Wednesday, January 23, 2013

"We're Going to Kill the Dollar" The Fed’s Plan B



Last week, amid growing rumors of a global currency war, the Fed’s balance sheet broke the $3 trillion-mark for the first time in history. According to blogger Sober Look: “For the first time since this program was launched (QE) it is starting to have a material impact on bank reserves … which spiked last week. 2013 will look quite different from last year. The monetary base will be expanded dramatically as long as the current securities purchases program is in place. ‘Money printing” is in now full swing.’” (“Fed’s balance sheet grows above $3 trillion, finally impacting the monetary base”, Sober Look)



Take a minute and consider the implications of the Fed’s money printing operations in relation to the above quote by market analyst Kyle Bass. Can you see what’s happening?
The Fed is acting exactly as one would expect it to act given it’s stated intention to increase inflation (currency debasement) while intensifying the class war at the same time.
How is the Fed waging class war, you ask?

Fed chairman Bernanke has been a big supporter of deficit reduction, which is code for slashing public spending. The recent “fiscal cliff” settlement raises taxes immediately on working people by ending the payroll tax holiday. As Bloomberg notes: “Everybody took a two percentage-point pay cut.” This is bound to impact consumer spending and confidence which dropped sharply last week. Here’s more from Bloomberg:
“Payroll taxes went up. As part of its budget agreement on Jan. 1, Congress agreed to let the tax, used to pay for Social Security benefits, return to its 2010 level of 6.2 percent from 4.2 percent. That reduces the paycheck by about $83 a month for someone who earns $50,000.” (Bloomberg)
So all the worker bees (you and me) have less money to spend, which means that there’s going to be less activity, higher unemployment and slower growth. This is what all the liberal economists have been warning about for over 3 years, that is, if the government withdraws its fiscal support for the economy by reducing the budget deficits too soon, the economy will slip back into recession.

So what is the Fed doing to counter this slide and to create the illusion that nutcases who preached “austerity is good” were right?

Well, the Fed is buying mortgage-backed securities, right? So the Fed is actually dabbling in fiscal policy, assuming a role that is supposed to be played by the Congress. Now, I realise that the buying of MBS doesn’t precisely fit the definition of fiscal policy because the Fed doesn’t collect taxes and redistribute the revenue. But it sure doesn’t fit the description of monetary policy either, now does it? The Fed is not setting rates to control the flow of credit into the system. No, the Fed is buying stuff; financial assets that provide credit to loan applicants who are purchasing hard assets. That ain’t monetary policy, my friend. It is fiscal policy writ large.

The Fed is currently purchasing $45 bil per month in US Treasuries to push down long-term interest rates in order to help the banks sell more mortgages so they can reduce their stockpile of distressed homes.

And, the Fed is buying $40 billion of MBS per month to help the banks clear their books of left-over MBS and to provide funding for the banks to generate new mortgages.
Also, 95% of all new mortgages are financed through Fannie and Freddie. In other words, the government is providing all the money and taking all the risk, while all the profits go to Wall Street.

Let’s review:
Fannie and Freddie’s policy is designed to help the banks
The Fed’s MBS purchasing program is designed to help the banks.
The Fed’s QE (UST purchases) policy is designed to help the banks.
Do you see a pattern here? It’s all for the banks, which is why Marx was correct when he referred to “political economy” because the economy doesn’t operate according to free market principals. It is organized in a way that best achieves the objectives of the constituency that controls the levers of political power.

Now guess which constituency controls those levels of political power presently?

If you guessed “the Wall Street banks”, give yourself a pat on the back.

So, what effect is this going to have on policy?

Well, to some extent we already know the answer to that question because–as we pointed out earlier–the policy is shaped to benefit the banks. Even so, an analogy may be helpful to better grasp what’s going on.

Let’s say you have $5 million that you want to put into manufacturing. In fact, you have decided you want to open your own factory and produce widgets of one kind or another to sell to the public. Eventually, you whittle your options down to two choices; you will either produce a modern line of electric cars to reduce emissions and pave the way for new technologies or you will make hula hoops. So, what’s it going to be?

Fortunately, for you, the Fed announces a new program that will provide $45 billion per month “indefinitely” to manufacturers who provide low interest loans to people who want to buy hula hoops.

“Yipee”, you say. “I will abandon my plan to save the planet from poisonous greenhouse gases and make my fortune selling hula hoop bonds to the Fed instead.”
Isn’t this what’s happening? None of this has anything to do with lowering unemployment, strengthening the recovery or increasing growth. It’s all just a way of funneling money to powerful constituents. And one thing is certain, that if the Fed creates the demand for a product (like MBS), then someone is going to fill that demand whether it helps the broader economy or not.

But if the Fed can buy mortgage bonds, then why can’t they buy infrastructure bonds? What’s the difference?

The difference is that mortgage bonds boost profits for bankers, whereas infrastructure bonds merely provide jobs for people who need them. In other words, the difference is not between fiscal and monetary, but between the “haves” and the “have nots”, which is the same as saying that the Fed’s policies are based on class interests. And, that brings back to our original comment by Kyle Bass, who wonders how the US can grow its way out of its present predicament (big budget deficits and weak exports) without more “private sector credit demand”?
Great question. But you can see that Fed chairman Bernanke has already tipped his hand. The Fed is going to keep waving that “$45 billion per month” carrot in front of the banks until they rev-up the credit flywheel and create a new regime of toxic mortgages. (The new Consumer Financial Protection Bureau’s rule on “Qualified Mortgage”, which requires neither a down payment nor credit scores, makes this prospect even more likely.) Bernanke is playing the role that the repo market played before the Crash of ’08, that is, the Fed is promising to buy all the complex bonds (MBS) the banks produce off balance sheet to keep money flowing to the banks. It’s just like the free market, except there’s nothing free about it. It’s all fake and Bernanke doesn’t care if you know it.

$45 billion per month isn’t chump change. It’s enough to inflate housing prices, to employ more out-of-work construction workers, to grow the economy, and to save bank balance sheets that are deep in the red. At the same time, the Fed’s ballooning balance sheet will put downward pressure on the dollar which will increase exports while lowering real-inflation adjusted wages. Like the man said, “We’re going to kill the dollar.”
This is the Fed’s plan: Bail out the banks, transfer the banks bad bets onto its own balance sheet, hammer the greenback, slash wages (via inflation), boost exports, and pump as much money as possible into the unproductive, overbuilt black hole we call the US housing market.

Of course, President Obama could avoid all this nonsense and just launch a government-funded jobs program that would snap the economy out of its coma, increase demand, and turbo-charge GDP, but that would be way too easy. And probably bad for profits, too.
January 22, 2013 "Information Clearing House" - “How do you solve a problem when you’re running a 10% fiscal budget deficit? You are not going to get growth without private sector credit demand. The government’s idea right now is that we’re going to export our way out of this, and when I asked a senior member of the Obama administration last week how are we going to grow exports if we will not allow nominal wage deflation? He said, “We’re going to kill the dollar.” Kyle Bass interview.



How to kill the Dollar power and give the 99% back their wealth???
And now what about this new gold coin from mother Russia???
It remains unclear exactly why or how the Gadhafi regime went from “a model” and an “important ally” to the next target for regime change in a period of just a few years. But after claims of “genocide” as the justification for NATO intervention were disputed by experts, several other theories have been floated.
Oil, of course, has been mentioned frequently — Libya is Africa‘s largest oil producer. But one possible reason in particular for Gadhafi’s fall from grace has gained significant traction among analysts and segments of the non-Western media: central banking and the global monetary system.

According to more than a few observers, Gadhafi’s plan to quit selling Libyan oil in U.S. dollars — demanding payment instead in gold-backed “dinars” (a single African currency made from gold) — was the real cause. The regime, sitting on massive amounts of gold, estimated at close to 150 tons, was also pushing other African and Middle Eastern governments to follow suit.

And it literally had the potential to bring down the dollar and the world monetary system by extension, according to analysts. French President Nicolas Sarkozy reportedly went so far as to call Libya a “threat” to the financial security of the world. The “Insiders” were apparently panicking over Gadhafi’s plan.

"Any move such as that would certainly not be welcomed by the power elite today, who are responsible for controlling the world's central banks,” noted financial analyst Anthony Wile, editor of the free market-oriented Daily Bell, in an interview with RT. “So yes, that would certainly be something that would cause his immediate dismissal and the need for other reasons to be brought forward [for] removing him from power."

According to Wile, Gadhafi’s plan would have strengthened the whole continent of Africa in the eyes of economists backing sound money — not to mention investors. But it would have been especially devastating for the U.S. economy, the American dollar, and particularly the elite in charge of the system.

“The central banking Ponzi scheme requires an ever-increasing base of demand and the immediate silencing of those who would threaten its existence,” Wile noted in a piece entitled “Gaddafi Planned Gold Dinar, Now Under Attack” earlier this year. “Perhaps that is what the hurry [was] in removing Gaddafi in particular and those who might have been sympathetic to his monetary idea.”

Investor newsletters and commentaries have been buzzing for months with speculation about the link between Gadhafi’s gold dinar and the NATO-backed overthrow of the Libyan regime. Conservative analysts pounced on the potential relationship, too.

“In 2009 — in his capacity as head of the African Union — Libya's Moammar Gadhafi had proposed that the economically crippled continent adopt the ‘Gold Dinar,’” noted Ilana Mercer in an August opinion piece for WorldNetDaily. “I do not know if Col. Gadhafi continued to agitate for ditching the dollar and adopting the Gold Dinar — or if the Agitator from Chicago got wind of Gadhafi's (uncharacteristic) sanity about things monetary.”

But if Arab and African nations had begun adopting a gold-backed currency, it would have had major repercussions for debt-laden Western governments that would be far more significant than the purported “democratic” uprisings sweeping the region this year. And it would have spelled big trouble for the elite who benefit from “freshly counterfeited funny-money,” Mercer pointed out.

“Had Gadhafi sparked a gold-driven monetary revolution, he would have done well for his own people, and for the world at large,” she concluded. “A Gadhafi-driven gold revolution would have, however, imperiled the positions of central bankers and their political and media power-brokers.”

Adding credence to the theory about why Gadhafi had to be overthrown, as The New American reported in March, was the rebels’ odd decision to create a central bank to replace Gadhafi’s state-owned monetary authority. The decision was broadcast to the world in the early weeks of the conflict.

In a statement describing a March 19 meeting, the rebel council announced, among other things, the creation of a new oil company. And more importantly: “Designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”

The creation of a new central bank, even more so than the new national oil regime, left analysts scratching their heads. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” noted Robert Wenzel in an analysis for the Economic Policy Journal. “This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences,” he added. Wenzel also noted that the uprising looked like a “major oil and money play, with the true disaffected rebels being used as puppets and cover” while the transfer of control over money and oil supplies takes place.

Other analysts, even in the mainstream press, were equally shocked. “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power?” wondered CNBC senior editor John Carney. “It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.”

Similar scenarios involving the global monetary system — based on the U.S. dollar as a global reserve currency, backed by the fact that oil is traded in American money — have also been associated with other targets of the U.S. government. Some analysts even say a pattern is developing.

Iran, for example, is one of the few nations left in the world with a state-owned central bank. And Iraqi despot Saddam Hussein, once armed by the U.S. government to make war on Iran, was threatening to start selling oil in currencies other than the dollar just prior to the Bush administration’s “regime change” mission.
While most of the establishment press in America has been silent on the issue of Gadhafi’s gold dinar scheme, in Russia, China, and the global alternative media, the theory has exploded in popularity. Whether salvaging central banking and the corrupt global monetary system were truly among the reasons for Gadhafi’s overthrow, however, may never be known for certain — at least not publicly.


It doesn't matter who are the Mega Corporations and what they want to invest, their government gives them your taxpayer money (subsidies) to their corporations, especially if they make an inefficient, flawed, dangerous or useless product (depopulation agenda).

Like Mega Corporations of 'green energy' companies (solar, wind, ethanol), insurance companies, pharmaceutical companies, GMO producers, securities corps, conflict related products and services.

Their objective isn’t to control the conflict, it’s to control the debt that the conflict produces. You see, the real value of a conflict – the true value – is in the debt that it creates. You control the debt, you control everything. You find this upsetting, yes?

But this is the very essence of the private banking industry (the opposite to public credit system), to make us all, whether we be nations or individuals, slaves to debt.

How to kill the Dollar power and give the 99% back their wealth??? And now what about this new gold coin from mother Russia??? It remains unclear exactly why or how the Gadhafi regime went from “a model” and an “important ally” to the next target for regime change in a period of just a few years. But after claims of “genocide” as the justification for NATO intervention were disputed by experts, several other theories have been floated. Oil, of course, has been mentioned frequently — Libya is Africa‘s largest oil producer. But one possible reason in particular for Gadhafi’s fall from grace has gained significant traction among analysts and segments of the non-Western media: central banking and the global monetary system.  According to more than a few observers, Gadhafi’s plan to quit selling Libyan oil in U.S. dollars — demanding payment instead in gold-backed “dinars” (a single African currency made from gold) — was the real cause. The regime, sitting on massive amounts of gold, estimated at close to 150 tons, was also pushing other African and Middle Eastern governments to follow suit.  And it literally had the potential to bring down the dollar and the world monetary system by extension, according to analysts. French President Nicolas Sarkozy reportedly went so far as to call Libya a “threat” to the financial security of the world. The “Insiders” were apparently panicking over Gadhafi’s plan.  "Any move such as that would certainly not be welcomed by the power elite today, who are responsible for controlling the world's central banks,” noted financial analyst Anthony Wile, editor of the free market-oriented Daily Bell, in an interview with RT. “So yes, that would certainly be something that would cause his immediate dismissal and the need for other reasons to be brought forward [for] removing him from power."  According to Wile, Gadhafi’s plan would have strengthened the whole continent of Africa in the eyes of economists backing sound money — not to mention investors. But it would have been especially devastating for the U.S. economy, the American dollar, and particularly the elite in charge of the system.  “The central banking Ponzi scheme requires an ever-increasing base of demand and the immediate silencing of those who would threaten its existence,” Wile noted in a piece entitled “Gaddafi Planned Gold Dinar, Now Under Attack” earlier this year. “Perhaps that is what the hurry [was] in removing Gaddafi in particular and those who might have been sympathetic to his monetary idea.”  Investor newsletters and commentaries have been buzzing for months with speculation about the link between Gadhafi’s gold dinar and the NATO-backed overthrow of the Libyan regime. Conservative analysts pounced on the potential relationship, too.  “In 2009 — in his capacity as head of the African Union — Libya's Moammar Gadhafi had proposed that the economically crippled continent adopt the ‘Gold Dinar,’” noted Ilana Mercer in an August opinion piece for WorldNetDaily. “I do not know if Col. Gadhafi continued to agitate for ditching the dollar and adopting the Gold Dinar — or if the Agitator from Chicago got wind of Gadhafi's (uncharacteristic) sanity about things monetary.”     But if Arab and African nations had begun adopting a gold-backed currency, it would have had major repercussions for debt-laden Western governments that would be far more significant than the purported “democratic” uprisings sweeping the region this year. And it would have spelled big trouble for the elite who benefit from “freshly counterfeited funny-money,” Mercer pointed out.   “Had Gadhafi sparked a gold-driven monetary revolution, he would have done well for his own people, and for the world at large,” she concluded. “A Gadhafi-driven gold revolution would have, however, imperiled the positions of central bankers and their political and media power-brokers.”  Adding credence to the theory about why Gadhafi had to be overthrown, as The New American reported in March, was the rebels’ odd decision to create a central bank to replace Gadhafi’s state-owned monetary authority. The decision was broadcast to the world in the early weeks of the conflict.  In a statement describing a March 19 meeting, the rebel council announced, among other things, the creation of a new oil company. And more importantly: “Designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”  The creation of a new central bank, even more so than the new national oil regime, left analysts scratching their heads. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” noted Robert Wenzel in an analysis for the Economic Policy Journal. “This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences,” he added. Wenzel also noted that the uprising looked like a “major oil and money play, with the true disaffected rebels being used as puppets and cover” while the transfer of control over money and oil supplies takes place.  Other analysts, even in the mainstream press, were equally shocked. “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power?” wondered CNBC senior editor John Carney. “It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.”  Similar scenarios involving the global monetary system — based on the U.S. dollar as a global reserve currency, backed by the fact that oil is traded in American money — have also been associated with other targets of the U.S. government. Some analysts even say a pattern is developing.  Iran, for example, is one of the few nations left in the world with a state-owned central bank. And Iraqi despot Saddam Hussein, once armed by the U.S. government to make war on Iran, was threatening to start selling oil in currencies other than the dollar just prior to the Bush administration’s “regime change” mission. While most of the establishment press in America has been silent on the issue of Gadhafi’s gold dinar scheme, in Russia, China, and the global alternative media, the theory has exploded in popularity. Whether salvaging central banking and the corrupt global monetary system were truly among the reasons for Gadhafi’s overthrow, however, may never be known for certain — at least not publicly.