serve as an honest unit of account due to its value being constantly manipulated by central bankers. This is often done at the behest of power-hungry politicians. 

Therefore, under a fiat monetary system we cannot know the true value of goods and services. This is why to create a sound economy that provides prosperity we should audit then end the fed.

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Copyright © 2022 by Ron Paul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.

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The Federal Reserve Wants You Fired

Posted by M. C. on September 6, 2022

written by ron paul

This is because the Fed’s strategy for reducing the historic price inflation now plaguing the economy — caused by the Fed’s unprecedented low or zero interest rate policies — is to increase unemployment in order to decrease consumer spending. In his speech to the annual monetary policy conference in Jackson Hole, Wyoming, Fed Chair Jerome Powell reiterated his commitment to increasing unemployment, or, as he puts it, “softening the labor markets.”

http://ronpaulinstitute.org/archives/featured-articles/2022/september/05/the-federal-reserve-wants-you-fired/

The Federal Reserve was no doubt troubled by July’s decline in the US unemployment rate to 4.5 percent and increase in job openings to 11.2 million. This is because the Fed’s strategy for reducing the historic price inflation now plaguing the economy — caused by the Fed’s unprecedented low or zero interest rate policies — is to increase unemployment in order to decrease consumer spending. In his speech to the annual monetary policy conference in Jackson Hole, Wyoming, Fed Chair Jerome Powell reiterated his commitment to increasing unemployment, or, as he puts it, “softening the labor markets.”  

Powell is correct that reducing price inflation is urgent. He is also correct that doing so will increase unemployment and slow economic growth. The Fed’s efforts to bring down inflation by increasing interest rates will also make it harder for average Americans to obtain home mortgages, purchase a car, or even pay their utility bills. Those hardest hit by the Fed’s “softening of labor markets” are also the primary victims of the Fed-created price inflation. This demonstrates the insanity and cruelty of the fiat money system, which enriches the elites while improvising the masses.

Well-connected members of the financial elite and crony capitalists benefit from the Federal Reserve’s money creation, as they are the first recipients of the new money. This enables them to increase their purchasing power before the new money has caused general price inflation. By the time the money creation has impacted the middle and working classes, the economy is racked with widespread price inflation. Therefore, a nominal gain in wages is not enough to compensate for the real price increase. So average Americans suffer from both Fed-created inflation and the Fed’s attempts to rein in that inflation. 

It is amazing that more individuals do not question the idea that inflation, recessions, unemployment, and booms and busts are necessary features of a sound monetary system. Even many otherwise staunch defenders of free markets maintain a child-like faith in central banking. Some conservatives support “reforming” the Fed by making it follow a “rules-based” monetary policy. These conservatives do not understand that the problem is the existence of a central bank with the power to manipulate the currency.

Many progressives recognize the damage the Fed does to average Americans when it increases interest rates. However, their “solution” is a cure worse than the disease: make the Fed maintain low interest rates (and thus high inflation) in perpetuity—or until the continued devaluation of the currency via inflation causes a dollar crisis, leading to a major economic calamity. The main victims of this crisis will, of course, be the very Americans progressives claim to care about.

The Federal Reserve’s failure to fulfill its dual mandate of producing stable prices and full employment, combined with the damage it inflicts on the American people, make the best case for changing our monetary policy. A stable currency, safe from manipulation by politicians or central bankers, would provide the basis for long term prosperity that benefits everyone, not just the crony capitalists and the power-hungry politicians. The first steps in this transition are to finally pass audit the Fed legislation and continue the efforts to pass state laws recognizing precious metals as legal tender.

Copyright © 2022 by RonPaul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.
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Thank goodness for diversity

Posted by M. C. on August 31, 2022

https://mailchi.mp/tomwoods/thefed?e=fa1aba8cd8

We have reason to celebrate, according to the Associated Press.

The Federal Reserve System is at its most diverse ever!

…So the problem with the Federal Reserve isn’t that it interferes with the market economy by manipulating interest rates. The problem isn’t that its interventions cause the business cycle. The problem isn’t its bailouts, or the moral hazard introduced by the very existence of a paper-money producer like the Fed (since major market actors know there is no physical constraint on money creation and therefore on the Fed’s ability to bail them out if it came to that, they behave more recklessly than they would otherwise).

No, the problem is that not enough female, black, and “openly gay” people have been participating in these awful things.

And now, problem solved!

Progressives sure are a cheap date.…

https://tomwoods.com/budgethomestead
Tom Woods

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How the Big Banks Enslave Humanity

Posted by M. C. on July 25, 2022

By Alexandra Bruce
Forbidden Knowledge TV

The Bank of China told their depositors that their savings accounts are now investment products and can no longer be withdrawn.

The New World Order is just the old world order: a cabal of parasite crime families feeding off of humanity and if we fail to take control of our own destiny now, then the New World Order will succeed and mankind will be eradicated. The choice is ours and there won’t be a second chance.

How the Big Banks Enslave Humanity

TRANSCRIPT

The Bank of China told their depositors that their savings accounts are now investment products and can no longer be withdrawn.

And to stop the people from trying to withdraw their money, the CCP deployed tanks.

Banks all over the world are imploding and within this Great Reset, there is great opportunity for mankind, so long as we realize who the real perpetrators are.

The word, “apocalypse” simply means “the lifting of the veil”, the revelation of truth or in modern terms, “The Great Awakening.”

Mankind is now awakening to the fact that we have been lied to and exploited as chattel for, at the very least, our entire lifetimes.

And one of the most valuable truths to be gleaned from the Great Awakening, as far as human civilization is concerned is who is responsible?

It’s crucial to identify who is responsible so that we can stop it from happening again, because the enemy likes to hide.

There is nothing new under the Sun and all we have to do is follow the money, which leads us directly to the Federal Reserve Banking System and their conglomerate of associates known as the Big Banks.

We can trace the Big Banks back to Mayer Rothschild, who famously said, “Give me control of a nation’s money supply and I care not who makes its laws.”

And he was likely speaking about the usury laws, that for centuries prevented people from charging interest on loans, because it was considered theft.

If all men are created equal, then the banks should be acting more like a service industry, not profiting off other peoples’ debt.

But Mayer Rothschild was able to bypass these usury laws, because the Rothschild banking dynasty was merely a front for the royal bloodlines as the Old World Order adapted their schemes for the Industrial Revolution, the Rothschild banking dynasty began running central banks for kings throughout Europe.

See the rest here

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Don’t Be Fooled: The World’s Central Bankers Still Love Inflation

Posted by M. C. on June 4, 2022

  • lagarde

Ryan McMaken

The Bank of Canada on Wednesday increased its policy interest rate (known as the overnight target rate) from 1.0 percent to 1.5 percent. This was the second fifty–basis point increase since April and is the third target rate increase since March of this year. Canada’s target rate had been flat at 0.25 percent for twenty-three months following the bank’s slashing of the target rate beginning in March 2020.

As in the United States and in Europe, price inflation rates in Canada are at multidecade highs, and political pressure on the central bank to be seen as “doing something about inflation” is mounting.

The bank is following much the same playbook as the Federal Reserve when it comes to allowing the target rate to inch upward in response to price inflation. The bank’s official position is that it could resort to very aggressive rate increases in the future in order to hit the 2 percent inflation target.

As in the US, it’s important for central bankers to sound hawkish, even if their actual policy moves are extremely tame.

The World’s Central Banks Are Still Committed to Monetary Inflation

In spite of their lack of any real action, however, Canada’s central bankers are comparatively hawkish when we look at the world’s major central banks. At a still very low target rate of 1.5 percent, Canada’s central bank has set a higher rate than the central banks in the US, the UK, the eurozone, and Japan. Indeed, in the case of the European Central Bank and the Bank of Japan, rising inflation has still not led to an increase in the target rate above zero.

  • Federal Reserve: 1.0 percent
  • European Central Bank: –0.5 percent
  • Bank of England: 1.0 percent
  • Bank of Japan: –0.1 percent

Moreover, the ECB and the BOJ haven’t budged on their subzero target rates in many years. Japan’s rate has been negative since 2016, and the EU’s has been negative since 2014.

banks

The Bank of England recently increased its target rate to 1 percent, which is the highest rate for the BOE since 2009.

In the US, the Federal Reserve has increased the target rate to 1 percent, the highest rate since March 2020.

However, it’s clear that none of these central banks are prepared to depart from the policies of the past twelve years or so, during which ultralow interest rate policy and quantitative easing became perennial policy.

The Federal Reserve has talked tough on inflation but has so far only dared to hike the target rate to 1 percent while inflation is near a forty-year high.

The Bank of England apparently suffers from the same problem, as Andrew Sentence of the UK’s The Times pointed out this week:

There is a serious mismatch between inflation and the level of interest rates in Britain. The rate of consumer prices inflation measured by the CPI is now 9 per cent—four-and-a-half times the official target rate of 2 per cent. The Bank of England is forecasting that CPI inflation will reach double-digit levels by the end of the year…. The older measure—the Retail Prices Index (RPI), which is still widely used—is already showing a double-digit inflation rate (over 11 per cent).

See the rest here

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How the lizard people avoid answering questions

Posted by M. C. on June 3, 2022

The best we can say about American elites is that they are deeply unimpressive people, and don’t know what they’re doing.

Another, rather more terrifying theory, is that they know perfectly well what they’re doing.

(This is an honorable disagreement among us.)

Whichever side you come down on, though, we agree that these are not people to rely on, or people who are going to improve your life.

The lockdown/mask/mandate regime should have made that clear enough, but the problem goes well beyond that.

Federal Reserve officials are another excellent example.

During the second George W. Bush term there were some excellent video compilations made showing just how in the dark then-Fed chairman Ben Bernanke was about every last trend that was about to blow up in Americans’ faces.

My favorite bit of Federal Reserve history involves former chairman Alan Greenspan explaining to Lesley Stahl how he managed to avoid answering questions before Congress. “I would engage in some form of syntax destruction, which sounded as though I were answering the question, but in fact had not.”

Stahl played for him a clip from a congressional hearing in which he had obviously been engaged in this practice. “Very profound,” he jokingly said to her after watching the clip. “Very profound,” she laughed in reply. “Impenetrably profound.”

Ha, ha, Lesley. Isn’t it just so funny the way our elites pull the wool over our eyes? What a knee slapper!

So-called progressives, meanwhile, who posture as protectors of the little guy, are curiously silent about the Fed, whose policies intensify inequality, reward influential people and institutions for their reckless behavior, and set the economy on a boom-bust cycle that can ruin people.

Just yesterday, Treasury Secretary Janet Yellen admitted that she’d been wrong about inflation, the precise thing that as a former chair of the Federal Reserve she would be expected to understand and anticipate.

“I was wrong then about the path that inflation would take,” she said. “As I mentioned, there have been unanticipated and large shocks to the economy…that I, at the time, didn’t fully understand.”

This problem was not caused by “unanticipated and large shocks to the economy.” If you’ve seen the money supply charts, you know that.

And we covered it on the Tom Woods Show with Gene Epstein, formerly of Barron’s:

https://tomwoods.com/ep-2092-inflation-what-caused-it-and-where-its-going/
I genuinely don’t know how ordinary people are enduring this present bout.

So remember, coming up very soon is the world premiere of the Money 2022 docuseries — which features normal people, rather than the lizard creatures who rule us.

You can watch the whole series for free if you register in advance. After that, they start charging for it.

What we are supposed to do in the current circumstances is a darn good question, and this series seeks to answer it.

The company making it is full of friends of mine, and has featured me in their documentaries as well. They have to deal with Big Tech censorship, so they rely on friends like me to spread the word about their important work.

Please click here to register for free:

http://www.tomwoods.com/moneyseries
Tom Woods

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The Number One Fallacy That Brought On This Economic Calamity

Posted by M. C. on May 24, 2022

When it comes to the economy and money, you can’t “fake it until you make it.” If you try to fake it, you’ll never make it. Ever since the founding of the Federal Reserve in 1913, America has been on a path to economic calamity. There aren’t many grains of sand left in the hour glass. Major changes will have to be made soon.

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