Posts Tagged ‘Fed’
Friday, October 28, 2011pm
What do you get when the producer of the world’s reserve currency takes on too much debt? Nothing less than the end of the US Treasury-based monetary system.
So says Eric Janszen, economic and financial market analyst and proprietor of iTulip.com. In chronicling the decline of the global economy over the past decade, Eric has formulated a framework called the “Ka-POOM” theory, which endeavors to understand how the immense run-up in global debt will be resolved.
In short, it looks at the credit bubble that began in the early 1980′s, started accelerating in 1995, and has now reached epic proportions. The amounts are so staggering at this stage that Eric believes it is too politically undesirable to let natural market adjustments clear them away — the magnitude of the deflationary pain this would create is simply unacceptable for politicians looking to get re-elected. The only other available option is to service these debts via a dramatically devalued currency. Hence the key role the Fed is playing today.
The Fed is at the epicenter of this process, intervening heavily to keep the natural corrective market forces at bay. In this, it has a dual strategy. The first is to keep asset prices high (i.e., fight asset deflation), which it is doing by keeping interest rates historically low. The second is to keep wage and commodity costs under control, which it primarily does via devaluing the currency (maintaining a “weak dollar”).
And, of course, through its intervention, the Fed is doing all it can to keep the current financial system in place to perpetuate the process for as long as possible. The end result is a fundamental shift in risk from Wall Street to the taxpayer.
So the big question is: How long can this last? Is there a point at which confidence in the system breaks and market forces finally overwhelm the intervention?
Eric’s answers: “Much longer than most people expect.” And “Yes.”
First off, as the most important central bank in the world, the Fed has supernormal powers. In theory, it can expand its balance sheet infinitely. Its ability to absorb massive amounts of new liabilities is theoretically limitless, much of which can be easily concealed from an accounting standpoint.
And since the US is both the world’s largest economy, as well as the provider of its reserve currency, other countries are compelled to support the current regime. A mortal crack-up in the US economy would deliver undue pain to all its trading partners, so they continue to buy Treasuries in sufficient amount to fund US economic activity.
But that’s not to say they’re happy about it. And here’s where attention should be paid (and where the importance of gold comes in).
For much of the past century, the United States comprised approximately 54-58% of the global economy. Today, its share has shrunk down to about 18%, meaning its relative importance to the global system has diminished.
Issuing the world’s reserve currency is a privilege that must be continually earned through transparency and sound stewardship — qualities the US has flagrantly lacked in the past several decades as it has been blowing asset bubbles and running trillion-dollar deficits, via incurring massive debts and increasing its money supply tremendously. So, even as they continue to support the current Treasury-backed monetary regime, the world’s central banks have begun hedging their exposure.
After several decades of being net sellers, the world’s central banks became net buyers of gold in the second quarter of 2009. As Eric puts it:
There was no Plan B in the global monetary system when it switched over to the US dollar reserve basis for global monetary reserves. The only fallback is gold, gold is the only reserve asset that central banks hold other than dollars, and to some extent euros, but it is mostly gold. So gold is the fallback. So what I thought was going to happen is that over time, gradually, that there would be an increase at some point in gold holdings by central banks as they hedged the marginal increase and the number of Treasury bonds that they needed to hold as a result of conducting trade with the US and also simply maintaining the US economy through low interest rates and providing sufficient investment to continue to offer the US government.
So what is very interesting to me is [that] starting in the second quarter of 2009, right after the financial crisis, is when global central banks became net buyers of gold, which to me indicated that they had as a group, determined that it was time to more seriously hedge their dollar assets, even as they continue to buy Treasury bonds to increase their hedging.
Before that, there were effectively two teams: There were the buyers, who were countries like India and Russia and China, and the sellers, which are most of your European countries. And that structure of the gold market occurred and was maintained until the second quarter of 2009, and it shifted to a much broader base increase in the number of governments participating in the gold market, including Saudi Arabia, Mexico, and other allies of the United States.
Eric sees this move by central banks, of positioning themselves closer to the door, as a natural step to the inevitable endgame here, which is the dissolution of the US Treasury dollar-based monetary system. Due to entrenched special interests, politics, escalating commodity scarcity, and other factors, he does not see the US taking necessary corrective action before confidence in the solvency of the US and its currency collapses.
As such, Eric advises investors position themselves into gold and assets that take advantage of rising rents and energy prices.
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Read the entire article HERE.
By Mark Felsenthal
WASHINGTON | Sun Aug 21, 2011 10:08am EDT
The U.S. economy is grinding so painfully and haltingly toward recovery that the Federal Reserve looks poised to incrementally strengthen the dosage to keep growth on track.
Expect Fed Chairman Ben Bernanke to use a speech at an annual central bank conference in Jackson Hole, Wyoming, next Friday to acknowledge his disappointment over the pace of growth, even downgrade his outlook, and explain which medicines left in the Fed’s cabinet are best suited to fortify the economy.
He looks unlikely to reach for shock treatment.
“With the recovery grinding to a halt in the first half of this year and the economy operating perilously close to a second recession, the Fed will remain on guard against a negative surprise on growth, and will be willing to act accordingly,” Millan Mulraine, an economist with TD Securities, wrote in a note to clients.
So, how is Fed to administer further remedies?
With interest rate tools well exploited, Bernanke is most likely to focus on the Fed’s balance sheet and opt for tinkering with the size and composition of its portfolio to get the world’s largest economy out of its funk.
Interest rates are already near zero, and the central bank’s policy-setting Federal Open Market Committee just two weeks ago signaled it is willing to hold borrowing costs at rock bottom levels for two years if necessary. There is little more that can be achieved using the rates tool.
Many of the balance sheet steps are well known, and each carries its own risks and rewards, which Fed staff would research carefully. But chances for a major new bond buying operation announced at Jackson Hole would appear limited currently.
In shaping its thinking, the Fed is likely guided by a sense that the current situation, though rather uncertain, merits a cautious approach and does not arise to the crisis proportions seen in 2008 through 2010 that justified bold and aggressive moves.
The last of these – the $600 billion bond purchase program dubbed QE2 because it was the second installment of quantitative easing – was the Fed’s response to historically low inflation that risked tipping the U.S. economy into a vicious cycle of falling prices and falling consumption and investment.
The situation today is different.
Unlike mid-2010, U.S. inflation is now higher, and core inflation, which strips out volatile food and energy prices has accelerated. While higher readings are a concern for some Fed officials, they are not raising widespread alarm at the central bank on the assumption that overall inflation will fall as energy prices recede and that core prices will remain in check.
Instead, the focus is on stumbling growth and the risks ahead. A central group of policymakers on the Fed’s decision-making committee see mounting evidence that growth originally forecasts at around 3 percent for the second half of the year will be slower. While not as dismal as the 1 percent that some Wall Street firms are forecasting, growth this sluggish would fall well short of what’s needed to reduce the steep 9.1 percent jobless rate.
Looming large as a risk factor is Europe’s long running sovereign debt saga, which is pummeling U.S. financial markets and business confidence. So far Europe’s woes and the market turmoil have not caused distress on the scale of the 2008/2009 credit crisis, but it is worrisome.
NO BIG GUNS
Against that backdrop, Bernanke appears unlikely to reach for dramatic measures, but the Fed could be primed to gradually boost the dosage for the ailing economy over the coming months.
One initial step might be simply to use verbal communication. It could commit to maintain its balance sheet, which has ballooned to $2.8 trillion from a pre-crisis level of around $900 billion, at this high level for an extended period of time — even adding a timeframe just as it has for the fed funds rate.
Another measure would be to put downward pressure on medium to long-term interest rates, where mortgages are fixed and corporations borrow, by taking steps to weight the mix of assets in the Fed’s balance sheet toward longer-maturity instruments. This can be done either by replacing its maturing securities with longer-term ones, or by actively exchanging shorter maturities with longer ones.
“Last year at Jackson Hole when the Chairman laid the groundwork for QE2, inflation was rapidly decelerating — the opposite is true at present,” Deutsche Bank economist Carl Riccadonna wrote to clients.
“As a result, if the Fed does move toward additional accommodation, it may first try to extend the average maturity of its portfolio rather than further expand its asset holdings.”
A bolder step would be to buy more bonds, though conditions do not seem to merit that at this juncture. While Fed officials argue bond buying has held longer term rates lower than they would otherwise have been and moved investors to seek riskier assets than safe-haven Treasury securities, the strategy has drawn sharp criticism domestically and internationally.
As a way to tamp down worries that bond buying would spur inflation, the Fed could consider sterilizing new bond buying by simultaneously draining bank reserves. Doing so would remove risk and duration from credit markets, push down interest rates at the longer end of the yield curve, while keeping abundant reserves in check.
FACING THE CRITICS
U.S. critics charge that fresh measures would court inflation. Detractors abroad say bond buying drives down the dollar, drives up commodity prices and unleashes volatile investment flows into emerging markets. Even some within the Fed object to aggressive easing, and the Fed’s August low rate pledge drew an unusual three dissents.
The Fed faces domestic political attacks as well. Republican presidential candidate Rick Perry this week said any further Fed monetary easing would be “almost treacherous, treasonous.
But the Fed has a track record of political independence and its credibility stems from a reputation of being free to act regardless of the political winds. To bow to these critics when the economy needed further support would be unusual.
Bernanke has a chance to make his case on Friday.
Read the entire article HERE.
By Greg Hunter’s
27 June 2011
The Federal Reserve has been a clandestine organization since its inception. It is not really part of the federal government; it is merely a subcontractor for monetary policy. The Fed is basically a cartel of both U.S. and European banks. It has pulled the levers in the economy from behind a curtain of secrecy since 1913 and has always enjoyed a certain degree of respect and admiration. All that changed when the economy melted down in 2008. The respect and admiration of the Federal Reserve is being shredded right along with its veil of secrecy. The Fed allowed everyone to think the cost of controlling the 2008 financial crash was just a measly $3.3 trillion. This giant lie was exposed after Senator Bernie Sanders of Vermont put a provision in last year’s financial reform bill that forced the Fed to come clean on $9 trillion in additional emergency loans and bailout money. The Fed funneled cash to foreign banks and companies right along with American banks and companies. It basically rewarded reckless and illegal behavior of greedy Wall Street bankers that caused the mess we are in now.
Nothing is fixed and nothing has really changed. The economy is still a wreck, and the Fed still wants its secrets. CNBC reported last week that the Fed refuses to tell how much cash it sent to Iraq just after the invasion because it came from the “oil for food” program. The Fed claims it has to obey “rules.” The report said, “The Fed’s lack of disclosure is making it difficult for the inspector general to follow the paper trail of billions of dollars that went missing in the chaotic rush to finance the Iraq occupation, and to determine how much of that money was stolen.” (Click here for the complete CNBC story.) Taxpayers would be on the hook for the missing cash that the Defense Department says is $6.6 billion. This could represent the largest theft in history. The Fed didn’t obey any “rules” when it hid $9 trillion in bailout money. Doesn’t the Fed work for the U.S.? Apparently not.
Last week in Congressman Ron Paul’s Monetary Policy Subcommittee, Treasury Inspector General Eric Thorson assured Congress U.S. gold was safe. The gold is under the control of the Federal Reserve, and it has not been audited in decades. Paul wants an audit, and there are plenty of folks at the Fed who are against it. CNN reported last week on the hearing and said, “During the hearing, Paul suggested that the Federal Reserve of New York, which has 5% of the U.S. gold reserves, has the ability to secretly sell or swap gold with other countries without anyone knowing. “The Fed is pretty secret, you know,” said Paul, who leans Libertarian. “Congress doesn’t have much say on what’s going on over there. They do a lot of hiding.” (Click here for the complete CNN story.)
Also last week, Fed Chief Ben Bernanke held a press conference and said, “We don’t have a precise read on why this slower pace of growth is persisting.” This is an astounding admission from the head of the Federal Reserve. Bernanke doesn’t know why the economy is failing? Economist John Williams from Shadowstats.com isn’t buying it. In his most recent report, Williams said, “It is hard to believe that Mr. Bernanke, the presidents of the regional Federal Reserve Banks and the extensive staff of fine economists throughout the Federal Reserve System do not understand why the economic and systemic-liquidity crises persist. If indeed the problems really are not understood, Mr. Bernanke should not be Fed Chairman. More likely, the problems are understood, but Bernanke’s admitting that would entail his admitting that circumstances are beyond control, and that the Fed lacks the ability to address the issues effectively. . . . There is the possibility, though, that the comments were deliberate, intended as a warning of things to come. . .”
The Federal Reserve wants its dealings with bailouts and our nation’s gold to be kept secret. I don’t know if Bernanke is just incompetent, or if he continually lies about what is happening in the economy to keep the public from panicking. Do we really need the Fed with all their secrets and lies?
Read the entire article HERE.
By Jennifer Ablan
NEW YORK | Wed Jun 22, 2011 12:15pm EDT
Jackson Hole is an annual global central banking conference, led by the Fed, which takes place at Jackson Hole, Wyoming. It was at this event last year that Fed chairman Ben Bernanke said the U.S. policymakers were prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation — a prolonged drop in prices of wages, goods and assets like homes and stocks.
Gross, the co-chief investment officer of PIMCO, the world’s top bond manager, on Wednesday said on Twitter: “Next Jackson Hole in August will likely hint at QE3 / interest rate caps.”
PIMCO oversees more than $1.2 trillion in assets, mostly in fixed-income. PIMCO confirmed Gross had sent the Tweet on QE3.
Last week, Gross first introduced the idea that the Fed on Wednesday could signal that interest rates could be capped if warranted due to soft economic growth.
Gross said on Twitter last week on Tuesday that: “QE3 likely to take form of ‘extended period’ language or interest rate caps on 2-3-year Treasuries.”
Gross also said on Twitter last week: “Next week’s Fed statement will likely stress ‘extended period of time’ language or even a period of interest rate caps.”
The Fed will issue its policy statement after the close of its meeting on Wednesday.
The recent soft patch of economic data has increased speculation over whether U.S. policymakers will perform a third round of bond purchases, an unconventional monetary measure known as “quantitative easing,” or QE2. The second round of QE2′s $600 billion in purchases will conclude on June 30.
Read the entire article HERE.
By JAVIER DAVID
APRIL 29, 2011
Wall Street Journal
NEW YORK—Investors wasted no time in sending the dollar to new three-year lows after the Federal Reserve gave them little reason to support it.
Weak U.S. growth and unemployment data quickened the dollar’s fall. Initial employment claims jumped back above the 400,000 level in the latest week. Meanwhile, gross domestic product data showed that economic growth slowed sharply in the first quarter, led by surging food and energy costs that sent a key gauge of inflation, the personal consumption expenditures (PCE) price index, soaring to its highest level in nearly three years.
Late Thursday, the euro was at $1.4821 from $1.4794 late Wednesday. The dollar traded at ¥81.54 from ¥82.04, while the euro was at ¥120.85 from ¥121.37. The U.K. pound bought $1.6640 from $1.6636. The dollar fetched 0.8733 Swiss franc from 0.8738 franc, plunging to a new record low.
The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 73.12 from 73.519, its lowest level since July 2008.
The Australian dollar, helped by rising interest-rate expectations and surging oil, rose to a new 29-year high at $1.0920 from $1.0872 late Wednesday.
The Federal Open Market Committee’s decision Wednesday to maintain its bias toward cheap credit loomed larger than ever for the beleaguered U.S. currency. At a time when traders are nervous about global inflation and rewarding the currencies of countries that raise interest rates, the dollar has lacked any yield advantage.
In a much-anticipated news conference, Fed Chairman Ben Bernanke tracked the FOMC statement and did little to deter dollar bears, who have profited from anti-dollar bets for months and appear willing to continue the rout.
“The FOMC statement, forecast changes and press conference all added up to a continuation of the dual-mandate mantra” of maximizing employment and maintaining stable prices, said Ken Dickson, investment director of currency at U.K.-based Standard Life Investments, which manages $250 billion in assets.
“Under this approach, easier monetary conditions will continue near term and the current weaker dollar trend looks likely to extend further,” Mr. Dickson added, given the landscape of weak employment and sluggish growth.
The immediate beneficiaries of the Fed’s easy money predilection have been the surging euro and pound. Both the euro zone and the U.K. are on a path toward tighter monetary policy, which has pushed both of their currencies to their highest levels against the dollar since late 2009.
The yen strengthened broadly after the Bank of Japan kept both its policy rate and size of its Asset Purchase Program (APP) unchanged. This encouraged some investors that had expected more liquidity—which would weaken the currency—to unwind some of those positions.
But more liquidity is the last thing the dollar needs. The Fed’s controversial asset purchases have helped bid up risk-related assets like stocks, but surging gold and a relentlessly strong Swiss franc indicate some investors are still nervous about global risks.
Meanwhile, the disappointing U.S. jobless and growth figures are raising eyebrows. The Fed is due to end its quantitative easing program at the end of June. While market watchers aren’t entirely sure of what will come next, weakening data may spur talk of a new round of easing, which would likely trigger a new round of dollar weakness.
Ronald S. Temple, a portfolio manager at Lazard Asset Management, said the Fed should preserve the option of easing anew to ward off more weakness in the economy. “We are moving from a secular era of adding to leverage to a secular era of deleveraging, and the Fed needs to have those tools at its disposal,” he said.
Read the entire article HERE.
April 27, 2011
Board of Governors of the Federal Reserve System
For immediate release
Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the Committee met in March. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Increases in the prices of energy and other commodities have pushed up inflation in recent months. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. The Committee continues to anticipate a gradual return to higher levels of resource utilization in a context of price stability.
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and will complete purchases of $600 billion of longer-term Treasury securities by the end of the current quarter. The Committee will regularly review the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability.
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, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.
For release at 2:15 p.m. EDT
The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the attached table summarizing the economic projections made by Federal Reserve Board members and Federal Reserve Bank presidents for the April 26-27 meeting of the Committee.
The table will be incorporated into a summary of economic projections released on May 18 with the minutes of the April 26-27 meeting. Summaries of economic projections are released on an approximately quarterly schedule.
September 6th, 2010
After a huge public relations campaign, engineered by the foreign central banks, the Federal Reserve Act of 1913 was slipped through Congress during the Christmas recess, with many members of the Congress absent. President Woodrow Wilson, pressured by his political and financial backers, signed it on December 23, 1913.
The act created the Federal Reserve System, a name carefully selected and designed to deceive. “Federal” would lead one to believe that this is a government organization. “Reserve” would lead one to believe that the currency is being backed by gold and silver. “System” was used in lieu of the word “bank” so that one would not conclude that a new central bank had been created.
In reality, the act created a private, for profit, central banking corporation owned by a cartel of private banks. Who owns the FED? The Rothschilds of London and Berlin; Lazard Brothers of Paris; Israel Moses Seif of Italy; Kuhn, Loeb and Warburg of Germany; and the Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York.
Did you know that the FED is the only for-profit corporation in America that is exempt from both federal and state taxes? The FED takes in about one trillion dollars per year tax free! The banking families listed above get all that money.
Almost everyone thinks that the money they pay in taxes goes to the US Treasury to pay for the expenses of the government. Do you want to know where your tax dollars really go? If you look at the back of any check made payable to the IRS you will see that it has been endorsed as “Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig.” Yes, that’s right, every dime you pay in income taxes is given to those private banking families, commonly known as the FED, tax free.
Like many of you, I had some difficulty with the concept of creating money from nothing. You may have heard the term “monetizing the debt,” which is kind of the same thing. As an example, if the US Government wants to borrow $1 million ó the government does borrow every dollar it spends ó they go to the FED to borrow the money. The FED calls the Treasury and says print 10,000 Federal Reserve Notes (FRN) in units of one hundred dollars.
The Treasury charges the FED 2.3 cents for each note, for a total of $230 for the 10,000 FRNs. The FED then lends the $1 million to the government at face value plus interest. To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer. The above was just an example, because in reality the FED does not even print the money; it’s just a computer entry in their accounting system. To put this on a more personal level, let’s use another example.
Today’s banks are members of the Federal Reserve Banking System. This membership makes it legal for them to create money from nothing and lend it to you. Today’s banks, like the goldsmiths of old, realize that only a small fraction of the money deposited in their banks is ever actually withdrawn in the form of cash. Only about 4 percent of all the money that exists is in the form of currency. The rest of it is simply a computer entry.
Let’s say you’re approved to borrow $10,000 to do some home improvements. You know that the bank didn’t actually take $10,000 from its pile of cash and put it into your pile? They simply went to their computer and input an entry of $10,000 into your account. They created, from thin air, a debt which you have to secure with an asset and repay with interest. The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED.
It sort of puts a new slant on how you view your friendly bank, doesn’t it? How about those loan committees that scrutinize you with a microscope before approving the loan they created from thin air. What a hoot! They make it complex for a reason. They don’t want you to understand what they are doing. People fear what they do not understand. You are easier to delude and control when you are ignorant and afraid.
Now to put the frosting on this cake. When was the income tax created? If you guessed 1913, the same year that the FED was created, you get a gold star. Coincidence? What are the odds? If you are going to use the FED to create debt, who is going to repay that debt? The income tax was created to complete the illusion that real money had been lent and therefore real money had to be repaid. And you thought Houdini was good.
So, what can be done? My father taught me that you should always stand up for what is right, even if you have to stand up alone.
If “We the People” don’t take some action now, there may come a time when “We the People” are no more. You should write a letter or send an email to each of your elected representatives. Many of our elected representatives do not understand the FED. Once informed they will not be able to plead ignorance and remain silent.
Article 1, Section 8 of the US Constitution specifically says that Congress is the only body that can “coin money and regulate the value thereof.” The US Constitution has never been amended to allow anyone other than Congress to coin and regulate currency.
Ask your representative, in light of that information, how it is possible for the Federal Reserve Act of 1913, and the Federal Reserve Bank that it created, to be constitutional. Ask them why this private banking cartel is allowed to reap trillions of dollars in profits without paying taxes. Insist on an answer.
Thomas Jefferson said, “If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered.”
Read the entire article HERE.
1) Lord Jacob de Rothschild, Globalist
2) His son, Nathaniel Rothschild, Rising Globalist
3) Baron John de Rothschild, Globalist
4) Sir Evelyn de Rothschild. (Wife is Lynn Forrester), Globalist
5) David Rockefeller, Globalist
6) Nathan Warburg (Family was instrumental in creating the Federal Reserve), Globalist
7) Henry Kissinger, Globalist
8] George Soros, Globalist
9) Paul Volcker, Globalist and economic adviser to Obama
10) Larry Summers, Globalist and economic adviser to Obama
11) Lloyd Blankfein, CEO of Goldman Sachs banking behemoth, Globalist
12) Ben Shalom Bernanke, Current Federal Reserve Chairman and Globalist
By Bradley Keoun and Craig Torres
Apr 1, 2011 10:53 AM PT
U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.
Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.
The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets.
“The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007.
Separate data disclosed in December on temporary emergency- lending programs set up by the Fed also showed big foreign banks as borrowers. Six European banks were among the top 11 companies that sold the most debt overall — a combined $274.1 billion — to the Commercial Paper Funding Facility.
The discount window, which began lending in 1914, is the Fed’s primary program for providing cash to banks to help them avert a liquidity squeeze. In an April 2009 speech, Bernanke said that revealing the names of discount-window borrowers “might lead market participants to infer weakness.”
The Fed released the documents after court orders upheld FOIA requests filed by Bloomberg LP, the parent company of Bloomberg News, and News Corp.’s Fox News Network LLC. In all, the Fed released more than 29,000 pages of documents, covering the discount window and several Fed emergency-lending programs established during the crisis from August 2007 to March 2010.
“The American people are going to be outraged when they understand what has been going on,” U.S. Representative Ron Paul, a Texas Republican who is chairman of the House subcommittee that oversees the Fed, said in a Bloomberg Television interview.
“What in the world are we doing thinking we can pass out tens of billions of dollars to banks that are overseas?” said Paul, who has advocated abolishing the Fed. “We have problems here at home with people not being able to pay their mortgages, and they’re losing their homes.”
David Skidmore, a Fed spokesman, declined to comment. Fed officials have said all the discount window loans made during the worst financial crisis since the 1930s have been repaid with interest.
The Monetary Control Act of 1980 says that a U.S. branch or agency of a foreign bank that maintains reserves at a Fed bank may receive discount-window credit.
“Our job is to provide liquidity to keep the American economy going,” Richard W. Fisher, president of the Federal Reserve’s regional bank in Dallas, told reporters today. “The loans were all paid back and they were well-collateralized.”
Wachovia Corp. was the only U.S. bank among the top five discount-window borrowers as the crisis peaked.
The company, based in Charlotte, North Carolina, borrowed $29 billion from the discount window on Oct. 6, in the week after it almost collapsed, the data show. Wachovia agreed in principle to sell itself to Citigroup Inc. on Sept. 29, before announcing a definitive agreement to sell itself to Wells Fargo & Co. (WFC) on Oct. 3. The Wells Fargo deal closed at the end of 2008.
Wells Fargo spokeswoman Mary Eshet declined to comment on Wachovia’s discount-window borrowing.
Bank of Scotland Plc, which had $11 billion outstanding from the discount window on Oct. 29, 2008, was a unit of Edinburgh-based HBOS Plc, which announced its takeover by London-based Lloyds TSB Group Plc in September 2008.
The borrowings in 2008 didn’t involve Lloyds, which hadn’t completed its acquisition of HBOS at the time, said Sara Evans, a spokeswoman for the company, which is now called Lloyds Banking Group Plc. (LLOY)
“This is historic usage and on each occasion the borrowing was repaid at maturity,” Evans said. “The discount window has not been accessed by the group since.”
Other foreign discount-window borrowers on Oct. 29, 2008, included Societe Generale (GLE) SA, France’s second-biggest bank; and Norinchukin Bank, which finances and provides services to Japanese agricultural, fishing and forestry cooperatives. Paris- based Societe Generale borrowed $5 billion that day, and Tokyo- based Norinchukin borrowed $6 billion.
Jim Galvin, a spokesman for Societe Generale, declined to comment.
“We used it in concert with Japanese and U.S. authorities in the purpose of contributing to the stabilization of the market,” said Fumiaki Tanaka, a spokesman at Norinchukin.
Bank of China
Bank of China, the country’s oldest bank, was the second- largest borrower from the Fed’s discount window during a nine- day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The Chinese bank’s New York branch borrowed $198 million on Aug. 17 of that month.
“It was just routine borrowing,” said Dale Zhu, head of the Bank of China New York branch’s treasury.
Two Deutsche Bank AG divisions borrowed $1 billion each, according to a document released yesterday.
Arab Banking Corp., then 29 percent-owned by the Libyan central bank, used its New York branch to get at least 73 loans from the Fed in the 18 months after Lehman Brothers Holdings Inc. collapsed. The largest single loan amount outstanding was $1.2 billion in July 2009, according to the Fed documents.
The foreign banks took advantage of Fed lending programs even as their host countries moved to prop them up or orchestrate takeovers.
Dexia received billions of euros in capital and funding guarantees from France, Belgium and Luxembourg during the credit crunch.
The Fed loans were “secured by high-quality U.S. dollar municipal securities,” and used only to fund U.S. loans, bonds and other financial assets, Ulrike Pommee, a spokeswoman for the company, said in an e-mail.
“The Fed played its role as central banker, providing liquidity to banks that needed it,” she said, adding that Dexia’s outstanding balance at the Fed has been reduced to zero. “This information is backward-looking.”
Depfa was taken over in October 2007 by Hypo Real Estate Holding AG, which in turn was seized by the German government in 2009.
“Since the end of May 2010, Depfa is not making use of the Federal Reserve Discount Window,” Oliver Gruss, a spokesman for the bank, said in an e-mailed statement. He declined to comment further.
Many foreign banks own large pools of dollar assets — bonds, securities and loans — funded by short-term borrowings in money markets. The system works when markets are calm, said Dino Kos, former executive vice president at the New York Fed in charge of open-market operations. In times of stress, banks can be subject to sudden liquidity squeezes, he said.
“They are playing with fire,” said Kos, a managing director at Hamiltonian Associates Ltd. in New York, an economic research firm. “When the market dries up, and they can’t roll over their funding — bingo, you have a liquidity crisis.”
The potential for dollar shortages remains. As the Greek fiscal crisis roiled financial markets last year, the Fed had to open swap lines with the European Central Bank, the Swiss National Bank, the Bank of England and two other central banks to make more dollars available around the world. That move was partially the result of U.S. money market funds shrinking their exposure to European bank commercial paper.
Bloomberg News is posting the Fed documents here for subscribers to the Bloomberg Professional Service as well as online at www.bloomberg.com.
Read the entire article HERE.
New York Times
By SEWELL CHAN
Published: December 26, 2010
WASHINGTON — As the Federal Reserve debates whether to scale back, continue or expand its $600 billion effort to nurse the economic recovery, four men will have a newly prominent role in influencing the central bank’s path.
One is an economist who fears that the Fed’s easy-money policies could lead to manias like the housing bubble that burst in 2007. Another is a Texas Democrat who served in the Clinton White House, but is wary of the Fed’s aggressive efforts to combat unemployment.
A third is a precocious economist who graduated from Princeton at 19. And the fourth is the only one who agreed wholeheartedly with the Fed’s chairman, Ben S. Bernanke, that the economy was at risk of falling into a dangerous cycle of deflation last summer and that an additional monetary boost was needed.
The four men are presidents of regional Fed banks, and under an arcane system that dates to the Depression, they will become voting members in 2011 on the Federal Open Market Committee, which gathers eight times a year around a 27-foot mahogany table to influence the supply of credit in the economy.
While Mr. Bernanke remains the dominant voice on which route the Fed takes, the change in voting composition is likely to give the committee a somewhat more hawkish cast. This could amplify anxieties about unforeseen effects of Mr. Bernanke’s policies and potentially contribute to the increasingly politicized atmosphere surrounding the Fed.
Since the Fed embarked last month on a second round of quantitative easing — a strategy of buying government securities to hold down mortgage and other long-term interest rates — it has faced an outpouring of criticism from foreign central banks and conservative Republicans.
One of them, Representative Paul D. Ryan of Wisconsin, who is in line to become chairman of the House Budget Committee, said he thought that dissenters within the Fed would influence whether Mr. Bernanke “throttles back, or keeps going,” with the bond-buying plan.
“We’re playing with fire, flirting with disaster,” Mr. Ryan said of the plan, which he believes could jeopardize the dollar’s status as the world’s reserve currency and touch off future inflation.
Most economists think the Fed is unlikely to drastically alter its policy direction, though some of the new members could nudge policy toward more restraint and less activism. Two of the four new voters are viewed as hawkish on inflation, meaning that they tend to be more worried about unleashing future inflation than they are about reducing unemployment in the short run.
The committee will be “a little more hawkish, on net, although I don’t think it’s a sea change,” said Jan Hatzius, the chief United States economist at Goldman Sachs.
Of the four new voting members, the one drawing the most attention is Charles I. Plosser, 62, president of the Federal Reserve Bank of Philadelphia since 2006.
Mr. Plosser, who formerly taught at the University of Rochester, argued in a speech at the libertarian Cato Institute last month that monetary policy “went off track” a few years ago, an acknowledgment of the criticism that the Fed kept interest rates too low from 2003 to 2005, contributing to the housing bubble.
“I’d like the recovery to be faster, but I’m not sure monetary policy can do much about that,” he said in an interview.
Mr. Plosser said that he has thought all along that the economic slowdown over the summer was temporary and that he “wasn’t a big fan” of Mr. Bernanke’s asset-purchase plan. He wants the Fed to move back toward normal policy.
“If we wait too long, and the economy really begins to pick up and we are too late in reacting, we could end up behind the curve and we could end up with more instability,” he said.
Most economists expect Mr. Plosser to dissent, possibly repeatedly, in 2011, inheriting a role played by Thomas M. Hoenig, president of the Kansas City Fed, who was the lone dissenter eight times this year but does not have a vote next year.
Richard W. Fisher, president of the Dallas Fed since 2005, is another potential dissenter. A former investment banker, he was the Democratic nominee for the Senate in 1994, but lost to Kay Bailey Hutchison, a Republican. He was a deputy United States trade representative during President Bill Clinton’s second term.
Compared with most Democratic politicians, Mr. Fisher, 61, is wary of the Fed’s latest moves. “The remedy for what ails the economy is, in my view, in the hands of the fiscal and regulatory authorities, not the Fed,” he said in a speech last month.
His views are also in line with those of fiscal conservatives, like Mr. Ryan, who think the Fed is abetting huge government deficits by “monetizing the federal debt.”
Narayana R. Kocherlakota, 47, the Princeton graduate, who became president of the Minneapolis Fed last year, will be voting for the first time. He has been more measured about quantitative easing. In a speech last month, he called it “a move in the right direction” but said the ultimate effects were “likely to be relatively modest.”
The fourth new voting member, Charles L. Evans, 52, has led the Chicago Fed since 2007. Unlike the other three, he is associated with the camp of so-called doves within the Fed, who are worried about chronic, long-term joblessness and think the recovery is still quite fragile.
Mr. Evans has advocated price-level targeting, a strategy that would allow inflation to run slightly above the desired level in the future to make up for inflation’s being too low today. But in an October speech, he conceded that the proposal would be “a hard pill to swallow” for an institution whose credibility rested on its successes at taming high inflation in the early 1980s.
Mr. Evans is likely to side with Mr. Bernanke on the bond purchases; if anything, he might even push to expand them beyond $600 billion if the recovery weakened again.
The Federal Open Market Committee comprises the Fed’s seven-member board of governors in Washington, including Mr. Bernanke; the president of the New York Fed, who is a permanent member; and four members drawn from the heads of the 11 other banks, who share votes through a rotation.
“It’s true that voting members get more attention in the press, but whether people are voting or nonvoting members, everyone has an equal voice at the table and an equal part in the discussions,” said Randall S. Kroszner, a former Fed governor and a professor at the Booth School of Business at the University of Chicago. “It’s a consensus-based organization.”
For now, Goldman Sachs, Morgan Stanley and other major forecasters expect the Fed will carry out its plan to buy $600 billion in securities — neither scaling back the program early, nor extending it past June. But Mr. Bernanke has left his options open, and the committee is likely to wait until the spring before deciding.
Read the entire article HERE.
By Phil Mattingly and Robert Schmidt
December 6, 2010
Retiring New Hampshire Senator Judd Gregg, one of the Federal Reserve’s most stalwart Republican supporters, showed up for a meeting at the central bank in November bearing a surprising gift: a box of End the Fed books. As he handed out the 2009 best seller by Representative Ron Paul, a longtime Fed critic, Gregg told the gathering it would be worth reading to see what the other side is plotting.
It may have taken 34 years, but Ron Paul has arrived, and he doesn’t plan to squander the moment. His agenda includes landing the chairmanship of the House Financial Services Committee panel that oversees monetary policy—a job that will give him the power to push legislation reining in the central bank and to haul Fed governors up to Capitol Hill for hearings.
The prospect has Wall Street, Fed officials, and even Republican House leaders worried that Paul’s agenda could roil the markets and make a mockery of the U.S. financial system. This is a man, after all, who entered politics because President Richard Nixon bucked the gold standard in 1971, and now wants to make gold and silver legal tender. He is pressing for an audit of the Fort Knox bullion depository and, earlier this year, grilled Fed Chairman Ben Bernanke about the central bank’s alleged funding of Watergate and Saddam Hussein’s nuclear program. Bernanke called the charges “absolutely bizarre.”
Although his book ploy was couched in humor, Gregg laid plain a new Washington reality: Moderate, probusiness lawmakers like him, who consistently protected the central bank’s independence and ability to set monetary policy, are mostly gone. In their place are politicians who view the Fed with suspicion, or worse. Their unofficial leader is Paul, the 75-year-old Texan whose quixotic 2008 Presidential run on the twin themes of ending the federal income tax and abolishing the Fed vaulted him to prominence with the nascent Tea Party. Some of those admirers are among the 75-plus new Republicans about to join Congress. For the first time since he was elected to the House in 1976, Paul’s followers are formidable.
They include his son Rand, an incoming senator from Kentucky who routinely bashed the Fed on the campaign trail and is now angling for a seat on the Senate Banking Committee where he, too, could train his sights on the central bank. Calls to Rand Paul’s staff seeking comment were not returned.
Officials at several major banks have privately raised concerns with Republican leaders that, by allowing Paul to become a chairman, his radical views would gain legitimacy, according to three bank lobbyists. Others are watching with great interest. “Congressman Paul has his own very strong views on things, and you’ve got to respect that,” says Steve Verdier, a lobbyist for the Independent Community Bankers of America, which represents smaller lenders and has fought efforts to weaken the central bank. “I think there is a strong consensus in the country to maintain the independence of the Fed,” he adds.
If he gets the subcommittee gavel, Paul says he plans a thorough review of Fed policy. Fear of inflation is what motivates him the most. Next to the doorway in his Washington office are six framed German bank notes dating from the 1920s hyperinflation era. The notes are sequentially dated “to show how quickly the zeroes were added onto the bills” as inflation skyrocketed, Paul says. The notes are arranged around a quote by one of Paul’s favorite Austrian School economists, the late Hans F. Sennholz, who Paul once met and calls “a tremendous influence on me.” Paul is a devotee of the Austrian School, which teaches that manipulating money supply and interest rates are responsible for history’s boom-and-bust cycles. “The Fed creates all of the bubbles and they create the inevitable bursting of all of the bubbles,” says Paul.
He believes his oversight role is long overdue. “There has been a politically cozy relationship between Congress and the Federal Reserve,” he says. That includes past efforts to keep him from heading the subcommittee. “Republican leadership, with the Fed’s influence, has been working to keep me away from this for a long time. That’s not going to happen this time.”
Read the entire article HERE.