Bunko! The Federal Reserve Bets the Future of America on a Pair of Two’s: How Desperation at the Federal Reserve May Destroy the Dollar and America’s Future

 

 

Bunko!  Hokum!  Flimflam!  Con job!  Snow job!  Played for a Mark!  Played for a Sucker!

America has once again been had by the Nefarious Federal Reserve and the Chief Con Artists of the planet earth: Mr. Benjamin Bernanke! Don’t believe me?

Watch carefully as commodity prices like gold, silver, oil, food and the like begin to rise mirroring a fall in the dollar because in a last desperation move the Federal Reserve has pulled a trillion dollars out of their butt and bought treasuries (American Debt) with it with the idiotic hope that they can stave off a depression.  We can’t.  We’re going into depression but we won’t be alone; we’re taking the rest of the world with us.  Follow along with me as we dissect what the Federal Reserve just did.

The Federal Reserve is not a part of the American Government.  They have a contract to manage the money supply and regulate interest rates but they are a private, profit making consortium of mostly foreign banks that essentially runs our economy. Their mission to run the economy grew out of other depressions in the nations past and it was hoped that this Central Bank i.e. The Federal Reserve System could manage the money supply and interest rates in such a way as to avoid cyclical depressions in the US economy.  Before the Federal Reserve, which is about as “Federal” as Federal express and is as much of a “Reserve” as bankrupt Social Security, depressions occurred at about 60 year intervals.  Since the Fed’s Infestation in America the rate has been a depression every 80 years. Many scholars suspect that the Fed, either intentionally or unintentionally, actually creates our depressions for their own nefarious purposes.  Based on my study of the last few years I think the Fed actually creates depressions for its own reasons and has far more control of world events than the President of the United States.

Thomas Jefferson once said that the creation of a central bank was more dangerous to the Liberty of the American people than a standing army.

Consider a dollar bill.  Look at it and somewhere on there you’ll find the words: “Backed by the full faith and credit of the United States of America”.  In the old days it said that it was backed by gold and fully redeemable at the Treasury of the United States.  What’s the difference?  When your currency is back by gold it’s attached to an asset, a thing of intrinsic value, like gold; and the dollar becomes a stand in for that asset.  When the currency is based on the full faith and credit it’s actually not backed by an asset but is essentially an IOU because that’s what credit is: Credit is Debt.  It’s called a fiat currency and as long as the people running the currency do a good job you can get away with it for a while.  If the currency is badly managed your have problems up to and including the collapse of the currency.  Its value can be derived, like many things, by its scarcity and the demand for the currency. If the world gets flooded with the currency it’s no longer scarce, and if, being no longer scarce, people lose faith in its value, then they dump the currency to get what they can for it.  Its value fluctuates like other commodities and its value becomes a function of what people think and feel about it.

“Permit me to issue and control the money of a nation and I care not who writes its laws” 

Nathan Meyer Rothschild

When a government, like ours, prints a trillion dollars at a crack, as we have done, it devalues the existing supply of money by decreasing its scarcity.  You lose purchasing power because the dollars you have become less scarce and therefore less valuable than they were before.  In this way your savings can be looted by an out of control government that prints money like crazy to cover its own crazy spending by essentially looting the value of the dollars you are holding in savings.  Government, to cover its greed, agrees to let the Federal Reserve make up more money which allows them to put out a fire by making your money worth less.  If the process gets out of control, or it there is a loss of faith by people or governments holding lots of dollar your money can indeed be worthless.

Here is what was just done to finance the astonishing and stupid debt the Neo Socialist Obama Administration has foolishly jammed down our throat to allegedly address the financial crisis and to destroy market capitalism in favor of socialism:

A consortium of mostly foreign bankers, who issue and control our money, has created, from nothing, a trillion dollars of our own money, with interest paid by us for issuing the money, to be used in buying American Debt in the form of Treasury Bonds. Eventually the Treasury will pay off, with interest, to the barer of the bonds,( the consortium of mostly foreign bankers,) with our fiat dollar, based on debt, the value of the Treasuries, with interest, to the consortium of bankers who issue and control our money. Where did the Fed get the money to buy the Treasuries?  They made it up out of thin air.

If you were a nation like China or Japan or Saudi Arabia or Russia who held lots of our dollars and were looking at this rank devaluing of the dollar to fund the pie-in-the-sky utopia of Neo-Socialist Democrats what would you do?  Would you sell your dollars for what you could get and find a new currency to trade in?  Would you demand a world currency that some other government, at its whim, couldn’t devalue just to bail its sorry butt out of the fire?  Is it a coincidence that the United Nations and China and Russia and Europe are calling for a major revamp of the financial system and a new world reserve currency?

“This is a budget only a liberal could love.  We cannot afford to return to the old days of high taxes, more spending and a larger less accountable government”.

Speaker of the House Newt Gingrich

On the 1999 Federal Budget

Why would the country want a consortium of mostly foreign bankers who issues and manages our money to deliberately devalue the currency by PRINTING A TRILLION MORE DOLLARS to fund insane, unsustainable, congressional spending: ultimately financed by the same profit making consortium of mostly foreign banks whom we now owe for buying the debt with our own money created from thin air by the consortium of mostly foreign bankers?????????

If we didn’t spend the money we need not print the money.  If the money is not printed we don’t devalue the dollar.  We might go into depression but when we get through the depression and out the other side: the dollar will still be there.  Now were certain to go into depression anyway and we’ve probably destroyed the dollar to boot. How much more of a con job will the world put up with before dumping their dollars and telling us what to do with them?

 When you see commodity prices go up, oil, gold, food, and the like and the dollar dropping on the world markets you see something that, if it gets out of hand, becomes a run on the dollar, just like a run on the bank, and our currency and economy will be finished for a generation or more. The spending of our politicians is killing the country.  The managers of our money have, with this crazy buying of our debt with our own currency, that they made up out of thin air, may well be the trigger that starts the run on our currency that no one can stop.  Get a good wheel barrow folks because you’re going to need it to buy bread.  If this were a poker game the Federal Reserve just went all in, with all your money, holding a pair of twos, hoping the world doesn’t call our bluff.  We’re in more trouble now than at any time since the Revolutionary War.

“Only a virtuous people are capable of freedom.  As nations become corrupt and vicious they have more need of masters.”

Benjamin Franklin

Here’s an article I found on Bloomberg about the “Rambo Fed” and its antics:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOsvwdYztl7Q

‘Rambo Fed’ Will Buy Treasuries to Combat Crisis (Update1)

By Scott Lanman

March 19 (Bloomberg) — By committing to buy Treasuries and double his purchases of mortgage debt, Federal Reserve Chairman Ben S. Bernanke signaled his determination to avoid a repeat of the Great Depression and his willingness to pump as much cash into the economy as needed to end the current crisis.

U.S. central bankers decided yesterday to buy as much as $300 billion of long-term Treasuries and more than double mortgage-debt purchases to $1.45 trillion, aiming to lower home- loan and other interest rates. The Fed kept its main rate at almost zero and may keep it there for an “extended” time.

The moves sparked the biggest drop in 10-year Treasury yields since 1962, rallies in the stock market and gold and a plunge in the dollar against the euro. Economist Richard Hoey said Bernanke has created the “Rambo Fed,” referring to the Sylvester Stallone character skilled with weapons.

“This is a very powerful and aggressive move,” Hoey, chief economist at Bank of New York Mellon Corp., said in an interview with Bloomberg Television. “One of the reasons I’ve been arguing we won’t have a depression is we’ve got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine.”

With the purchases of Treasuries and housing debt, Bernanke is effectively using the Fed’s powers to print money and aim it where he and other officials believe it will have the greatest impact in lowering borrowing costs.

Bond Reaction

The 10-year note yield fell two basis points to 2.52 percent as of 9:14 a.m. in London, according to BGCantor Market Data. The price of the 2.75 percent security maturing February 2019 rose 5/32, or $1.56 per $1,000 face amount, to 102 1/32. A basis point is 0.01 percentage point.

The Federal Open Market Committee’s decision was unanimous, indicating the agreement to start buying Treasuries quelled disputes over how the central bank should expand its balance sheet. Richmond Fed President Jeffrey Lacker and others favored government-debt purchases instead of intervening in credit markets, as Bernanke has pioneered in the past six months.

Bernanke has studied the Great Depression extensively and published a book of his papers on the subject in 2000. In 1929, the Fed was “essentially leaderless and lacking in expertise,” Bernanke said in a November 2002 speech. The situation led to decisions that were associated with a “massive collapse of money, prices, and output,” he said.

Fed Purchases

Yesterday’s decisions will add $750 billion in purchases this year of mortgage-backed securities issued by government- sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, for a total of $1.25 trillion. The Fed has already announced $217.1 billion in net purchases out of $500 billion planned through June, under a program unveiled in November.

The central bank will also double to as much as $200 billion this year its planned purchases of debt issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks. The Fed bought $44.4 billion of the so-called agency debt as of March 11.

The $1 trillion Term Asset-Backed Securities Loan Facility, which is opening this week to jumpstart consumer and business lending, “is likely to be expanded to include other financial assets,” the FOMC statement said, without elaborating.

The Obama administration is considering melding the Treasury’s plan to set up private investment funds to buy frozen assets with the Fed program, known as the TALF, people familiar with the matter said. Treasury Secretary Timothy Geithner may make an announcement as soon as this week, after his first unveiling of the strategy caused a sell-off in financial stocks.

‘All Tools’

“This is not really a victory for Lacker,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “Lacker seems to be arguing for Treasury purchases instead of targeted programs. They are instead supplementing the targeted programs. They are just using all tools.”

The New York Fed will concentrate Treasury purchases among two- and 10-year securities. The transactions will take place two to three times a week, and the Fed may also buy other maturity Treasuries and Treasury Inflation-Protected Securities, according to a New York Fed statement.

The moves may more than double the Fed’s balance-sheet assets by September to $4.5 trillion from $1.9 trillion, said John Ryding, founder of RDQ Economics LLC in New York.

At the same time, the changes increase the danger, once the economy recovers, that the Fed won’t be able to unload the securities quickly enough to raise interest rates and counter inflation, said Ryding, a former Fed economist.

‘Evolving Circumstances’

Bernanke floated the idea of buying Treasuries in a Dec. 1 speech. Then the FOMC said in its last statement on Jan. 28 that the Fed would be “prepared” for the purchases if “evolving circumstances” indicated their effectiveness.

The option gained ground after the Bank of England succeeded in lowering long-term rates by buying U.K. government bonds known as gilts in a program announced this month, said Lyle Gramley, a former Fed governor. The 10-year gilt yield slid to the lowest level in at least 20 years after the purchases began.

“Our objective is to improve the functioning of private credit markets so that people can borrow for all kinds of purposes,” Bernanke said at a Feb. 24 Senate hearing. “We are prepared, and we want to keep the option open to buy Treasury securities if we think that is the best way to improve the functioning or reduce interest rates in private markets.”

While Treasury yields fell, the strategy isn’t guaranteed to work in reducing other rates.

The Fed is “naive” if officials think the move will lower borrowing costs, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management. The “historic precedent” of when the Treasury Department was buying back debt amid the budget surpluses of the Clinton administration show it may fail to do so, he said.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

Last Updated: March 19, 2009 05:21 EDT

 

March 19 (Bloomberg) — The rally that pushed the dollar to the highest levels since 2006 is in danger of crumbling as the Federal Reserve starts buying Treasuries and ramps up its purchases of mortgage debt, adding to a flood of greenbacks.

“The implications of today’s Fed decision are unambiguous,” currency strategists at Citigroup Inc. wrote in a research report within a half hour of the Fed’s decision yesterday. The dollar “should weaken,” they said.

Fed policy makers said yesterday they plan to buy as much as $300 billion of U.S. government bonds and step up purchases of mortgage bonds, expanding the central bank’s balance sheet by as much as $1.15 trillion. The extra supply of dollars threatens to overwhelm investors just as the budget deficit swells.

The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, tumbled 2.7 percent to 84.595, its biggest one-day drop since 1971. That pushed its decline to 5.6 percent since reaching 89.62 on March 4, the highest in almost four years.

It fell yesterday by the most in nine years versus the euro, to $1.3474, and traded at $1.3631 as of 12:01 p.m. in London. The dollar dropped today against Japan’s currency to a three-week low of 94.72 yen.

“Sell the dollar!” said Scott Ainsbury, a portfolio manager who helps manage about $12 billion in currencies at New York-based hedge fund FX Concepts Inc. “This is huge, huge. It’s equivalent to the Plaza accord. This is the last thing they have in the closet, and they used it a bit early.”

Rally Reversal

In 1985, the U.S., U.K., France, Japan and West Germany agreed at New York’s Plaza Hotel to coordinate the devaluation of the dollar against the yen and the deutsche mark.

The Dollar Index started to slide in 2005 on concern about the widening current-account deficit and reached a record low in the first quarter of 2008 as credit market losses mounted following the crash of the subprime mortgage market.

It then rallied in the second half of last year as the global recession spurred demand for haven assets such as Treasury bills. Rates on bills fell below zero percent in December. UBS AG currency strategist Benedikt Germanier in Stamford, Connecticut, said he is sticking with his forecast for the dollar to trade at $1.30 per euro over the next month.

‘Pretty Big’

Yields on 10-year Treasuries declined the most since 1962 after the Fed said it would concentrate purchases in notes due from two to 10 years. The central bank is expanding its quantitative easing policy, which already includes agency and mortgage debt, to more than $1.85 trillion in securities.

“We’ve been selling dollars and we’re now adding to that short,” said Jim McCormick, Citigroup Inc.’s London-based global head of currencies. “The Fed program announced last night is pretty big both in terms of magnitude and breadth.”

McCormick said the dollar may fall to $1.40 against the euro.

The purchases will bolster concern that inflation will accelerate as borrowing costs fall, said Jessica Hoversen, a foreign exchange analyst with MF Global Ltd. in Chicago.

‘Dollar is Done’

“The Fed is basically financing our deficit by buying the debt issued by the Treasury,” she said. “If the Obama administration pushes through another stimulus package, the dollar is done.”

President Barack Obama is seeking Congressional approval for a $3.55 trillion budget for the year starting in October that would increase spending by 32 percent to kick start the economy. Goldman Sachs Group Inc. estimates the U.S. will almost triple debt sales this fiscal year ending Sept. 30 to a record $2.5 trillion.

The euro will probably rise to $1.3590 in two weeks provided it holds above $1.3330 through March 20, Hoversen predicted. It may rally above $1.39 “sooner than we think,” Citigroup analysts Tom Fitzpatrick in New York and Shyam Devani in London wrote in a research note yesterday.

Trading patterns also suggest the dollar is poised to weaken. Europe’s common currency took 26 days to break through $1.3117 on Dec. 11, before appreciating to the 200-day moving average above $1.47, the Citigroup analysts wrote. Yesterday’s break occurred 27 days after the euro established a resistance level on Feb. 9, suggesting it may “explode” higher, they wrote.

The euro, the Norwegian krone and the Australian dollar will outperform as those nations’ central banks hold out longer against the temptation to print money, said Dale Thomas, head of currencies at Insight Investment Management, which oversees about $121 billion in assets.

‘Timing Difference’

“All the major central banks may end up in the same position,” London-based Thomas said. “The way we look to play it is to see which goes the first and which one lags, and try to explore the timing difference between the two.”

Central banks are grappling with how to steer their economies when interest rates are already close to zero.

The Bank of England is buying government bonds and corporate debt to unlock trading in frozen credit markets and stimulate the economy. The Bank of Japan is snapping up government notes and making subordinated loans to banks, and the Swiss National Bank is selling francs to prevent gains against the euro.

Fed policymakers have committed to buy or lend against everything from corporate debt, mortgages and consumer loans to government bonds as they try to end the seizure in credit markets.

The extra yield relative to benchmark interest rates that investors demand to own debt backed by consumer loans has soared amid concern that defaults will climb.

Bond Spreads Wide

Spreads for top-rated bonds backed by auto loans are trading at about 300 basis points more than the one-month London interbank offered rate compared with 65 basis points in January 2008, JPMorgan Chase & Co. data show. One-month Libor, a borrowing benchmark, is currently 0.55 percent. A basis point is 0.01 percentage point.

“We cannot rule out that this will place additional pressure on other central banks to follow suit,” wrote David Woo, the global head of foreign-exchange strategy at Barclays Capital in London. “Should this turn out to be the case, deflationary concerns in the market may begin to give way to longer-term worries about monetary inflation.”

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.

Last Updated: March 19, 2009 08:06 EDT

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