Archive for Federal Reserve
The Republican Conundrum
Posted by: | CommentsNearly two months ago, a gathering of friends highlighted a problem facing the mainstream media labeled frontrunners for the Republican Presidential nomination. At that time, the two leading candidates were Mitt Romney and Rick Perry. Among our group not one single person picked either one as their candidate of choice.
Last night at an impromptu meeting of a half-dozen friends the same question was again put to the table. The people involved in the question, like the time before, are quite intelligent and knowledgeable about an array of subjects. The answers last night were again all over the board. Gingrich pulled one vote; Cain got one other; two voted for Paul; one said anybody but Obama, and the most politically astute member of the group voted they were deeply conflicted. Notice how Romney again received not a single nod.
Furthermore, several voiced the opinion that if Gingrich or Romney ended up winning the nomination, then two would sit out the election and another stated they would mark the ballot for Obama in an act of pouring gasoline on to the fire.
The problem for the Republicans, and thus the country appears to be this: A significant portion of the country truly wants liberty restored and an end to American imperialism abroad. They see government at all levels as corrupt. Additionally, they recognize the crony capitalism of government and the Federal Reserve as the source of all economic evil, which is true. Many may agree with such an outline, but swayed somewhat by the media and the Republican power brokers, they have determined a candidate espousing these views cannot win a general election.
A candidate like Gingrich or Romney that speaks in tempered terms about freedom while still promoting the ideas of American global power and government solution to economic woes is according to the experts palatable to the masses. But the two recently anointed front-runners leave a bad taste to those with a deep conviction toward minimal government, not just less. With a chunk of the electorate bolting someone other than Gingrich or Romney, then the pair becomes no different than the stigma attached to Ron Paul; they are unelectable.
The fact remains this country is about evenly divided between the :makers and the takers”. At this point, the election for President appears to be headed for a very ugly conclusion, which is the re-election of Obama.
Best Description of Central Banking Intervention
Posted by: | CommentsSeveral times today I have heard the manipultion of interest rates by the Federal Reserve described as “nationalizing yields”.
Herman Keynes
Posted by: | CommentsCount me as one not running with the crowd toward the Herman Cain bandwagon. As I pointed out two weeks ago, his 999 tax plan has the folly of promising more revenue to the federal government. I admit not following the Republican Presidential nomination very closely. After perusing the news this morning, I was shocked to find out that Cain was once chairman of the Kansas City Federal Reserve. He was and by his words still are a bankster and economic interventionist.
In the recent past, he has thumbed his nose at the Austrians calling for an audit of the Federal Reserve. Cain calls such people ignorant. By his own admission he never saw the current financial calamity coming. As the economy imploded, Cain became a shill for the Bush administration talking up the strength of the economy. Furthermore, he supported the bailout and cheered taxpayer funds siphoned toward Wall Street.
Herman Cain also believes that Alan Greenspan as the best leader of the Federal Reserve over the last forty years. Greenspan is the type of person that Cain says he will appoint Chairman of the Federal Reserve if elected president.
As Austrians long ago realized and even our earlier Presidents, central banking is the root cause of the boom-bust cycle. How can you support a candidate that not only was part of the beast, but believes it does not need to be watched over through audits? How can you support a candidate that at heart is an economic interventionist? How can you support a candidate that believes the federal government needs more money?
The bottom line is that Herman Cain is another George Bush who does not believe in free markets. In other words he is no friend of liberty.
Enough said.
Economic History Never Learned
Posted by: | CommentsIt has been said that the only thing we learn from history is that we do not learn from history. Nothing could be truer when analyzing the mad money printing policies of the Federal Reserve. Art Cashin, Director of Floor Operations for UBS, writes today about an ominous event I history 89 years ago. It was a lesson never learned.
Bernanke and Natural Economic Forces
Posted by: | CommentsIn a prelude to QE3 or some version of money printing, Ben Bernanke in Minneapolis today conceded that the economy is suffering from more than transitory problems. Bernanke cited the severe recession on a global scope plus the deep slump in the housing and financial sector have acted to slow the natural recovery process.
When the Federal Reserve Chairman uses terms like “the natural recovery process” is he referring to an economy free from monetary manipulation and government intervention into every aspect of economic exchange. As the Depression of 1921 and the economic panics of the 19th century demonstrated, the corrective forces of the free market will make quick work of downturns in the economy.
As the Austrian Business Cycle Theory has pointed out, the natural recovery process that Ben Bernanke refers to is exactly what ails us. It is his natural process of rigging interest rates through monetary expansion combined with the government’s meddling into private transactions.
Bernanke has always championed himself as a scholar on the Great Depression. He obviously learned his lessons well.
QE3
Posted by: | CommentsQE2 was the Federal Reserve engaging in the purchase of $600 billion worth of treasury securities by printing money to accomplish the task. The purpose was to force interest rates lower than they otherwise would have been so as to somehow “jump start” the economy through low cost indebtedness by borrowers who would, theoretically, engage in economic activity thus increasing purchases, hiring, etc. There was no stated, specific, interest rate target. The only explicit, overt, revelation was the amount of money to be used (printed) to purchase treasuries… this was known as quantitative easing, part 2. The only thing in accomplished was a rise in the dollar denominated price of financial assets and commodity prices. Unemployment remains unacceptably high, and the economy is still flat. Since the Fed’s mandate is “maximum employment, stable prices, and moderate long-term interest rates” they are obliged to do something..
So, what is the Fed up to with the realization that QE2 not work? That it failed insofar as their mandate is concerned? Looks like they are now going to “target” an interest rate ceiling above which they will not allow rates to go. To accomplish this new goal, they will buy an unannounced, unknown, and potentially never ending amount of bonds to maintain a specific (or lower) level of interest rates. Yet, they will refuse to call this new manuever quantitative easing…
Folks this is doublespeak hardly to be matched, and is clearly QE3. They have no other choice (in their minds), their time is running short, and before they are done QE2 will look like the flip of a nickle to a beggar on the street…
Treasury Purchases Up 700% by Federal Reserve In Past Months
Posted by: | Comments
The Federal Reserve is Buying 70% of U.S. Treasuries. The Federal Reserve has been buying 70% of all new U.S. treasury debt. Up until this year, the U.S. has been successful at exporting most of its inflation to the rest of the world, which is hoarding huge amounts of U.S. dollar reserves due to the U.S. dollar’s status as the world’s reserve currency. In recent months, foreign central bank purchases of U.S. treasuries have declined from 50% down to 30%, and Federal Reserve purchases have increased from 10% up to 70%. This means U.S. government deficit spending is now directly leading to U.S. inflation that will destroy the standard of living for all Americans.
Paul versus Paul
Posted by: | CommentsWhenever I hear the name of Congressman Paul Ryan, it brings me back to his justification that government had to do something during the financial plunge. He evoked no free market principles in voting for the auto and financial bailouts.
In an interview yesterday with Larry Kudlow, Ron Paul points out an important distinction between him and Ryan. Listen toward the end of the clip. Regarding interest rates Paul Ryan feels the Federal Reserve should raise them. Ron Paul, on the other hand, says let the free market determine interest rates and keep the central planners out of it. Paul also makes a great point in that a central bank controlling money is part of every transaction we make.
No Central Planning Here
Besides his belief in monetary central planning and bailouts, Paul Ryan voted for No Child Left Behind, Bush’s Medicare folly, the wars, and the Patriot Act. And this is the person the Republicans consider to be the next face of the party.
No Thanks!
A Declaration of Dependency – welcome to the dark ages.
Posted by: | CommentsWe are in a situation that proves once again the failure of central banking. These know-it-all, self-righteous, punks who serve on the Federal Reserve Boards around the county and, in particular, Heli-Ben, were not planning on passage of the Health Care bill. Please go back and review the odds of this nightmare, this Declaration of American Dependency, passing.. When the Fed was tinkering, dare I say massively intervening into the economy, the chances of passage were very low. There is simply no way they were engaging in policy premised upon passage.
Let me restate this: Do you think that their overt inflation of the money supply would have been altered had they known 12, 18, 24 months ago that passage of this idiotic bill was a certainty???
Ladies and gents, the Fed was in a pickle regardless the outcome of last night’s vote. But now, now we are all in the jar with them and the cover is tightly sealed. You cannot run, you cannot hide. There is no amount of prayer, worship, or meditation that will keep one of the new 16,500 IRS agents from peering into your health care coverage – just to make sure it is “adequate.”
I cannot help but to advise you to run for your life. The lights on that hill that Ronald Reagan spoke about flickered, buzzed, and went completely out last night… we are now officially in the Dark Ages, part deux.
Knight to c2
Posted by: | CommentsIn chess a fork occurs when a piece moves into a position where it can simultaneously attack two or more opposing pieces. The knight, which can move in an “L” shaped pattern and four different directions, is the piece most commonly used to execute this type of attack. A fork usually results in the opposing player losing a major piece. High caliber players often take care to avoid moves that could leave an opening for two quality pieces like a Queen and a Bishop to be attacked at the same time.
In his aggression to flood the economy with fiat money and lower key interest rates to zero, Ben Bernanke may have moved his monetary pieces and the economy into a vulnerable position. The Federal Reserve faces two problems. While lower rates did little to boost an economy already flooded in debt, they did help chase money toward the stock market where indices have bounced approximately 60% from the lows made almost a year ago.
A dramatically inflated money supply creates the very real danger of rapid price increases across the economic landscape. At its very worse, inflation can destroy the currency as illustrated historically by the experience of the Weimar Republic. The Producer Price Index, which showed an annualized rise of 16%, sounded an alarm to put the brakes on the monetary printing presses.
The likely result of pulling back on the monetary reins will be much higher interest rates and siphoning money out of the stock market. On the other hand, if the Federal Reserve continues on its present course, then the odds of a currency crisis increase with each passing day.
It looks like Bernake is sure to lose a piece. He has to be careful not to put the country into “checkmate”.
S&P: You asked for it, here it is ..
Posted by: Flashy | Comments (0)S&P downgrade of United States AAA rating probability >=33% !
On Sunday, Timothy “I can’t figure my own taxes” Geitner stated in no uncertain terms that we (meaning the Federal Government of the United States) actually can have our cake and eat it too.. All we need to do, says Geitner, is tax the rich and raise the debt ceiling..
About 20 minutes later, former Federal Reserve Chairman Alan Greenspan indicated that it is and has been for the longest time irrational to him that we even HAVE a debt ceiling law..
Today, (first time in history, I believe but I could be wrong) Standard & Poors Ratings Services Inc. cut its outlook on the U.S. to negative, increasing the likelihood of a potential downgrade from its triple-A rating, as the path from large budget deficits and rising government debt remains unclear.
S&P analyst Nikola G. Swann stated that:”More than two years after the beginning of the recent crisis, U.S. policy makers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures.” Swan went on to note that the rating agency puts the chance of a U.S. downgrade within two years at least one-in-three.
Now, Greenspan’s comments on the heels of Geitner’s was interesting insofar as he was pointing out the rediculous nature of what Geitner was suggesting.. Essentially, why have a law that states you have a debt ceiling when you simply vote to raise it everytime you need to spend beyond your means. What was implicit in Geitner’s pipedream, and sage reflection by Greenspan (who I do not always agree with) was the fundamental premise that America can borrow, tax, and spend at will with no consequence… That, in fact, economics stops at the gate to the Federal Reserve… Also, and this bears some reflection, none of this occurs in an international vacuum.. please note that roughly 24 hours ago China further tightened its monetary policy.
Folks, this is akin to an auto driver leading a caravan of protestors heading for Madison who has decided to drive 85 instead of 65 in very inclement weather with ice and snow on the road. He gets pulled over, along with 5 other motorists, by the State Patrol. The officer starts to issue citations and the first motorist says, “wait, stop, we’re all going to protest, and we have a right to protest, so we’re going to have a vote by the road here to see if the speed limit should be increased to 86 (retroactively) … and, by the way, majority rules, i.e. a democratic vote…”
The vote was 6 for and 1 against, no tickets were issued. 30 miles down the road all 5 followers were involved in a multi-car accident that killed 12, jammed the interstate for hours, and caused (all things considered) a couple $million in costs … including the lives o two women and their unborn fetuses. The lives and future generations will never be the same…
And the lead driver? He never saw the accident behind him because the snow cloud he was creating in his wake was simply too thick…
WSJ