Category: Economy


The Fed & Stock Market Manipulation

Jeremy Grantham: “The Fed Has Spent Most of the Last 15, 20 Years Manipulating the Stock Market”

From  http://www.washingtonsblog.com

Legendary investor Jeremy Grantham – Chief Investment Strategist of Grantham, Mayo, Van Otterloo- told CNBC last week:

What I worry about most is the Fed’s activity and — QE2 is just the latest demonstration of this. The Fed has spent most of the last 15, 20 years— manipulating the stock market whenever they feel the economy needs a bit of a kick. I think they know very well that what they do has no direct effect on the economy. The only weapon they have is the so-called wealth effect. If you can drive the market up 50 percent, people feel richer.

***

This is what the Fed wants by the way.

It wants us to go out there and buy stocks, which are overpriced because bonds they have manipulated into being even less attractive. So, we’re being forced to choose between two overpriced assets.

***

And what the Fed is trying to do is to make cash so ugly that it will force you to take it out and basically speculate. And in that, it’s very successful, of course, with the hedge funds. They’re out there speculating. Finally, the ordinary individuals are beginning to get so fed up with having no return on their cash that they’re beginning to do a little bit more purchasing of equities. And that’s what the Fed wants.

It wants to have the stocks go up, to make you feel a bit richer so that you’ll spend a little more and give a short-term kick to the economy. But, it— it’s a pretty circular argument. For every dollar of wealth effect you get here, as stocks go from overpriced to worse, you will give back in a year or two. And you’ll give it back like it— like it happened in— in ’08 at the very worse time.

All of the kicker that Greenspan had engineered for the ’02, ’03, ’04 recovery and so on was all given back with interest. The market overcorrected through fair value. The housing market that was a huge driver of economic strength and a— actually masked structural unemployment with all those extra, unnecessary houses being built. All of that was given back similarly at the same time. It couldn’t have been worse.

Grantham also slams the Fed for blowing bubbles and for encouraging moral hazard:

[Question:] So, what should the federal government be doing then? I mean, the housing industry, for example, missing in action. What is it going to take to get housing moving again? What is it gonna take to get businesses hiring again? If it’s not the job of the Federal Reserve, what policy should we be seeing coming out of the government?

[Grantham:] I think the Federal Reserve has— is in a very strong position to move against bubbles. Bubbles are the most dangerous thing— asset-class bubbles that come along. They’re the most dangerous to investors. They’re also the most dangerous to the economies of— as we have seen in Japan and in 1929 and now here. You’ve got to stop them.

The Fed has enormous power to move markets. And it— not necessarily immediately, but give them a year and they could bury a bull market. They could have headed off the great tech bubble. They could have headed off the housing bubble. They have other responsibilities— powers. They— they could have interfered with the quantity and quality of the sub-prime event. They chose not to.

In fact, Greenspan led the charge to deregulate this, deregulate that, deregulate everything, which was most— ill advised, and for which we have paid an enormous price. So, they can— they can stop bubbles, and— and they should. It’s easy. It’s a huge service. What you do now is— is— I like to say it’s a bit like the Irish problem.

I wouldn’t start the journey from here if I were you when you ask— the way. You— you really shouldn’t allow the— situation to get into this shape. You should not have allowed the bubbles to form and to break. Digging out from a great bubble that has broken is so much harder than preventing it in the first place.

***

And unless we’re lucky, we will have yet another crisis without being able to lower the rates ’cause they’ll still be low, without being able to issue too much moral hazard promises from the Fed because people will begin to find it pretty hollow. Cycle after cycle, the Fed is making basically— is flagging the same intention. Don’t worry, guys. Speculate. We’ll help you if something goes wrong. And each time something does go wrong and it gets more and more painful.

Finally, Grantham slams low interest rates and quantitative easing:

Let me point out that the Fed’s actions are taking money away from retirees.They’re the guys, and near retirees, who want to part their money on something safe as they near retirement. And they’re offered minus after-inflation adjustment. There’s no return at all. And where does that money go? It goes to relate the banks so that they’re well capitalized again. Even though they were the people who exacerbated our problems.

***

I— I think, therefore, under these conditions, low rates is actually hurting the economy. It’s taking more money away from people who would have spent it —retirees — than are being spent by passing it on to financial enterprises and being distributed as bonuses to people who are rich and, therefore, save more.

So, I think it’s a— a— bad idea at any time and a particularly bad idea now.

Here’s the interview:

One in 7 US households hit by hunger issues in 2009
By Jerry Norton From http://www.alertnet.org

 Emergency food pantry use up sharply in recent years

* Food stamps used by 15 million families a month in 2009  Emergency food pantry use up sharply in recent years

* Food stamps used by 15 million families a month in 2009

WASHINGTON, Nov 15 (Reuters) – The number of U.S. households that reported getting emergency food from a food pantry almost doubled between 2007 and 2009, at the height of the recession, a government report said on Monday.

The U.S. Department of Agriculture said the number of households jumped to 5.6 from 3.9 million.

“Households also accessed additional assistance through USDA’s 15 food and nutrition assistance programs,” the article in the USDA Economic Research Service (ERS) “Amber Waves” said.

The USDA oversees the government’s food stamp program, also known as SNAP or the Supplemental Nutrition Assistance Program, for low-income families and other domestic feeding programs like school lunches.

In the 2009 fiscal year, “15.2 million households participated in SNAP in an average month, up from 12.7 million in FY 2008,” the article said.

In a separate report, the ERS said the percentage of U.S. households without food security — access to enough food for an active, healthy life — at some point during the year hit a record in 2009.

It said more than 50 million people, including at least 17 million children, lived in households uncertain of having or getting enough food at some point because of insufficient money or other material resources.

The 14.7 percent of households without food security at some time in 2009 was up from 14.6 percent in 2008 and 11.1 in 2007, and was the highest since data-keeping on the subject began in 1995, according to the ERS report. (http://www.ers.usda.gov/Briefing/FoodSecurity/)

Some 9 percent of households had low food security, meaning they relied on such strategies as “eating less varied diets, participating in Federal food assistance programs,” or getting emergency food help.

About 6 percent had very low food security, meaning they had the normal eating patterns of one or more members disrupted and reduced at times during the year.

For about a quarter of food-insecure households and one-third of those with very low food security, “the occurrence was frequent or chronic,” the ERS report said.

It said that among states, food insecurity ranged from a 6.7 percent level in North Dakota to a 17.7 percent high in Arkansas, as measured over a three year period through 2009. Very low food security ranged from North Dakota’s 2.6 percent to Alabama’s 6.8 percent.

(Editing by Peter Bohan and Sandra Maler)

41 Facts About The History Of Central Banks In The United States That Our Children Are No Longer Taught In School

From http://poorrichards-blog.blogspot.com

Today, most American students don’t even understand what a central bank is, much less that the battle over central banks is one of the most important themes in U.S. history.  The truth is that our nation was birthed in the midst of a conflict over taxation and the control of our money.  Central banking has played a key role in nearly all of the wars that America has fought.  Presidents that resisted the central bankers were shot, while others shamefully caved in to their demands.  Our current central bank is called the Federal Reserve and it is about as “federal” as Federal Express is.  The truth is that it is a privately-owned financial institution that is designed to ensnare the U.S. government in an endlessly expanding spiral of debt from which there is no escape.  The Federal Reserve caused the Great Depression and the Federal Reserve is at the core of our current economic crisis.  None of these things is taught to students in America’s schools today.

In 2010, young Americans are taught a sanitized version of American history that doesn’t even make any sense.  As with so many things, if you want to know what really happened just follow the money.
The following are 41 facts about the history of central banks in the United States that every American should know….
#1 As a result of the Seven Years War with France, King George III of England was deeply in debt to the central bankers of England.
#2 In an attempt to raise revenue, King George tried to heavily tax the colonies in America.
#3 In 1763, Benjamin Franklin was asked by the Bank of England why the colonies were so prosperous, and this was his response….

“That is simple. In the colonies we issue our own money. It is called Colonial Script. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers.
In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one.”

#4 The Currency Act of 1764 ordered the American Colonists to stop printing their own money.  Colonial script (the money the colonists were using at the time) was to be exchanged at a two-to-one ratio for “notes” from the Bank of England.
#5 Later, in his autobiography, Benjamin Franklin explained the impact that this currency change had on the colonies….

“In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the Colonies were filled with unemployed.”

#6 In fact, Benjamin Franklin stated unequivocally in his autobiography that the power to issue currency was the primary reason for the Revolutionary War….

“The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction. The inability of the colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the prime reason for the Revolutionary War.”

#7 Gouverneur Morris, one of the authors of the U.S. Constitution, solemnly warned us in 1787 that we must not allow the bankers to enslave us….

“The rich will strive to establish their dominion and enslave the rest. They always did. They always will… They will have the same effect here as elsewhere, if we do not, by (the power of) government, keep them in their proper spheres.”

#8 Unfortunately, those warning us about the dangers of a central bank did not prevail.  After an aborted attempt to establish a central bank in the 1780s, the First Bank of the United States was established in 1791.  Alexander Hamilton (who had close ties to the Rothschild banking family) cut a deal under which he would support the move of the nation’s capital to Washington D.C. in exchange for southern support for the establishment of a central bank.

#9 George Washington signed the bill creating the First Bank of the United States on April 25, 1791.  It was given a 20 year charter.
#10 In the first five years of the First Bank of the United States, the U.S. government borrowed 8.2 million dollars and prices rose by 72 percent.
#11 The opponents of central banking were not pleased.  In 1798, Thomas Jefferson said the following….

“I wish it were possible to obtain a single amendment to our Constitution – taking from the federal government their power of borrowing.”

#12 In 1811, the charter of the First Bank of the United States was not renewed.
#13 One year later, the War of 1812 erupted.  The British and the Americans were at war once again.
#14 In 1814, the British captured and burned Washington D.C., but the Americans subsequently experienced key victories at New York and at New Orleans.
#15 The Treaty of Ghent, officially ending the war, was ratified by the U.S. Senate on February 16th, 1815 and was ratified by the British on February 18th, 1815.

#16 In 1816, another central bank was created.  The Second Bank of the United States was established and was given a 20 year charter.
#17 Andrew Jackson, who became president in 1828, was determined to end the power of the central bankers over the United States.
#18 In fact, in 1832, Andrew Jackson’s re-election slogan was “JACKSON and NO BANK!”
#19 On July 10th, 1832 President Jackson said the following about the danger of a central bank….

“It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners… is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? … Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence… would be more formidable and dangerous than a military power of the enemy.”

#20 In 1835, President Jackson completely paid off the U.S. national debt.  He is the only U.S. president that has ever been able to accomplish this.
#21 President Jackson vetoed the attempt to renew the charter of the Second Bank of the United States in 1836.
#22 Richard Lawrence attempted to shoot Andrew Jackson, but he survived.  It is alleged that Lawrence said that “wealthy people in Europe” had put him up to it.

#23 The Civil War was another opportunity for the central bankers of Europe to get their hooks into America.  In fact, it is claimed that Abraham Lincoln actually contacted Rothschild banking interests in Europe in an attempt to finance the war effort.  Reportedly, the Rothschilds were demanding very high interest rates and Lincoln balked at paying them.
#24 Instead, Lincoln pushed through the Legal Tender Act of 1862. Under that act, the U.S. government issued $449,338,902 of debt-free money.
#25 This debt-free money was known as “Greenbacks” because of the green ink that was used.
#26 The central bankers of Europe were not pleased.  The following quote appeared in the London Times in 1865….

“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”

#27 Abraham Lincoln was shot dead by John Wilkes Booth on April 14th, 1865.
#28 After the Civil War, all money in the United States was created by bankers buying U.S. government bonds in exchange for bank notes.
#29 James A. Garfield became president in 1881, and he was a staunch opponent of the banking powers.  In 1881 he said the following….

“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

#30 President Garfield was shot about two weeks later by Charles J. Guiteau on July 2nd, 1881.  He died from medical complications on September 19th, 1881.
#31 In 1906, the U.S. stock market was setting all kinds of records.  However, in March 1907 the U.S. stock market absolutely crashed.  It is alleged that elite New York bankers were responsible.
#32 In addition, in 1907 J.P. Morgan circulated rumors that a major New York bank had gone bankrupt.  This caused a massive run on the banks.  In turn, the banks started recalling all of their loans.  The panic of 1907 resulted in a congressional investigation that ended up concluding that a central bank was “necessary” so that these kinds of panics would never happen again.

#33 It took a few years, but the international bankers finally got their central bank in 1913.
#34 Congress voted on the Federal Reserve Act on December 22nd, 1913 between the hours of 1:30 AM and 4:30 AM.
#35 A significant portion of Congress was either sleeping at the time or was already at home with their families celebrating the holidays.
#36 The president that signed the law that created the Federal Reserve, Woodrow Wilson, later sounded like he very much regretted the decision when he wrote the following….

“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men … [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world–no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”

#37 Between 1921 and 1929 the Federal Reserve increased the U.S. money supply by 62 percent.  This was the time known as “The Roaring 20s”.
#38 In addition, highly leveraged “margin loans” became very common during this time period.
#39 In October 1929, the New York bankers started calling in these margin loans on a massive scale.  This created the initial crash that launched the Great Depression.
#40 Rather than expand the money supply in response to this crisis, the Federal Reserve really tightened it up.

#41 In fact, it was reported the the U.S. money supply contracted by eight billion dollars between 1929 and 1933.  That was an extraordinary amount of money in those days.  Over one-third of all U.S. banks went bankrupt.  The New York bankers were able to buy up other banks and all kinds of other assets for pennies on the dollar.
But are American students being taught any of this today?
Of course not.
In fact, it is a rare student that can even adequately explain what a central bank is.
We have lost so much of what is important about our history.

And you know what they say – those who forget history are doomed to repeat it.
It is absolutely critical that we educate as many Americans as possible about what is really going on in our financial system and about why we need to make some truly fundamental changes.

This is an actual full length documentry … be prepared..

http://video.google.com/googleplayer.swf?docid=-515319560256183936&hl=en&fs=true

It’s Not the “Great Recession”. It’s the Great Bank Robbery
by Washington’s Blog From http://globalresearch.ca

In case it’s not crystal clear, this isn’t the “Great Recession”.

It’s really the Great Bank Robbery.

First, there was the threat of martial law if the $700 Billion Tarp bailout wasn’t passed. Specifically, Treasury Secretary Hank Paulson warned Congress that there would be martial law unless the Tarp bailouts were approved.

As I pointed out last October:

The New York Times wrote on July 16th: 

In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.

***
Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed:

http://www.liveleak.com/e/ca2_1234032281

http://www.eyeblast.tv/public/eyeblast.swf?v=e4qG2G6UkU
Bait And Switch

Indeed, the Tarp Inspector General has said that Paulson misrepresented some fundamental aspects of Tarp.

And Paulson himself has said:

During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.

So Paulson knew “by the time the bill was signed” that it wouldn’t be used for its advertised purpose – disposing of toxic assets – and would instead be used to give money directly to the big banks?

And see this and this.

But at least the bailout money was used to help the economy by stabilizing the financial sector, right?

Sorry.

As I wrote in March 2009:

The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

  • A lot of the bailout money is going to the failing companies’ shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”
  • The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)

And as the New York Times notes, “Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners”.

***

In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG’s credit default swaps and is not even really stabilizing AIG.

But at least the government is trying to help the struggling homeowner, right?

Well, PhD economists John Hussman and Dean Baker (and fund manager and financial writer Barry Ritholtz) say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this and this).

But certainly quantitative easing is helping the little guy?

Unfortunately, QE only helps the big banks and giant corporations, and the small number of investors who hold most of the stock. See this, this, this, this and this.

And now, the government has announced that it will maintain tax breaks for the wealthiest while considering slashing social security and medicare.

Warren Buffet famously said a couple of years ago:

There’s class warfare, all right,  but it’s my class, the rich class, that’s making war, and we’re winning.

The proof is in the pudding: a small handful of people have ended up with a lot more loot in their safes, while everyone else has gotten a lot poorer. And, unfortunately, radical concentration of wealth is destroying both capitalism and democracy.

The government has not only failed to enforce any laws to prevent theft, but has been so busy helping the big boys carry their bags of cash that – even with the sheriff’s badges – it is difficult to tell who is who.

 

41 Facts About The History Of Central Banks In The United States That Our Children Are No Longer Taught In School
 

from http://blacklistednews.com  Published on 11-12-2010

 

Source: The American Dream Today, most American students don’t even understand what a central bank is, much less that the battle over central banks is one of the most important themes in U.S. history.  The truth is that our nation was birthed in the midst of a conflict over taxation and the control of our money.  Central banking has played a key role in nearly all of the wars that America has fought.  Presidents that resisted the central bankers were shot, while others shamefully caved in to their demands.  Our current central bank is called the Federal Reserve and it is about as “federal” as Federal Express is.  The truth is that it is a privately-owned financial institution that is designed to ensnare the U.S. government in an endlessly expanding spiral of debt from which there is no escape.  The Federal Reserve caused the Great Depression and the Federal Reserve is at the core of our current economic crisis.  None of these things is taught to students in America’s schools today. In 2010, young Americans are taught a sanitized version of American history that doesn’t even make any sense.  As with so many things, if you want to know what really happened just follow the money. The following are 41 facts about the history of central banks in the United States that every American should know…. #1 As a result of the Seven Years War with France, King George III of England was deeply in debt to the central bankers of England. #2 In an attempt to raise revenue, King George tried to heavily tax the colonies in America. #3 In 1763, Benjamin Franklin was asked by the Bank of England why the colonies were so prosperous, and this was his response….

“That is simple. In the colonies we issue our own money. It is called Colonial Script. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one.”

#4 The Currency Act of 1764 ordered the American Colonists to stop printing their own money.  Colonial script (the money the colonists were using at the time) was to be exchanged at a two-to-one ratio for “notes” from the Bank of England. #5 Later, in his autobiography, Benjamin Franklin explained the impact that this currency change had on the colonies….

“In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the Colonies were filled with unemployed.”

#6 In fact, Benjamin Franklin stated unequivocally in his autobiography that the power to issue currency was the primary reason for the Revolutionary War….

“The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction. The inability of the colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the prime reason for the Revolutionary War.”

#7 Gouverneur Morris, one of the authors of the U.S. Constitution, solemnly warned us in 1787 that we must not allow the bankers to enslave us….

“The rich will strive to establish their dominion and enslave the rest. They always did. They always will… They will have the same effect here as elsewhere, if we do not, by (the power of) government, keep them in their proper spheres.”

#8 Unfortunately, those warning us about the dangers of a central bank did not prevail.  After an aborted attempt to establish a central bank in the 1780s, the First Bank of the United States was established in 1791.  Alexander Hamilton (who had close ties to the Rothschild banking family) cut a deal under which he would support the move of the nation’s capital to Washington D.C. in exchange for southern support for the establishment of a central bank. #9 George Washington signed the bill creating the First Bank of the United States on April 25, 1791.  It was given a 20 year charter. #10 In the first five years of the First Bank of the United States, the U.S. government borrowed 8.2 million dollars and prices rose by 72 percent.     #11 The opponents of central banking were not pleased.  In 1798, Thomas Jefferson said the following….  

“I wish it were possible to obtain a single amendment to our Constitution – taking from the federal government their power of borrowing.”

#12 In 1811, the charter of the First Bank of the United States was not renewed. #13 One year later, the War of 1812 erupted.  The British and the Americans were at war once again. #14 In 1814, the British captured and burned Washington D.C., but the Americans subsequently experienced key victories at New York and at New Orleans. #15 The Treaty of Ghent, officially ending the war, was ratified by the U.S. Senate on February 16th, 1815 and was ratified by the British on February 18th, 1815. #16 In 1816, another central bank was created.  The Second Bank of the United States was established and was given a 20 year charter. #17 Andrew Jackson, who became president in 1828, was determined to end the power of the central bankers over the United States. #18 In fact, in 1832, Andrew Jackson’s re-election slogan was “JACKSON and NO BANK!” #19 On July 10th, 1832 President Jackson said the following about the danger of a central bank….

“It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners… is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? … Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence… would be more formidable and dangerous than a military power of the enemy.”

#20 In 1835, President Jackson completely paid off the U.S. national debt.  He is the only U.S. president that has ever been able to accomplish this. #21 President Jackson vetoed the attempt to renew the charter of the Second Bank of the United States in 1836. #22 Richard Lawrence attempted to shoot Andrew Jackson, but he survived.  It is alleged that Lawrence said that “wealthy people in Europe” had put him up to it. #23 The Civil War was another opportunity for the central bankers of Europe to get their hooks into America.  In fact, it is claimed that Abraham Lincoln actually contacted Rothschild banking interests in Europe in an attempt to finance the war effort.  Reportedly, the Rothschilds were demanding very high interest rates and Lincoln balked at paying them. #24 Instead, Lincoln pushed through the Legal Tender Act of 1862. Under that act, the U.S. government issued $449,338,902 of debt-free money. #25 This debt-free money was known as “Greenbacks” because of the green ink that was used. #26 The central bankers of Europe were not pleased.  The following quote appeared in the London Times in 1865….

“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”

#27 Abraham Lincoln was shot dead by John Wilkes Booth on April 14th, 1865. #28 After the Civil War, all money in the United States was created by bankers buying U.S. government bonds in exchange for bank notes. #29 James A. Garfield became president in 1881, and he was a staunch opponent of the banking powers.  In 1881 he said the following….

“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

#30 President Garfield was shot about two weeks later by Charles J. Guiteau on July 2nd, 1881.  He died from medical complications on September 19th, 1881. #31 In 1906, the U.S. stock market was setting all kinds of records.  However, in March 1907 the U.S. stock market absolutely crashed.  It is alleged that elite New York bankers were responsible. #32 In addition, in 1907 J.P. Morgan circulated rumors that a major New York bank had gone bankrupt.  This caused a massive run on the banks.  In turn, the banks started recalling all of their loans.  The panic of 1907 resulted in a congressional investigation that ended up concluding that a central bank was “necessary” so that these kinds of panics would never happen again. #33 It took a few years, but the international bankers finally got their central bank in 1913. #34 Congress voted on the Federal Reserve Act on December 22nd, 1913 between the hours of 1:30 AM and 4:30 AM. #35 A significant portion of Congress was either sleeping at the time or was already at home with their families celebrating the holidays. #36 The president that signed the law that created the Federal Reserve, Woodrow Wilson, later sounded like he very much regretted the decision when he wrote the following….

“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men … [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world–no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”

#37 Between 1921 and 1929 the Federal Reserve increased the U.S. money supply by 62 percent.  This was the time known as “The Roaring 20s”. #38 In addition, highly leveraged “margin loans” became very common during this time period. #39 In October 1929, the New York bankers started calling in these margin loans on a massive scale.  This created the initial crash that launched the Great Depression. #40 Rather than expand the money supply in response to this crisis, the Federal Reserve really tightened it up. #41 In fact, it was reported the the U.S. money supply contracted by eight billion dollars between 1929 and 1933.  That was an extraordinary amount of money in those days.  Over one-third of all U.S. banks went bankrupt.  The New York bankers were able to buy up other banks and all kinds of other assets for pennies on the dollar. But are American students being taught any of this today? Of course not. In fact, it is a rare student that can even adequately explain what a central bank is. We have lost so much of what is important about our history. And you know what they say – those who forget history are doomed to repeat it. It is absolutely critical that we educate as many Americans as possible about what is really going on in our financial system and about why we need to make some truly fundamental changes.

 
 

Dr. Bernanke Gets a Phone Call

From http://www.lewrockwell.com/ 

Recently by Gary North: Klaatu Obama Nikto

 
   

Zhou Xiaochuan is the Governor of the People’s Bank of China. Imagine that the following phone call were to take place.

Zhou: Hello. Dr. Bernanke?

Bernanke: Yes.

Zhou: I wanted to let you know about the decision that our board has taken, after consulting with the Premier and the Politburo’s Standing Committee. We hope you are sitting down.

Bernanke: I get it. A little Oriental humor.

Zhou: You could say that.

Bernanke: What can I do for you?

Zhou: You can abandon your plan to purchase $600 billion of Treasury bonds.

Bernanke: The Federal Open Market Committee voted ten to 1 for this policy. I cannot change it now.

Zhou: We think it is an unwise policy. It will lower the value of the dollar. Americans will then buy fewer goods from China.

Bernanke: That is not how we see it. We think the policy is required to put Americans back to work. They will buy more goods from China and everywhere else when they are once again working.

Zhou: You will increase the supply of dollars, which will lower the dollar’s price internationally. Imported goods will cost Americans more. An increased supply of dollars will mean a lower price for dollars. It’s supply and demand.

 

Bernanke: That is the old economics. That is the logic of Adam Smith and Milton Friedman and those kooks from Vienna. We are committed to the new economics.

Zhou: Who teaches it? Where?

Bernanke: I taught it for years at Princeton.

Zhou: Where Paul Krugman also teaches?

Bernanke: Yes.

Zhou: We see it differently here. We prefer the older economics.

Bernanke: Adam Smith’s economics?

Zhou: No, even older.

Bernanke: Mercantilism?

Zhou: That is what you call it. We call it the export-driven Asian miracle.

Bernanke: But mercantilist governments wanted to hoard gold. Your nation does not hoard gold. Your bank holds U.S. Treasury debt.

Zhou: That is the purpose of my call.

Bernanke: Gold?

Zhou: No. U.S. Treasury debt.

Bernanke: What about it?

Zhou: There is too much of it.

Bernanke: You sound like Ron Paul.

 

Zhou: Ah, yes. Congressman Paul. I understand that he is likely to be the next chairman of the Monetary Policy Subcommittee. You and he should have some interesting discussions.

Bernanke: I prefer to talk about Treasury debt.

Zhou: We have determined that an increase of $600 billion in your purchases of Treasury debt will lower the rate of interest on the debt.

Bernanke: That is our thought, too.

Zhou: We hold almost $1 trillion in Treasury debt.

Bernanke: You ought to buy more.

Zhou: We will be losing money on our holdings if rates fall.

Bernanke: You ought to buy more.

Zhou: The value of the dollar will fall. That will lower the value of our holdings.

Bernanke: Nevertheless, you ought to buy more.

Zhou: We have decided to own less.

Bernanke: How much less?

Zhou: $600 billion less.

Bernanke:

Zhou: Dr. Bernanke?

Bernanke:

Zhou: Are you still there?

Bernanke: I am still here.

Zhou: We have decided that every time the Federal Reserve purchases its monthly total of $75 billion, we will sell $75 billion.

 

Bernanke: Are you serious?

Zhou: You sound like Nancy Pelosi.

Bernanke: But that would raise interest rates on Treasury debt.

Zhou: That is our conclusion, too. But remember: we own lots of Treasury debt. We could use a better rate of return.

Bernanke: But higher rates might cause a recession in the United States.

Zhou: That is our conclusion, too.

Bernanke: But that will mean fewer imports from China.

Zhou: We think it will mean more bankrupt manufacturing facilities in the United States. Then Americans will come back to our manufacturers.

Bernanke: But this could cause unemployment in China if you are wrong.

Zhou: We are willing to risk that.

Bernanke: That is a big risk on your part.

Zhou: No bigger than the risk on your part by inflating the monetary base by 30%. That could raise prices in the United States.

Bernanke: We don’t think so.

Zhou: Why not?

Bernanke: Because our bankers are so frightened of recession in 2011 that they are not lending. They just turn the money over to the FED.

Zhou: Then you do not expect inflation?

Bernanke: Only a little. Maybe 2% to 3%.

Zhou: You sound like Milton Friedman.

Bernanke: Around here, we say, “Better 2% inflation than 9.6% unemployment.”

 

Zhou: We think it is better for us not to hold onto Treasury debt that cannot be paid off.

Bernanke. Don’t worry. We owe it to ourselves.

Zhou: On the contrary, you owe it to us.

Bernanke: It’s only a figure of speech.

Zhou: We can figure. We are going to be left holding the bag, as you say. All we have is a pile of IOUs.

Bernanke: They’re as good as gold.

Zhou: Since they pay zero interest, we think gold is better.

Bernanke: It’s only a figure of speech.

Zhou: We can figure. Gold is over $1,350 an ounce. The dollar has been falling. We think the older mercantilism was right. We want to own more gold.

Bernanke: You can’t eat gold!

Zhou: We can’t eat T-bonds, either.

Bernanke: But if you sell dollars, their price will fall.

Zhou: Why?

Bernanke: It’s supply and demand.

Zhou: Gotcha!

Bernanke: You speak English very well.

Zhou: You see, I was educated in your country at UCRA.

Bernanke: Really?

Zhou: Not really. But I love those old Richard Loo World War II movies. He made a great Japanese officer.

Bernanke: But if you sell Treasury debt, that could start a fire sale. Central banks all over the world might start selling T-bonds.

Zhou: That is a possibility.

Bernanke: But that would make your holdings worth even less.

Zhou: That is true. So, if Japan starts selling, we will dump all of our holdings in one shot. We might as well get out before the rush.

Bernanke: But that could crash the dollar!

Zhou: That is a possibility.

 

Bernanke: You’re bluffing!

Zhou: That is a possibility.

Bernanke: But this is not the way that central banks operate.

Zhou: How do they operate?

Bernanke: They inflate.

Zhou: Always?

Bernanke: Of course always. That is the only policy tool we have.

Zhou: You could deflate.

Bernanke: Are you serious?

Zhou: You really have Nancy Pelosi down pat.

Bernanke: There is no way we can deflate.

Zhou: What about your exit strategy? That is deflation.

Bernanke: In theory, yes. But we don’t intend to execute it.

Zhou: That is not what you told Congress. You told Congress you have an exit strategy. Several, in fact.

Bernanke: We do have them. We just don’t intend to implement them.

Zhou: Do you think you can fool Congress?

Bernanke: Are you serious? Congress doesn’t know horse apples from apple butter.

Zhou: You mistake Barney Frank for Ron Paul. You will now have to deal with Ron Paul.

Bernanke:

Zhou: Hello.

Bernanke:

Zhou: Are you still there?

Bernanke: Yes, I’m still here.

Zhou: We are not asking you to deflate. We are asking you not to inflate.

Bernanke: But we must inflate.

Zhou: Why?

Bernanke: Because we have 9.6% unemployment.

Zhou: What has that got to do with your decision to inflate?

 

Bernanke: We must lower interest rates.

Zhou: For Treasury bonds.

Bernanke: Yes.

Zhou: What does that have to do with unemployment?

Bernanke: When mid-term rates are lower, businesses will start new projects and hire people.

Zhou: Mid-maturity T-bond interest rates are the lowest ever since what you call the Great Depression and what we call the old normal.

Bernanke: You can never have low enough T-bond rates.

Zhou: But, as Treasury bond investors, we don’t like low rates. We like high rates. We hold lots of T-bonds. If we get very low rates, we might as well own gold.

Bernanke: But you will like all that increased demand for made-in-China goods when all those unemployed Americans go back to work.

Zhou: But rates are lower than they have been in 80 years. You still have 9.6% unemployment.

Bernanke: But if the 10-year T-bond rate goes from 2.6% to 1%, American businessmen will hire millions of workers.

Zhou: Do you have evidence for this in one of those dozen Federal Reserve bank monthly bulletins? Or maybe in the Federal Reserve Bulletin?

Bernanke: Not really. But it’s the thought that counts.

Zhou: I don’t think we are getting anywhere. So, just to remind you. We will sell enough Treasury debt each month to match any net increase in the amount you buy.

Bernanke: Dollar for dollar?

Zhou: Dollar for dollar. But, I’ll tell you what. Buy them from us, and we’ll give you a discount for volume purchases.

Bernanke: You guys never miss a trick, do you?

Zhou: We’re really not inscrutable. We just offer discounts for volume purchases.

Bernanke: I will discuss this with the FOMC.

 Zhou: Do that. Shalom!

Bernanke: That’s my middle name.

Zhou: You Americans have a saying for everything.

Bernanke: No. I mean it. That really is my middle name.

Zhou: If you start buying Treasury debt, you’ll have an honorary middle name over here.

Bernanke: What’s that?

Zhou: Paper Tiger.