Bank-Implode! » CENTRAL BANKERS

Productivity Bubble = Kahn Job

Tony — Fri, 10 Jul 2009 19:52:02 +0000

The US Federal Reserve, recently outed as the villainous culprit of the Dot Com Bomb and the current credit crisis, is shifting blame for the housing collapse. In a classic move of “Fedicism,” the central bank has hired one of its own to do provide academic cover for their theft. And let me tell you, the result is hilarious!

Former Fed member James Kahn’s paper puts the blame for the housing bubble squarely on the shoulders of the American people. With bubbles popping everywhere, Mr. Khan attempts to con you into believing a productivity bubble caused the housing crisis. Nothing could be further from the truth.

Lax lending standards alone did not bring about the housing bubble, according to a study by the New York Federal Reserve, challenging the widely held view of the origins of the collapse in home prices.

The study released on Thursday argues that swings in labor productivity played a significant role in the rapid growth and subsequent steep drop in house prices.

Consumers thought that because they were working harder starting in the mid-1990s, their paychecks would follow suit, encouraging them to pay high prices for housing, the study found.

Obviously, any scapegoat will do. Yes, American workers were more productive beginning in the mid-1990s, but the bubble was inflated by loose monetary policy at the Fed and lax lending standards. The well-known scam was to frontload the profits, backload the expenses and offload the losses to the next guy.

Lenders are supposed to have lending standards to protect them from making bad loans, but somehow the lenders were forced to make the bad loans to stupid people making more money than they deserved and applying for loans to buy houses they couldn’t afford. Oh, okay. I get it now. Get real.

The optimism continued until 2007, when evidence of a slowdown in productivity helped quash the rosy view and with it the housing boom.

Angelo Mozzilo, I had you wrong all along. Gosh, all this time I thought you were a fraudster.

Understanding the link between productivity — output per hour of work — and house prices could help inform policy decisions, said James Kahn, the study’s author.

“The current housing crisis stemmed in large measure from a change in economic fundamentals and was only exacerbated by credit market conditions,” Kahn, a professor of economics at Yeshiva University wrote in the Federal Reserve Bank of New York’s Current Issues in Economics and Finance journal.

“Indeed, what appear in retrospect to be relatively lax credit conditions in the early part of this decade may have emerged in part because of then-justifiable, although ultimately misplaced, optimism about income growth,” he said.

Better understanding of what was behind the current housing crisis could help policymakers gauge the impact that credit market interventions have on the housing market, Kahn said.

Let me help you understand what’s going on here. The Fed inflated the money supply, which means the guy working productively must work harder because his money now buys him less. The effect on housing prices is as predictable as 2+1 = 3.

Watch this new math: print lots of money + hand it out for free for people to speculate in the real estate market = prices go up and make a bubble that will crash. Holy shit, I just summed up the entire class on monetary policy that happened over the last ten years.

In case you missed the class, here’s a recap: paper money printing press + evil people = you lost your house and your job.

But according to the Kahn job over at the Fed, this is the reality:

The link between productivity and the housing downturn could also offer insight into when house prices will stop falling.

If productivity growth reverts to the higher rates seen between 1996 to 2004 and between 1947 to 1972, the model used by the study suggests that housing prices will bottom out and begin growing again faster than overall inflation.

James, decouple from the fantasy that increased productivity caused the housing bubble. For one, it’s stupid. For two, you’re supposed to be an economist, but you sound like a dumbass.

Also, James, you are putting the cart before the horse. If housing prices bottom, then productivity growth will revert to higher rates. Finally stop lying, it makes you sound stupid.

And even if productivity growth remains slow, the model would imply that housing price declines will ease. But it also suggests that prices could continue to fall modestly on an inflation-adjusted basis, as they did in the 1980s and 1990s, Kahn said.

Dumb Dumb! I just told you productivity growth will remain slow until housing prices bottom. Prices will continue to fall until the government stops trying to prop them up, along with every aling and failing bank with rotten paper riding on the mortgages. Your Fed created so much of its own paper that a potted plant could get a mortgage.

Kahn was a vice president at the New York Fed at the time the article was written.

Meaning that the Fed had to stay in-house to find someone to say with a straight face that too much productivity created the housing bubble. I am not surprised.

In other words, if we all sit on our ass and make productivity go down, the problem should get better.

Give us More More More Stimulus

Tony — Fri, 03 Jul 2009 20:35:25 +0000

The banker billionaires must be bellowing up to the “give us more more more” bar. Seems a little bit of reality in the jobs numbers chopped the “green shoots” theory down to size, and since the first stimulus did not work so well, Congress has decided to do another. Nancy Pelosi, the corporate house whore, is leading the charge for the Democrats.

Today’s disappointing jobs number is certain to trigger a serious push for a second stimulus bill.

The talk was already happening. Earlier this we[e]k, John Judis at The New Republic argued that one was needed. Also this week, Obama responded to a question about a possible second stimulus by saying it was “too soon” to know whether one would be needed, suggesting that it’s certainly on the table. Of course, House Speaker Nancy Pelosi was in favor of a second stimulus before the ink even dried on the first one, so it shouldn’t be much of a stretch to get it through the Congress, especially with the Democrats newly-solidified supermajority in the Senate (welcome Sen. Franken!).

And now we’ve heard it at least 10 times this morning on CNBC. The market is looking for its hit.

And, of course, anything for the market…

This is how it’s supposed to work: we have spent and indebted ourselves to the verge of bankruptcy, so we will borrow once again to buy time to repay more debt than we can repay now. In other words, we’re trying to dig ourselves out of the hole that we dug ourselves into by digging deeper. We’ve been hearing analogies of this type for so long now that you can be sure even the White House understands what’s going on. But this government, which is intent on destroying the United States, just keeps digging us in deeper.

Prediction: We’ll get it by the end of the year.

Observation: We’ve already got it. With a Ponzi scheme like this, it kind of makes you wonder what they had against Madoff.

Question: Last month, when the layoffs came in light, Obama aides Christina Romer and Austan Goolsbee were all over the airwaves, playing up the green shoots stuff. Will they be taking an early 4th of July weekend today?

Update: Oops, we were too cynical; Romer will be on CNBC at 9:35 (sorry!). Looking forward to what she has to say.

Update 2: When asked about the second stimulus, Romer told Rebecca Jarvis: “Well do whatever it takes.”

But honey, of course you would! Just like a good whore should!

The Times

Tony — Wed, 01 Jul 2009 20:15:41 +0000

Long, long ago, doing our best for others meant bringing ourselves into the streets, where the political machine could not touch us. Those days of yore entailed missiles in October, a place called Vietnam, a precarious risk for defenders of the status quo and outright danger for those who challenged it. ML King and JF Kennedy met early demises. Both were shot dead in the summer heat of American discontent, one a challenge to the civil establishment, the other an aggressor against the financial shadow government.

With American Liberty slipping into the abyss and our country dissolving before our very eyes, Lyndon Johnson not only maintained the status quo, the bloody war, the Federal Reserve, the high taxation, and the conscription, but he also managed to exponentially increase the size of the welfare state. Only Bush and Obama have come close to the terror and destruction wrought upon our nation during those times.

Now, in a world struggling to overcome the New World Order, a manufactured credit crisis provides another opportunity for both the principled and practical. At present, 247 men and women of unknown and questionable principle stand with one man of unparalleled integrity, Dr. Ron Paul, to question the fountain of corruption from which stems all American corruption, both political and financial.

Just a decade ago. Dr. Paul introduced legislation similar to HR 1207, the “Audit the Fed” bill, and inspired exactly zero co-sponsors. Now, we have 247 congress critters to show how far we’ve come and disturbing the beast in its process of reaching for empire on its own.

The system retaliates with impunity.

When asked by Rep. John Duncan on Thursday about the fact that a majority of Congress is co-sponsoring Ron Paul’s HR 1207 bill to audit the Federal Reserve, Ben Bernanke responded:

Ben Bernanke: “My concern about the legislation is that if the GAO is auditing not only the operational aspects of the programs and the details of the programs but making judgments about our policy decisions would effectively be a takeover of policy by the Congress and a repudiation of the Federal Reserve would be highly destructive to the stability of the financial system, the dollar and our national economic situation.”

That threat is serious and severe, to deliberately ruin the economy, forcing every man, woman and child in a nation of 300 million to suffer for the sake a smitten few. Ironically it has already been carried out. It would take over $21 today to buy what $1 would get you in 1913, when this, the third US central bank, was born.

The Second Bank of the United States was run by a genius named Nicholas Biddle, who graduated from Princeton as the class valedictorian at age 15. The bank had a twenty year charter, which Jackson refused to renew. It culminated in a failed assignation attempt by a man with ties to Biddle.

Jackson believed that his reelection was a mandate from the people to break the power of what he called “this hydra of corruption,” the Second Bank of the United States. To accomplish this, Jackson decided to withdraw government money from the bank to pay current expenses and to deposit future government revenues in selected state banks. These banks were called pet banks. Jackson appointed Roger B. Taney of Maryland as secretary of the treasury to carry out this policy after his two previous secretaries refused.

Bank President Biddle and his congressional supporters, led by Clay and Webster, were determined to save the bank. Biddle used the bank’s money to buy political favors. In 1834 the Senate passed a resolution of censure against Jackson and refused to confirm Taney’s appointment to the Cabinet. Biddle said, “This worthy President thinks that because he has scalped Indians and imprisoned Judges he is to have his way with the bank. He is mistaken.”

Biddle began to restrict credit and call in loans from state banks. Business leaders pleaded with Jackson to approve the bank and end the crisis. However, Jackson placed the blame for the panic on the doorsteps of Biddle’s bank and advised all callers to “Go to Nicholas Biddle.” Biddle’s reply was: “All the other banks and all the other merchants may break, but the Bank of the United States shall never break.”

In this struggle for power, Biddle was doomed to defeat. Jackson rallied public opinion behind him, and Biddle was pressured into restoring credit and loans. All he had proved was that Jackson was correct in his contention that a private monopolistic bank, independent of government regulation, should not be entrusted with public finances. Jackson won his greatest political victory, and the Second Bank of the United States passed out of existence when its charter expired in 1836.

The Second Bank of the United States was the spawn of the “money from thin air” creature and, though that bank passed out of existence, the creature did not. Since its resurrection at Jekyll Island, it has been consuming us every day.

Don Bernanke

Tony — Thu, 25 Jun 2009 14:53:46 +0000

My favorite movie of all time is The Godfather, but I actually don’t care one bit for the gangster violence. Rather, I love the film for the metaphor it draws. What a strange coincidence that there were five brothers of Rothschild and five families (Mafia) of New York.

The Federal Reserve is a private enterprise owned by the wealthiest families in the world. It seems as though Godfather Ben has been doing some strong-arming of his own as well.

It looks like Peter Boockvar at The Big Picture has the fascination too.
If you have ever seen The Godfather, you will get it instantly.

Someone commented on the post that “life imitates art.” I say that in this case, it is art that imitates life.

Krugman’s Debt Trap

Tony — Tue, 16 Jun 2009 17:46:22 +0000

Keynesian economics was developed to provide academic cover to a theory so blatantly flawed as to render it defenseless under any ordinary attack of sound logic. But surrounded since it’s inception by layers of PhD s and volumes of Fed speak, until recently no one dare see through the emperors new clothes. It is doubtful though that any Keynesian actually believes any of it, anymore than the disciples of Leo Strauss believed in weapons of mass destruction or links to al-Qaeda in Iraq. Yet it was Strauss’s theory the Neo-Conservatives crawled under for intellectual cover, a necessary ingredient to excuse the inexcusable before the commission of a crime and vital to forgive thew unforgivable if it goes awry afterwards. Under his theory Strauss proclaimed religion could be used to endorse

,… “noble lies”: myths used by political leaders seeking to maintain a cohesive society.

Our leaders had always been lying Strauss a notable professor from an elite university provided a thin veil of academic legitimacy for the liars to rely on. The pseudo theory was just a fig leave too small for cover until there was a panic, the panic making the fig leaf was just big enough fit. And making it a Zionist endorsing religion, believing in neither, but using both who’s ideas formed the intellectual basis to push a nation to war for the riches of it’s corporate and political elite.

Although Strauss espoused the utility of religious belief, there is some question about his views on its truth.[17] In some quarters the opinion has been that, whatever his views on the utility of religion, he was personally an atheist.

Political Zionism is problematic for obvious reasons. But I can never forget what it achieved as a moral force in an era of complete dissolution. It helped to stem the tide of “progressive” leveling of venerable, ancestral differences; it fulfilled a conservative function.

In the same vein the bedrock of Keynesian theory is so distorted that upon it can rest only a ruse. The pretense of an academic theory, whose true intent is to anoint a criminal central bank with the academic legitimacy necessary for the sanction to print money from nothing, conferring upon it the unseen power to master us all. How else could a global economy run on a system which rewards the producers of nothing with everything of every value and price or priceless? A Keynesian ideology stealthily infatuated with Fascism, Fascism being defined as the unity of corporate and political power, itself a fig leaf for a mad dictator.

Keynesian economics (also called Keynesianism (pronounced /ˈkeɪnziən/) and Keynesian Theory) is a macroeconomic theory based on the ideas of 20th-century British economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1]

But the central bank is a cartel of private banks so Keynesian really means corporate control of state controlled assets and power i.e. Fascism. And despite the despicable rhetoric to the contrary the reality now shows it is a foregone conclusion that monetary policy actions directed by a central bank and fiscal policy actions by the government are doomed to destabilize the economy as fast paced economic growth slams headlong into a brick wall of debt.

The ability to sustain high rates of economic growth, decreed by governments and central bankers, is questionable. The aggressive increase in debt globally resulted in a sharp increase in sustainable growth rates, wherein $4 to $5 of debt was required to create $1 of growth. Approximately half the recorded growth in the US over recent years was driven by borrowing against the rising value of houses (mortgage equity withdrawals). As the level of debt in the global economy decreases, attainable growth levels also decline.

Meanwhile with the dollar on the event horizon of implosion the central bank mass monetizes it’s fictional notes and prepares another $3.25 Trillion ripoff of the true producers of the nation’s wealth, while driving the nation deeper into it’s debt under the guise of fiscal stimulus.

Federal Reserve boss Ben Bernanke is getting ready to pull another rabbit out of his hat and he’s hoping no one figures out what he’s up to. Here’s the scoop; the Fed chief needs to “borrow up to $3.25 trillion in the fiscal year ending Sept. 30″ (Bloomberg) without triggering a run on the dollar.

Desperate to see you look anywhere other than at the man behind the curtain, just as the Neo-cons employed Strauss the bankers use the Noblest liar of them all to apply a Keynesian smoke screen, and keep the specter of debt behind the curtain, unseen. Paul Krugman sounding like another one of Strauss’s madmen, implores you to Stay the Course, even if it sends you with the dollar off the cliff. And while Krugman advocates for the benefits of inflation as though he doesn’t know what he’s talking about, it’s what he’s not talking about that is the Fed’s real trap.

The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it’s déjà vu all over again — literally.

That’s right it is déjà vu all over again — literally. The predictable yet ominous policy is to blow another bubble to delay the shock wave of the bursting housing bubble, that bubble was itself a buffer from the dot com blow up. Both of them Keynesian magic tricks, pulling rabbits from hats, but smaller and smaller rabbits from smaller and smaller hats.

For this is the third time in history that a major economy has found itself in a liquidity trap, a situation in which interest-rate cuts, the conventional way to perk up the economy, have reached their limit. When this happens, unconventional measures are the only way to fight recession.

When this happens conventional reasoning rather than wisdom shows what we have known for a long time now. Namely that we are insolvent not ill liquid. Forcing banks at gun point to take TARP dollars and forcing at gun point to lend those dollars may bring a short term relief to rates, but insolvency lingers ever after.

Yet such unconventional measures make the conventionally minded uncomfortable, and they keep pushing for a return to normalcy. In previous liquidity-trap episodes, policy makers gave in to these pressures far too soon, plunging the economy back into crisis. And if the critics have their way, we’ll do the same thing this time.

Such unconventional measures should make any right thinking person uncomfortable, begging the question, why aren’t you, Paul?

The first example of policy in a liquidity trap comes from the 1930s. The U.S. economy grew rapidly from 1933 to 1937, helped along by New Deal policies. America, however, remained well short of full employment.

New Deal policies drove America deeper into debt, in debt to the Fed, to get out of debt, the nation borrowed more from the Fed, to be repaid by the income tax. Not a liquidity trap, but a debt trap an inescapable one at that.

Yet policy makers stopped worrying about depression and started worrying about inflation. The Federal Reserve tightened monetary policy, while F.D.R. tried to balance the federal budget. Sure enough, the economy slumped again, and full recovery had to wait for World War II.

Policy makers created the great depression on purpose, first by inflation, then by deflation. And despite your implication that a balanced federal budget caused an economic slump F.D.R. never tried to balance the federal budget. If he had he would have burned the Fed’s dollars and gone to a real gold standard, instead he kept the Fed money and illegally confiscated the gold. Moral hazard aside debt was the result.

The second example is Japan in the 1990s. After slumping early in the decade, Japan experienced a partial recovery, with the economy growing almost 3 percent in 1996. Policy makers responded by shifting their focus to the budget deficit, raising taxes and cutting spending. Japan proceeded to slide back into recession.

Japans currency and economy were devalued so Wall Street could apply it’s carry trade for two decades of arbitrage ripoff of the Japanese economy. But it wasn’t Japan that printed mounds of Yen to bailout it’s failed financiers, Zimbabwe did that, and their inflation is in the millions of percent per day, there is the valid comparison.

And here we go again.

On one side, the inflation worriers are harassing the Fed. The latest example: Arthur Laffer, he of the curve, warns that the Fed’s policies will cause devastating inflation. He recommends, among other things, possibly raising banks’ reserve requirements, which happens to be exactly what the Fed did in 1936 and 1937 — a move that none other than Milton Friedman condemned as helping to strangle economic recovery.

Well it’s more like you just keep on being wrong.

[Of course the rigid ideology responsible for our latest brush with economic disaster is, in fact, Krugman's. Back in 2002, like so many economists he was panicked about a fall in consumer spending. So he favored using inflation to create a housing bubble in the first place. Oops.]

But that never stoped Krugman in service of his masters.

Meanwhile, there are demands from several directions that President Obama’s fiscal stimulus plan be canceled.

Some, especially in Europe, argue that stimulus isn’t needed, because the economy is already turning around.

Others claim that government borrowing is driving up interest rates, and that this will derail recovery.

And Republicans, providing a bit of comic relief, are saying that the stimulus has failed, because the enabling legislation was passed four months ago — wow, four whole months! — yet unemployment is still rising. This suggests an interesting comparison with the economic record of Ronald Reagan, whose 1981 tax cut was followed by no less than 16 months of rising unemployment.

O.K., time for some reality checks.

The reality is that every dollar the bankers at the Fed pull from the darkness is a dollar Joe and Jane taxpayer must repay with real sweat and toil. What could the Fed bankers like more than to drive the United States hopelessly into their debt, by lending not money just the illusion of money. When the money comes from nothing, it’s not liquidity, but debt that results.

First of all, while stock markets have been celebrating the economy’s “green shoots,” the fact is that unemployment is very high and still rising. That is, we’re not even experiencing the kind of growth that led to the big mistakes of 1937 and 1997. It’s way too soon to declare victory.

What about the claim that the Fed is risking inflation? It isn’t. Mr. Laffer seems panicked by a rapid rise in the monetary base, the sum of currency in circulation and the reserves of banks. But a rising monetary base isn’t inflationary when you’re in a liquidity trap

But we aren’t in a liquidity trap,

America’s monetary base doubled between 1929 and 1939; prices fell 19 percent. Japan’s monetary base rose 85 percent between 1997 and 2003; deflation continued apace.

Well then, what about all that government borrowing? All it’s doing is offsetting a plunge in private borrowing — total borrowing is down, not up. Indeed, if the government weren’t running a big deficit right now, the economy would probably be well on its way to a full-fledged depression.

Debt is not the answer! Government borrowing, is government debt paid with interest by the personal income tax. Paul won’t tell so we will, that’s private debt. Indeed, if the government weren’t running a big deficit right now, the economy would never have come close to a depression and if we had rid ourselves and the government of debts burden the economy would certainly be well on its way to a full-fledged recovery, as in 1921, the depression no one remembers. For all his genius the only ideas Krugman can come up with is to go deeper into debt to pay the debt we cannot pay now, doesn’t work with personal finances and doesn’t work with national economy either.

Oh, and investors’ growing confidence that we’ll manage to avoid a full-fledged depression — not the pressure of government borrowing — explains the recent rise in long-term interest rates. These rates, by the way, are still low by historical standards. They’re just not as low as they were at the peak of the panic, earlier this year.

To sum up: A few months ago the U.S. economy was in danger of falling into depression. Aggressive monetary policy and deficit spending have, for the time being, averted that danger. And suddenly critics are demanding that we call the whole thing off, and revert to business as usual.
Those demands should be ignored. It’s much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss.

To tell the truth: Aggressive monetary policy and deficit spending have, blew up the housing bubble. It is precisely that bubble burst which threatens the U.S. economy with depression. The policies Krugman supports are the ones that brought us to the edge of the abyss, and the only ones which can push us over if followed. It is past time we stop doing what got us here in the first place.

Paul Krugman is on a Sherman’s march to crash the economy into a wall of inflation and bury the nation in imaginary debt to the Federal Reserve for eons. The bankers dream the peoples nightmare, a cradle to grave debt trap. The only possible way for this to occur is to fall into Krugmans debt trap.

“…,the same Keynesian clowns who were calling for a housing bubble to bail out the Nasdaq stock crash are now calling for another even bigger stimulus package to bail out the housing bubble that crashed.

Krugman says “It’s much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss.”

The irony is the policies Krugman espouses are exactly what threw us over the edge of the abyss in the first place.

Yes Paul, it is indeed déjà vu all over again – literally. And the sad thing is neither you nor McCulley have learned a damn thing from it either.

Bernanke’s Deficit

Tony — Wed, 03 Jun 2009 20:50:32 +0000

On the face of it, you might be persuaded that Ron Paul had finally sunk some sense into Ben Bernanke, as the Fed’s chief speaker said today that the United States needs to develop a plan to restore fiscal balance. I actually believe Bernanke was sincere when he said “plan to restore fiscal balance,” but I also believe he sincerely wouldn’t want to implement that plan. No cynicism here. It’s just that years of listening to Allan Greenspan have taught me to look for the subtleties, for there lay the lies. Mixing lies with obvious truths, and taking public positions in furtherance of private, unpopular ventures designed to mislead is the nature of the beast. The Fed was born of a lie and so too shall it remain.

So, to hear Bernanke say we must control the deficit, while he has gleefully swelled the it to nearly $2 trillion, is to recognize it’s in perfect keeping with history.

Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

The budget deficit this year is projected to reach $1.85 trillion, equivalent to 13 percent of the nation’s economy, according to the nonpartisan Congressional Budget Office.

“Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation,”Bernanke said in response to a question. “The Federal Reserve will not monetize the debt.”

Does he mean anymore?

Morgan and Rockefeller had at least the luxury of lying publicly, while acting secretly to push their agenda, but while Ben blatantly lies, he is almost simultaneously acting in plain view, demonstrating that he is none less than a despicable lying scoundrel.

Not that you could expect him care, but you do have to wonder how can he get away with it. Of course, there are the legions of congressional leaches, more than eager to genuflect on one knee or both.

House Majority Leader Steny Hoyer told reporters that Bernanke “is absolutely right, we need to be very concerned about incurring additional indebtedness.” The House plans to pass legislation before its July 4 recess to cut spending in one category before increasing it in another, he said. In addition, “we need to address entitlements.”

WOW! You can hear the smack of Hoyers lips to Ben-butt all the way from Capitol Hill, repulsive but not nearly so dangerous as this. Witness:

Wisconsin Representative Paul Ryan, the ranking Republican on the committee, said in opening remarks that the Treasury’s debt issuance and the Fed’s monetary stimulus, including purchases of government bonds, “can be a dangerous policy mix” and risks “runaway inflation” in the longer term.

Ryan said he’s concerned about “substantial” political pressure on the Fed to delay plans to tighten credit should unemployment remain high.

“The Fed’s political independence is critical and essential for safeguarding its commitment to price stability,” Ryan said. “We policy makers should realize that our most challenging policy period is going to be ahead of us.”

Ryan needn’t be concerned about any pressure applied to the Fed as I’m sure he knows too well that the pressure, like feces, flows from the Fed. The Fed is far removed from the political process of the United States anyway. The Fed is secretive and out of control.

According to current federal law, the Fed’s agreements with foreign governments and central banks–and, more important, its open market and monetary policy operations–are exempt from an audit by the General Accounting Office. As the GAO observed in the 1970s, the last time the issue of an audit really came to the fore, “We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets that it has.” The Fed has such broad power to intervene in the economy and to engage in agreements with foreign governments and central banks that it is unconscionable that such actions are exempt from oversight.

And as Ryan frets, the Fed rules our lives.

The Fed’s open market operations are not at all neutral in allocating credit. The Fed creates new balances out of thin air and uses those new balances to purchase Treasury bills from banks. Thus the banking sector is the first to get the use of the new money created in these bank balances. As this new money circulates through the economy, prices rise, and individuals further down the chain experience a higher cost of living before their salaries rise.

The fact that a single entity, the Federal Reserve, engages in and has a monopoly on monetary policy has detrimental effects on the economy. As long as we try to keep up this fiction, that the Federal Reserve has a long-term focus, that attempting to fix interest rates will not distort the economy, and that the Fed can end a recession by injecting liquidity, we will never free ourselves from the booms and busts of the business cycle.

Screw Joe DiMaggio, we want Ron Paul! Outside of him, you have to go all the way to Europe to find a politician who will speak ill of the Ryan’s precious Fed.

In Europe, German Chancellor Angela Merkel said yesterday she views “with great skepticism what authority the Fed has and the leeway the Bank of England has created for itself,” to purchase a range of assets in their efforts to end the crisis. She urged central banks to return to a “policy of reason.”

Asked by a lawmaker about Merkel’s comments, Bernanke said, “I respectfully disagree with her views.”

“I am comfortable with the policy actions that the Federal Reserve has taken,” he said. “We are comfortable that we can exit from those policies at the appropriate time without inflationary consequences.”

Oh, what a relief! Ben is comfortable, thank goodness! I was losing sleep! He wants you to be comfortable too. Comfortable with the public policy actions that the Federal Reserve has taken, in secret. Also that we can exit from those policies at the appropriate time without inflationary consequences. But we wouldn’t know Ben, because your policy meetings are in secret.

Well ok, Ben and Ron wont be knockin back a cold one together anytime soon, but let’s hear what Ron would say if they did.

The necessary first step to restoring economic stability in this country is to audit the Fed, to find out the multitude of sectors in which it has involved itself and, once the audit has been completed, to analyze the results and determine how the Fed should be reined in. Proposals to push the Fed back into the shadows, or to give it an even greater role as a guarantor of systemic stability, are as misguided as they are harmful.

Krugman, Cramer and Hitmen Coming

Tony — Wed, 03 Jun 2009 05:52:39 +0000

No truer testament to the power of creating money out of thin air exists than the way that sanction, single and singular, has taken the classes of the inept and clueless and transformed them into rulers of us all. Presently, on the cusp of economic collapse, the parasitic elite reach yet again to that book and pull from it the latest tool of their choosing. That tool being a 56-year-old Nobel prize-winning economist who single handedly runs the oldest scam in the book.

Despite an army of Ph.D.’s, the only product the Federal Reserve can produce is a low quality counterfeit reproduction of the United States dollar. Coming as it does out of thin air, this product is manufactured and marketed for free, yet the shafters of this universe fail to maintain market value for the only product on the market, so they pull Paul Krugman out of a hat to do a pump and dump for the counterfeit liability known as the dollar. The Fed-Krugman team is so incredible that it makes even Jim “Bear Stearns is not insolvent” Cramer seem sensible.

Unlike Cramer’s ear splitting raucous rant, Krugman runs this con with guile, misleading with the implication drawn from a well honed and highly precise rhetoric. But if you listen to Krugman and hold onto your dollars, then you’ll soon be holding paper worth less than the Bear Stearns stock that Cramer pumped.

Arguing for any one of inflation’s numerous definitions over any other is akin to arguing politics and religion at the same time. Indeed, Krugman avoids the fight by not defining inflation at all, but he stealthily uses, mixes and mismatches three different definitions of it.

Inflation is rising prices in general
Inflation is best described as a net expansion of money supply and credit.
Deflation is logically the opposite of 1, or falling prices in general

Number one can also be described as a general decrease in the purchasing power of money.

You can bet the farm Krugman knows those definitions a lot better than you or I, but he is an establishment stooge and know the general public only cares about prices. To them, inflation means number one. Krugman’s ruse rests on interchanging 1 and 2 in such a way to support the notion that expansion of the money supply does not increase the risk of higher prices, a notion which suits insiders on the various Fed boards while grossly screwing humanity. The notion is immediately disposed of once you stop laughing. In fact the Feds hyper-printing is actually hyper-inflationary, the kind leading to hyper-high prices by anyone’s definition. Just like water building up behind a damn, it is energy with a terrible potential.

Still, waters run deep covering the cesspool of diseased liabilities (not assets like the stooges would like you to believe), while providing silky cover for the Nobel laureate’s ruse. Krugman knows it, but he never breathed a word. The Fed either stops printing, or the damn breaks. A slow trickle overflow is possible, but history shows that most most currencies collapse overnight, washing away their economies in a flash flood of inflation. Anything is conceivable, but a technical analysis of the most recent US Dollar index chart shows what is credible, between them insolvency lingers. Krugman knows it! He knows history and charts too. What else does Krugman know and why is he so wrong? You can only guess at it, but you can be sure that he is desperate to divorce, in your mind, the increasing supply of money from the resultant higher prices it produces, making you ripe for Krugman to twist terms and torture logic so that up is down and true is false and hyperflation is deflation.

Did Cramer know that Bear Stearns was solvent when he tried to keep you in? Did he know that it did not matter, and what was to happen? Again no way to know for sure, but you do know what happened. Bear Stearns was gutted, sacrificed for the greed of insiders, at the expense of shareholders.

As the shares hovered at 74 the trigger was pulled and the ensuing brutal fall wouldn’t end until 2.84. On March, 14 it opened at 54.24 the following day it closed at 4.81, most of the crushing 50 point decline on a single stick and gap leaving no way to run. Share holders, some of them life long employees with shares loaded into retirement funds were wiped out. With all eyes on the Street for bears no one suspected the sharks in Stearns own board room.

Wiped out overnight! What it must have felt like! Yet whatever damage was done to Bear Stearn’s investors, Krugman’s “printing is not inflationary” decoy will be much worse.

First, as the world’s reserve currency, the dollar, is ubiquitous, so then is the risk. Moreover where the fiscal health of Bear Stearns was debatable at the worst, the status of the dollar is not. Technically, the Fed’s Reserve notes are already in purgatory on their way to hell, as the chart above shows. Desperate to save the banks and seeing no other way, the Fed has inflated the dollar to near death, making the dollar fundamentally virulent as well. The printing press is the machine that sooner or later will, break the damn and, as the stubbornly steepening yield curve shows, the damn is nearly full. Finally what the Fed relies on most to save it will betray it at the very second when it’s needed most. Whether or not China makes good on its threat to use a new currency, just as it was with Bear Stearns, the rumor is out. If a run on the dollar starts, all those “reserve” dollars out of the country will come crashing back on itself, causing hyper-flation, overnight with no warning.

The tiger, as they say, is held by the tail. To avoid defaulting on Treasury bonds, the Fed must keep printing, but to avoid hyperinflation, it must stop printing, leaving who knows who to buy the bonds. It’s an impossible choice, but one the Fed has made. Obviously, they will print. So, last week, with the risks palpable and pervasive, just as Cramer had done before, in service of his masters, Paul Krugman went to work.

Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike.

But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later.

And I suspect that the scare is at least partly about politics rather than economics.

And I suspect that the inflation you are talking about is higher prices, inflation number 1, while ignoring that the Fed is force feeding its notes to the economy, i.e. inflation number 2, printing mountains of money at a time.

First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

Suspicion confirmed! We don’t need a hint of inflationary pressures in the economy right now. There is indisputable proof of it and Krugman gives that proof to you.

Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves.

More specifically, THAT IS INFLATION, like water rising.

And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

And in anytime this IS highly inflationary by definition. Moreover, mortgage rates are skyrocketing as the FED prints, making the dam more deadly.

But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

Really? He’s talking inflation number 2, saying the money is just clogging the pipes. For how long? Krugman wants you to think it will be forever, but you know it won’t be. The only profits the big banks had in the first quarter came on trading gains, big ones, with capital printed by the Fed. The banks WILL spend or invest the cash, but even if they hoard every cent, it’s still on the books, available to bid for assets, employees, ect. If they buy gold and silver it’s double disastrous for us, they get more of the true wealth, thus removing it from circulation, and we get more of the shaft. More money chasing the same number of things means rising prices. Paul wont tell you, so I did.

All in all, much of the current inflation discussion calls to mind what happened during the early years of the Great Depression when many influential people were warning about inflation even as prices plunged. As the British economist Ralph Hawtrey wrote, “Fantastic fears of inflation were expressed. That was to cry, Fire, Fire in Noah’s Flood.” And he went on, “It is after depression and unemployment have subsided that inflation becomes dangerous.”

Is there a risk that we’ll have inflation after the economy recovers? That’s the claim of those who look at projections that federal debt may rise to more than 100 percent of G.D.P. and say that America will eventually have to inflate away that debt — that is, drive up prices so that the real value of the debt is reduced.

All in all what happened during the early years of the Great Depression happened under a sound money policy. The paper we use for money today was already inflated from the time of that depression until the credit bubble burst in July 2007, since then the printing press has gone hyper-active. We have already seen food riots in industrialized countries with economies similar to ours, i.e. without sound money.

Such things have happened in the past. For example, France ultimately inflated away much of the debt it incurred while fighting World War I.

But more modern examples are lacking. Over the past two decades, Belgium, Canada and, of course, Japan have all gone through episodes when debt exceeded 100 percent of G.D.P. And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems.

So is there any reason to think that inflation is coming? Some economists have argued for moderate inflation as a deliberate policy, as a way to encourage lending and reduce private debt burdens. I’m sympathetic to these arguments and made a similar case for Japan in the 1990s. But the case for inflation never made headway with Japanese policy makers then, and there’s no sign it’s getting traction with U.S. policy makers now.

Japan’s currency and economy were devalued so Wall Street could apply its carry trade for two decades of arbitrage rip-off of the Japanese economy. Japan didn’t print mounds of Yen to bail out its failed financiers; Zimbabwe did that, and their inflation is in the millions of percent per day. There is the valid comparison.

Furthermore:

Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed. Those are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark.

But Krugman isn’t listing to facts, and he doesn’t want you to either.

All of this raises the question: If inflation isn’t a real risk, why all the claims that it is?

Because inflation is not a risk it’s a reality you dope! Skyrocketing prices is the real risk that inflation brings. Krugman says the Fed can print all day, don’t worry keep your dollars, Bear Stearns is fine!

Well, as you may have noticed, economists sometimes disagree. And big disagreements are especially likely in weird times like the present, when many of the normal rules no longer apply.

That’s from another page in the playbook under heading “I’m preaching idiocy here, but it’s my job, and it’s the only way I can sell it.”

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

Exactly diametrically wrong on every count! The obvious and inescapable fact is that asymptotic spending increases to rescue the billionaire bankers created the astronomical deficits referred to. They must be abandoned, because not abandoning them will draw the entire economy into the inflationary black hole Stooge Krugman so blatantly denies, obviously for the sake of his billionaire handlers. The only path to ruin is the only path you can suggest, that’s a page from the book too.

Needless to say, the president should not let himself be bullied. The economy is still in deep trouble and needs continuing help.Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. But when it comes to inflation, the only thing we have to fear is inflation fear itself.

The one thing you can be most sure of is that Krugman doesn’t give a damn about the economy. He only cares about the billionaires’ economy. Otherwise he would do his Nobel mightiest to cajole, entice, bully or bludgeon the president into abandoning the only policy that can financially ruin the country. Instead, he tries to con you into going along with the bailout that will send you with your family to the food lines. If we don’t kill the inflation right now, there will be no need of a long-run solution. Ask Zimbabwe. When it comes to the only thing we have to fear, it IS inflation itself, but we need only fear it if we follow Paul’s advice.

Printing money from nothing comes straight from the Keynesian’s, who believe you can get something for nothing and now Krugman is using it as a fig leaf of academic cover. The problem is that the fig tree is in the economic woods, where most people with a life live it better elsewhere. So, the fig leaf is just big enough to cover what is not there.

The point is there’s no way to financially engineer our way out of this crisis.

Economists love the idea that the Fed is all powerful, that it has some magic wand to wave which can rescue Americans from debt deflation. I suspect this is because, deep down, they harbor ambitions to be Fed Chairman themselves. For most economists, the Fed’s printing press is the ultimate toy….one they’ve always wanted to play with.

And it is a powerful one. Most recessions are easily “solved” because the Fed can always use that printing press to inflate a credit bubble, to inflate demand artificially.

This works great until it doesn’t. Eventually the credit bubble becomes so big it’s simply impossible to sustain with more printing.

It only works until it’s too late, and it’s getting late. Remember, Krugman is deliberately misusing the terms “inflation” and “deflation,” to confuse lower prices with a lack of inflationary pressure. Don’t you be confused, especially for food and commodities.

Where there clearly is evidence of falling food prices is in international commodity markets. That does to some extent feed into consumer prices, but there are plenty of other factors too.

These prices are still pretty high by some standards
In that area, there is a very clear decline, which shows up in an index produced by the United Nations’ Food and Agriculture Organisation (the FAO). It’s based on international prices for meat, dairy, cereals, sugar and oils and fats.
The most recent figure, for April, is slightly up from the previous two months, but is lower by a third from the high it reached in June last year. The decline is particularly striking for dairy foods, which are down by more than half.
In the World Service survey, those declines were reflected to some degree in the shops in Brussels and Washington.

How much you pay depends on where you live
It is likely that in the other countries, consumer prices would have increased even more, had there not been these declines in commodity markets.

Did you catch what Aaron Krowne (in email) caught in that?

Not only are food prices up, but they only seem to be down significantly in advanced countries that are highly influenced by futures exchanges (which we know are corrupt and excessively influenced by credit). This divergence will eventually be resolved one way or another — and I think it will be with higher prices in developed countries.

Oil prices, back over 60… metals and other commodities have recovered a lot, etc.

Besides which, the naive investing world is now getting to the point where they realize the Dollar/US Treasuries are a roach motel, and from there the only place to flee to is precious metals and hard assets.

That’s the place the elites don’t want you, but you better get there while you can. Krugman is playing for time, but time is running out on us all, faster than any of us knows. Krugman knows it, but won’t breath a word. Why not? With that most precious commodity bleeding into the nothingness from which money springs, Krugman wants you in a box, playing by the rules that his insiders made for themselves to break. One man’s insider is another man’s scoundrel, and as those outside, insiders take aim at resolving Krowne’s divergence. ”One way or another” better not be where Krugman wants you to be – in the firing line. It will be much worse than buying Bear Stearns from Jim Cramer.

The HITMEN have been hired, with highly lucrative contracts and wide berth in methods to be put to use. Their assigned task is to castrate the levered family jewels from some of the major players who illegally keep the gold price and silver price artificially low. The targeted victims know their awaited fate, and are presently defecating in their skivvies. A short list of banks facing the firing squad is already known, details for Hat Trick Letter members. Some detailed speculation will be devoted to the June HTL reports, since too controversial. This will be an evolving story, with new chapters soon written. The executions will be sudden. The missing US-UK levers will be immediate. Since last autumn, the global powers have aligned against Wall Street, even if the central bankers have supported it. If one wants to destroy a building, then weaken its pillars, cut a few support beams, then rush in a crowd of people, and wait for a turbulent storm. In the case of the COMEX, the wicked players will crowd the corrupted building. They will sink into ruin and then oblivion. They might become objects of mockery when they make noises from prison. If lucky, they will join Ken Lay from Enron fame in a remote Caribbean island where other favored operators live a secluded life, but a life nonetheless, complete with plenty of sunshine, fresh air, beaches, bikinis, and sailboats, but no intrusive cameras. Please, do not disturb the quasi-dead!

Unbelievable? Was Bear Stearns?

Unbelievable? The elites used Krugman and Cramer to make you believe it’s unbelievable.

Believe this, right now as you are reading this, the elites, along with Krugman and Cramer, got their’s and hit men are on the way.

Krugman’s Nobel Sell Out

Tony — Tue, 26 May 2009 22:43:34 +0000

The Federal Reserve is a cartel of private banks created in 1913, principally by JP Morgan and John D. Rockefeller. History says the bankers were no more popular in 1913 than they are today, so any bill putting a private bank in charge of the people’s money was dead on arrival. To counteract the popular sentiment toward them, Morgan and Rockefeller lied and publicly opposed Federal Reserve Act of 1913 as they were funding it and privately working behind the scenes push it through. The game plan has not changed since, and now along comes along Paul Krugman, who, since winning the Nobel Prize, can’t seem to say anything that even I know isn’t true.

The global economy’s “free fall” may have ended, which could in turn hurt the U.S. dollar, Nobel Prize-winning economist Paul Krugman said.

Well Krugman isn’t lying there. He is just kidding you.

The world economy is projected to shrink 1.3 percent this year, the International Monetary Fund said in April, reversing a previous forecast of 0.5 percent growth. Still, confidence in the global economy has jumped to the highest level in 19 months, based on a Bloomberg survey last week.

Interest-rate cuts by the U.S. Federal Reserve, moves by the Fed to buy assets such as mortgage-backed securities, and government stimulus spending have eased the crisis, Krugman told a seminar today in Ho Chi Minh City, Vietnam. The American economy may expand “slightly” in the second half, he said, citing a slowdown in the pace at which jobs are being lost.

That’s a bald faced lie. Those moves by the Fed created the crisis. Interest rate cuts were steroids which caused kidney failure to the economy, and more steroids won’t help. The lie is so bad that to tell it Pauly had to stoop down to the bologna that the Bureau of Labor calls statistics. Still Krugman ignores the obvious. Witness:

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

Indicators

“Just about all of the economic indicators out there are suggesting that the free-fall has come to an end, that weve stabilized,” said Krugman, an economics professor at Princeton University in New Jersey. “Probably the worst in terms of shocks to the system is over.”

Singapore’s economy shrank less than initially estimated in the first quarter, signaling the nation may be past the worst of its deepest recession since 1965. The Bank of Japan may tomorrow raise its assessment of the economy for the first time since July 2006, said economists including Yasunari Ueno from Mizuho Securities Co. in Tokyo.

More lies! The free fall hasn’t ended on a mark-to-Mickey Mouse stock rally. “Probably the worst in terms of shocks to the system is” yet to occur, and all the management of lowered expectations can’t keep it away.

Measures of stress in financial markets have eased, Krugman told today’s seminar.

Which measures? The same ones used to test the banks?

“The acute stress that we had last fall after the failure of Lehman has been reduced,” he said. “Interest-rate spreads on commercial paper are way down, interest-rate spreads on corporate debt are down a little bit. The spread on interbank lending is down.”

Interest rates are way down. PERIOD, you dope!

The London interbank offered rate, or Libor, for three- month dollar loans fell 3 basis points yesterday to 0.75 percent, the British Bankers’ Association said, the 35th straight drop. The Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 55 basis points, the least since February 2008. It was as high as 364 basis points in October.

But hiding in the LIBOR is the story that ‘Exceptionally Wide’ Bank Spreads tells, namely that the banks are still hoarding the bailout cash.

The drop in the London interbank offered rate, the benchmark for $360 trillion of financial products, to a record low masks a growing gap between the rates that the biggest banks charge each other for credit.

The difference between the highest and lowest interest rates banks say they pay for three-month dollar-denominated loans is near the widest this year, according to data compiled by the British Bankers’ Association. The spread signals that lenders still lack confidence in each other, even though measures ranging from the so-called Libor-OIS spread to corporate bond sales show credit markets have recovered from the freeze caused by the Sept. 15 collapse of Lehman Brothers Holdings Inc.

“It’s premature to judge that the credit meltdown is fully over,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s largest bank. “Banks remain wary of extending credit to each other due to strenuous concerns about counterparty risk.”

But Krugman just can’t quit.

Global purchasing managers’ indices have improved, as have industrial production figures in the U.S. and freight-loading figures at major ports, Krugman said.

“All of the indicators are telling the same story,” he said. “Things are getting worse, but they’re getting worse more slowly.”

Oh I get it. Crisis over. Get this Paul.

Following a trend that began in late 2007 and prevailed throughout 2008, US home prices continued to fall at a record pace over the first quarter of this year, dampening hopes the housing slump is nearing an end.

The S&P/Case-Shiller US National Home Price Index recorded a 19.1% decline in Q109 compared to Q108, marking the largest decline in the series’ 21-year history.

“We see no evidence that a recovery in home prices has begun,” said David Blitzer, chairman of the index committee for Standard & Poor’s

Pauly won’t say, but I will. There will be no stock market recovery, no milk maid’s recovery, no recovery of any kind, not even your kid from a cold, until the housing market recovers, stabilizing the defaulting of mortgage bonds. And just for your information Pauly, the housing market wont recover until we get lower house prices, not lower interest rates. Got it yet, Pauly? Then get it here.

Mark Gongloff touches upon some truisms in today’s Ahead of the Tape column in the WSJ. Most significantly, he quotes Rosie on the Shadow Inventory, which when you include REOs and spec investors waiting to put their involuntary rentals back on the market, sends total inventory back over 12 months supply.
:
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As to halting the fall of prices, I believe that’s backwards — we want prices to normalize, so that more people can afford homes. Until that happens, Housing cannot begin to recover.

Bounce or Stay?

While the first year of the current global economic crisis resembles the first year of the Great Depression, further declines along the lines of the 1930s-era financial collapse are unlikely, Krugman said.

There is no comparison. In the Great Depression at least we had sound money, thus no hyperflation, and support from which the economy could bounce.

“I don’t think we’ve hit bottom, but the bottom is not too much further below us,” he said.

He is 1/2 right.

“My big concern is that we don’t hit the bottom and bounce, we hit the bottom and stay there.

It is no concern at all. Aas soon as the marked-to-make-believe stock market rally fades, we will not bounce because we have not bottomed, so we will break.

“It’s not obvious where recovery comes from.”

It’s obvious there will be no recovery until we let the banks fail and houses bottom.

A global economic stabilization may hurt the U.S. dollar, as will external American deficits, Krugman said.

“The U.S. dollar is going to fall quite a lot, or at least significantly,” he said. “The demand for dollars has been temporarily inflated by the crisis. Good news is actually bad news for the dollar. If things stabilize, then the safe-haven demand for dollars falls off.”

The main thing that’s been inflated is the dollar itself. “A global economic stabilization” wont hurt the U.S. dollar a bit, but the afore mentioned interest-rate cuts and printing of dollars by the trillions will throw it off the cliff.

China’s government in March suggested the creation of a new international reserve currency to replace the dollar.

“I view the Chinese agitation about a new currency as basically an attempt to have somebody rescue them from their own investment decision,” Krugman said. “China bought too many dollars. Now it’s looking at it and saying, ‘we’re going to lose a lot of money on this investment’.”

The Chinese view is that the FED screwed them with a printing press to rescue the bankers from their own investment decisions, which is the same view shared by Americans who’s purchasing power is screwed. I view your criticism of the “Chinese agitation about a new currency as basically an attempt to” keep your fat cat pals at the FED in the money monopoly captian’s seat.

Any currency, including a single world currency, can be debased. But more importantly, if too many dollars are being pumped out, people can start holding other currencies such as the Euro. If businesses and people don’t trust the government issuing a particular currency, they can write contracts in whatever they want. With a single world currency, there is nowhere else to go. As a general rule, competition is good – and money is no exception.

Even more competition in currency would be beneficial. During the double-digit inflation of the late 1970s, American Express tried unsuccessfully to be allowed to pay interest on its Travelers Cheques. The Federal Reserve blocked the move because it feared that people would want to hold Travelers Cheques instead of dollars. As usual, government monopolies fear competition.

The FED is a private monopoly in control of the governments money, but don’t expect them to send you a brochure telling you all about it. They prefer everybody remain in the dark.

The Chinese want a currency out of Anglo, England, i.e. FED control. I view you criticism of the “Chinese agitation about a new currency as basically a criticism of competition to your pals at the FED.

So, just why did you sell out Pauly? Was it for the Nobel reason or was the Nobel just payout for the sell out?

CZAR

Tony — Sat, 09 May 2009 17:18:07 +0000

Anyone who doesn’t believe that the The Federal Reserve is moving for one world dictatorship had better open at least one blind eye to see the obvious. Some know that The FED is a private bank, but it’s more accurate to say it’s cartel of banks. The owners are themselves banks and the wealthy families that own those banks, who by the way don’t care about you. We don’t know the exact owners because like everything else about the FED it’s a secret. Now the FED offers up a solution by making itself bank dictator and by extension dictator to us all.

The Federal Reserve could become the supercop for “too big to fail” companies capable of causing another financial meltdown under a proposal being seriously considered by the White House.

The Obama administration told industry officials on Friday that it was leaning toward making such a recommendation, according to officials who attended a private one-hour meeting between President Barack Obama’s economic advisers and representatives from about a dozen banks, hedge funds and other financial groups.

How nice and right in keeping with its usual MO, the FED’s man in Treasury leads the charge in the White House to make the FED regulator to all banks.

Treasury Secretary Timothy Geithner and other officials made it clear they were not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators. Geithner told the group that one organization needs to be held responsible for monitoring systemwide risk.”

Committees don’t make decisions,” said Geithner, according to one participant.

No, Tim, dictators do. Committees and democracies are messy, but Tim terrific cracking voice now has the balls to put the banks in charge of regulating the banks. You have to wonder what they have against Stephen Friedman, unless the mess there became unsightly for polite folks who put the strangle hold on your money.

The chairman of the Federal Reserve Bank of New York resigned Thursday, days after coming under attack for his continuing involvement in a company regulated by the institution.

Stephen Friedman received a waiver to remain on the board of Goldman Sachs (GS, Fortune 500), the Wall Street firm that became a bank holding company amid September’s financial frenzy, according to a report in the Wall Street Journal on Monday. He also holds a substantial amount of shares in the company and continued to buy more even after Goldman came under the Fed’s supervision.

But the FED is involved with the banks it proposes to regulate. In fact it’s owned by them. So here comes the MO again: instead of being content with Friedman taking a walk, it proposes to make itself czar.

“Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper,” Friedman wrote in his resignation letter. “The Federal Reserve System has important work to do and does not need this distraction.”

Distracted, but undeterred Stephen. The MO continues. The FED put all the FEDsters in charge of all the banks and all is well for the well off.

Stress Release

Tony — Fri, 08 May 2009 06:33:40 +0000

Another piece of Obama’s economic stimulus was put into play today as the FED released the results of its so-called stress test of the 19 largest banks. The purpose of the test is to verify the financial worthiness of the banks, and estimate their ability to with stand high-stress economic conditions. Given that these banks have received billions of dollars without which they would now be bankrupt and word has it they still need an additional $75 billion among them, one can confidently say their financial worthiness has been verified. They’re insolvent.

The Federal Reserve just released the results of its stress tests. You can see the Fed’s 38-page document discussing those results here, and our list of the 19 institutions is here, along with the capital buffer that regulators say each bank needs to raise over the next six months.

The total buffer required is $74.6 billion, the document says. That’s what regulators say the banks need to survive the dire economic scenario envisioned under the tests. The document also lays out what losses the banks might suffer under such a scenario.

But in the most dire economic scenario envisioned, the FED said let them eat cake.

The results cannot and will not provide “considerable comfort” because the stress test parameters were a cakewalk. In the so called “adverse scenario” the Fed concluded unemployment would peak at 10.3% at the end of 2010 and GDP would fall 3.3% this year. I think we see the unemployment rate at 9.8% by August and 11% by the end of 2009. The adverse scenario is my baseline scenario. The results are skewed from the start as the baseline scenario is pure fantasy.

So how do the banks come up with the next $75 billion?

As we’ve mentioned before, the banks have a number of options for raising the money. In a press conference earlier today, Treasury Secretary Tim Geithner said that his sense was that the banks are “reasonably confident” that they could raise the money privately. If they can’t raise it privately, they could convert preferred shares (which operate like bonds) that the government already holds to common stock.

Reasonably confident means that you can be absolutely certain that you will be on the hook for what is sure to be a lot more than $75 billion.

Well capitalized or not, banks want to pay back TARP funds to escape conditions the Fed attached to the money. CEOs are all itching to give themselves big raises.

The greedy bankstas are itchin at the trigger finger to give back the TARP money so they can pay them selves off with a really big PPIP payday.

If they want to pay back the TARP let them, make them, pay it back to the last red cent. Let the failing banks fail to keep the country from falling into a great depression and stop bleeding the US taxpayer for generations.