25 Fast Facts About The Federal Reserve: “Biggest Ponzi Scheme in World History”
Please Share With Everyone You Know
Since 1935, the following seal appears on the reverse side of every $1 dollar Federal Reserve Note:
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Annuit Coeptis is Latin for “Providence Favors our Undertakings” and Novus Ordo Seclorum is Latin for “New Order of the Ages”
As we approach the 100 year anniversary of the creation of the Federal Reserve, it is absolutely imperative that we get the American people to understand that the Fed is at the very heart of our economic problems. It is a system of money that was created by the bankers and that operates for the benefit of the bankers. The American people like to think that we have a “democratic system”, but there is nothing “democratic” about the Federal Reserve. Unelected, unaccountable central planners from a private central bank run our financial system and manage our economy.
There is a reason why financial markets respond with a yawn when Barack Obama says something about the economy, but they swing wildly whenever Federal Reserve Chairman Ben Bernanke opens his mouth. The Federal Reserve has far more power over the U.S. economy than anyone else does by a huge margin. The Fed is the biggest Ponzi scheme in the history of the world, and if the American people truly understood how it really works, they would be screaming for it to be abolished immediately. The following are 25 fast facts about the Federal Reserve that everyone should know…
#1 The greatest period of economic growth in U.S. history was when there was no central bank.
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help “administer” those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.
#18 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to “regulate” the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So exactly why is the Federal Reserve doing it?
#25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
THE TRUTH ABOUT THE FEDERAL RESERVE BANK
The Federal Reserve Bank is NOT actually a lending operation. IT IS A FIAT PRINTING PRESS. It is an illegal monopoly on the power to counterfeit fiat paper, as U.S. “dollars”. That’s right, I said COUNTERFEIT. It is an unconstitutional, and thereforeillegal, monopoly on the power to counterfeit “money” into existence, in its own hands of course. A power that has of course, been unconstitutionally granted to the bank’s owners by the morons (and traitors) in Congress. The reason why this is all true is because the bank DOES NOT POSSESS THE MONEY THAT IT LENDS, BUT SIMPLY COUNTERFEITS IT OUT OF THIN AIR. Tell me, how do you lend to others, that which you do not actually possess yourself to lend? Can you lend money that you do not possess to someone who asks for a loan, or for help? HOW DOES THE FEDERAL RESERVE BANK DO IT? (By illegal monopoly?) You don’t really think they actually have ten trillion dollars to lend to the U.S. government, do you? So how is it possible? ONLY BY FRAUD AND THEFT.
Also, the Federal Reserve Bank is NOT EVEN actually part of the Federal government. It is no more Federal than Federal Express, or Federated Department Stores. It is a private corporation with a legislated monopoly on currency and credit that is allowed to BUY its paper currency for nothing more than the cost of the paper, ink, and labor, from the Bureau of Printing & Engraving (U.S. Treasury). Originally this added up to about 2.3 cents per note, or $230 of cost to buy one million dollars (10,000 100 dollar bills). Today the cost is apparently still about the same.
Because of the existence of the Federal Reserve bank and fractional reserve banking system, America is now without any permanent money supply AT ALL, and all of the paper (notes) that we now have and use as money (in place of real money) have been borrowed into existence from this monopoly. Unfortunately, the “money” to pay the interest on this borrowing has never been created within the system. So the national debts under this system are now inextinguishable.
Also, just as the income tax is the 2nd plank,the Federal Reserve bank is the Fifth plank of the Communist Manifesto.
The Federal Reserve bank has never paid a dime in income tax and has never been audited, and a percentage of this private bank is owned (or controlled) by foreigners (or their corporate shells)!!
Can you buy your money for $230 per million ?
Whatever happened to equal opportunity ? Why are only the Federal Reserve Bankers allowed to buy money? Does this monopoly make them rich?
"The Federal Reserve Banks are privately owned, locally controlled corporations"
[Lewis vs. U.S., 680 F.2d 1239, 1241](1982)
[Lewis vs. U.S., 680 F.2d 1239, 1241](1982)
"As we have advised, the Federal Reserve is currently paying the Bureau approximately $23 for each 1,000 notes printed. This does include the cost of printing, paper, ink, labor, etc. Therefore, 10,000 notes of any denomination, including the $100 note would cost the Federal Reserve $230. In addition, the Federal Reserve must secure a pledge of collateral equal to the face value of the notes."
- William H. Ferkler (Manager Public Affairs, Dept. of Treasury, Bureau of Engraving & Printing, Wash. D.C.
"It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- Henry Ford, Founder of the Ford Motor Co.
"I believe that banking institutions are more dangerous to our liberties than standing armies... if the American people ever allow private banks to control the issue of currency...the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent that their fathers conquered."- Thomas Jefferson (Ed. – Does this sound familiar ?)
Why are private unelected individuals controlling the American currency system ? Virtually running the entire country, the stock market, the banks, the lending rates, nearly everything ? Where is any of this in the Constitution?
Do you really believe they are representing We the People with their policies?
If you do, you aren't thinking clearly!
"All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.” - John Adams
Wouldn't you like to buy your currency for $230 per million (and have the American People guarantee its full face value, with their own assets)? Well, we won't do that for Citizens but we do it for a select group of private and foreign bankers. And then we let them fractionalize the reserves to issue even more fiat money in the form of unbacked credit. What, you mean your government didn't teach you about this little arrangement in their propaganda centers (public schools). Can you guess why?
Why is a private corporation cashing your income tax check instead of the Treasury? The money doesn't even go to the Federal government? That's right, not one penny actually goes into the Treasury! It all goes straight to the Federal Reserve bank to service the debts owed to them because of this monopoly on borrowing money into existence that they use to control the money supply. These very rich banksters are illegally and unconstitutionally attempting to usurp control and rule over America, its People and their wealth, by unlawfully controlling and manipulating our currency through their ownership of this bank, and using that power to manipulate the national policies of our government and nation !
Because of the existence of this unconstitutional bank (Federal Reserve Bank) and its fractional reserve banking system, every penny of our money supply has been borrowed into existence from this bank and its monopoly on “money” (currency and credit), which includes the sole power to issue money without backing – essentially from nothing but air.
Therefore, when the debt is repaid OUR MONEY DISAPPEARS FROM CIRCULATION, unless the bank re-lends the money BACK out into circulation. Therefore, when ALL the debts are paid off, America will have no “money” left in circulation and will be bankrupt, or will be completely beholden to the banks for more money. So it is not only impossible to pay off the debts, because while the principal is printed into existence the money necessary to pay the interest never is created, it is not desirable under the current so-called “money” system, because it will bankrupt the nation. The so-called “money” system is really nothing more than a sophisticated peonage scam that keeps We the People servicing the debts of the bankers forever in order to have “money” to “use” (rent), that they are allowed to create out of thin air as their private property to lend. What a scam. But sorry, its not available to you.
Because of this hellish system, AMERICA IS ABSOLUTELY NOW WITHOUT A PERMANENT MONEY SUPPLY (like we used to have in gold and silver coin that never disappeared from the accounting books), and the American People are forever chained and enslaved to the repayment of debts for the loans from the banks of “property” that never existed (in the bank’s name) to be borrowed in the first place! A monopoly on the power to create “money”. WOW – where is that in the Constitution. Isn’t that actually prohibited ?
WITHOUT A PERMANENT MONEY SUPPLY IN EXISTENCE, THE ENTIRE NATION IS BEHOLDEN TO THE BANKERS FOR ITS VIABILITY AND SOLVENCY. AS Thomas Jefferson said: “The issuing power must be taken from the banks and returned to the People where it rightfully belongs”
SOON, because of this so-called banking system (that is really not a banking system at all, but a sophisticated system of peonage (debt service)) ALL OF OUR NATIONAL POLICIES WILL BEDIRECTED BY THE BANKERS, NOT THE GOVERNMENT. SOME FEEL THAT THIS HAS ALREADY BEEN HAPPENING FOR A WHILE, AND THAT THE CURRENT EVENTS ON CAPITAL HILL CONFIRM DAILY THAT THIS IS NOW UNDENIABLY TRUE !
Do you know what peonage is? Do you feel like a peon?
You should, because that is the role your government has relegated you to.
The servicing of the debt.
If you are not able to understand what is written above, PLEASE READ THE INFORMATON ARTICLES BELOW UNTIL YOU GET IT !
"AS GOES THE FATE OF THE CURRENCY,SO GOES THE FATE OF THE NATION !"
American Financial Markets Have No Relationship To Reality — Paul Craig Roberts and Dave Kranzler
American Financial Markets Have No Relationship To Reality
Paul Craig Roberts and Dave Kranzler
As we have demonstrated in previous articles, the bullion banks (primarily JP Morgan, HSBC, ScotiaMocatta, Barclays, UBS, and Deutsche Bank), most likely acting as agents for the Federal Reserve, have been systematically forcing down the price of gold since September 2011. Suppression of the gold price protects the US dollar against the extraordinary explosion in the growth of dollars and dollar-denominated debt.
It is possible to suppress the price of gold despite rising demand, because the price is not determined in the physical market in which gold is actually purchased and carried away. Instead, the price of gold is determined in a speculative futures market in which bets are placed on the direction of the gold price. Practically all of the bets made in the futures market are settled in cash, not in gold. Cash settlement of the contracts serves to remove price determination from the physical market.
Cash settlement makes it possible for enormous amounts of uncovered or “naked” futures contracts — paper gold — to be printed and dumped all at once for sale in the futures market at times when trading is thin. By increasing the supply of paper gold, the enormous sales drive down the futures price, and it is the futures price that determines the price at which physical quantities of bullion can be purchased.
The fact that the price of gold is determined in a paper market, in which there is no limit to the supply of paper contracts that can be created, produces the strange result that the demand for physical bullion is at an all time high, outstripping world production, but the price continues to fall! Asian demand is heavy, especially from China, and silver and gold eagles are flying off the shelves of the US Mint in record quantities. Bullion stocks are being depleted; yet the prices of gold and silver fall day after day.
The only way that this makes sense is that the price of bullion is not determined in a real market, but in a rigged paper market in which there is no limit to the ability to print paper gold.
The Chinese, Russians, and Indians are delighted that the corrupt American authorities make it possible for them to purchase ever larger quantities of gold at ever lower prices. The rigged market is perfectly acceptable to purchasers of bullion, just as it is to US authorities who are committed to protecting the dollar from a rising price of gold.
Nevertheless, an honest person would think that the incompatibility of high demand with constrained supply and falling price would arouse the interest of economists, the financial media, financial authorities, and congressional committees.
Where are the class action suits from gold mining companies against the Federal Reserve, its bullion bank agents, and all who are harming the interest of the mining companies by short-selling gold with uncovered contracts? Rigged markets–especially on the basis of inside information–are illegal and highly unethical. The naked short-selling is causing damage to mining interests. Once the price of gold is driven below $1200 per ounce, many mines become uneconomical. They shut down. Miners are unemployed. Shareholders lose money. How can such an obviously rigged and manipulated price be permitted to continue? The answer is that the US political and financial system is engulfed with corruption and criminality. The Federal Reserve’s policy of rigging bond and gold prices and providing liquidity for stock market speculation has damaged the US economy and tens of millions of US citizens in order to protect four mega-banks from their mistakes and crimes. This private use of public policy is unprecedented in history. Those responsible should be arrested and put on trial and they should simultaneously be sued for damages.
US authorities use the Plunge Protection Team, the Exchange Stabilization Fund, currency swaps, Federal Reserve policy, and purchases of S&P futures to support an artificial exchange value of the dollar and to provide the liquidity needed to support stock and bond prices, with the latter so artificially high that savers receive negative real interest rates on their saving.
The authorities have created a financial system totally out of sync with reality. When the authorities can no longer keep the house of cards standing, the collapse will be extreme.
It is a testament to the complicity of economists, the incompetence of financial media, and the corruption of public authorities and private institutions that this house of cards was constructed. The executives of the handful of mega-banks that caused the problem are the people who are running the US Treasury, the New York Fed, and the US financial regulatory agencies. They are using their control over public policy to protect themselves and their institutions from their own reckless behavior. The price for this protection is being paid by the economy and ordinary Americans – and that price is rising.
The latest orchestrated takedown of the gold price is related to two events (see the graphs below). One is that the Federal Reserve decided to boost the upward spike in the dollar’s exchange rate from the Fed’s announcement of the end of Quantitative Easing (QE). The Fed’s announcement of the end of dollar creation in order to support bond prices lessened the rising anxiety in the world about the US dollar’s value when the supply of new dollars continued to increase faster than the US output of goods and services. The Fed reinforced the boost that its announcement gave to the dollar by having its bullion bank agents drive down the gold price with naked short-selling.
Naked short selling was also used to offset the effect on the gold price by the Bank of Japan’s surprise announcement on October 31 of a massive new program of QE. Apparently, the Bank of Japan either has been pressured by Washington to inflate Japan’s currency in order to support the dollar’s value or is applying a policy based on the Keynesian Phillips Curve that 2-3% inflation stimulates economic growth. Japan has been in the economic doldrums for a long time and is now reduced to pre-Reagan “snake oil” prescriptions in a desperate attempt to revive its economy.
Japan’s announcement of infinite money creation should have caused the price of gold to rise. To prevent a rise, at 3:00 AM US Eastern Time, during one of the least active trading periods for gold futures, the electronic futures market (Globex) was hit with a sale of 25 tonnes of uncovered Comex paper gold contracts, which dropped the gold price $20 dollars. No legitimate seller would destroy his own capital by selling a position in this way.
The gold price stabilized and moved higher, but at 8 AM US Eastern Time, and 20 minutes prior to the opening of the New York futures market (Comex), another 38 tonnes of uncovered paper gold futures were sold. The only possible purpose of such a sale is to drive down the price of gold. Again, no legitimate investor would unload a huge amount of his holdings in this way, thereby wiping out his own wealth.
Allegedly, the United States is the home of scientific economics with the predominance of winners of the Nobel Prize in economics. Despite these high qualifications, the price of gold, silver, equities, and bonds that are set in the US bear no relationship to economic reality, and American economists do not notice.
The divergence of markets from economic reality disturbs neither public policymakers nor economists, who promote the interests of the government and its allied interest groups. The result is an economy that is a house of cards.
For additional reading see: http://investmentresearchdynamics.com/the-system-is-terminally-broken/
Dr. Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. Roberts' latest books are The Failure of Laissez Faire Capitalism and Economic Dissolution of the West and How America Was Lost.
At the end of 2008, the U.S. Federal Reserve embarked upon a monetary policy so extreme and so reckless that it had to invent a (new) euphemism for what it was doing, since if it simply used the old euphemism, even the puppet-politicians of the U.S. government would have rebelled at this monetary insanity.
At that time, the Federal Reserve began “monetizing debt” (the old euphemism). What that economic jargon actually means is that the Fed (on behalf of the U.S. government) simply began conjuring its currency out of thin air – without any pretense of backing or value – as the only means of being able to continue to pay the interest on the exploding U.S. national debt. It was (is) the last refuge of a bankrupt government: the choice to hyperinflate its currency rather than officially declare bankruptcy.
Obviously neither the bankers nor the Corporate media were prepared to admit what they were really doing, so they invented a new euphemism for this old insanity: “quantitative easing”. But conjuring “money” out of thin air (by the $trillions) to pay the interest on U.S. debt was only the beginning. After that, the Fed “expanded” this monetary insanity – and began openly buying-up $trillions in U.S. Treasuries, as well as the “bad debt” (i.e. fraud) hidden on Wall Street balance sheets.
We were explicitly told by the bankers, media, and U.S. government that it was engaging in this “QE” to pump-up the U.S. Treasuries market (and thus manipulate interest rates lower), and to pump-up U.S. equities markets, to supposedly “stimulate the economy”. This was, of course, total nonsense.
Only the bankers still hold U.S. Treasuries, and only the wealthy still hold U.S. stocks (roughly 85% of all stock), and those two demographics were already wealthier than at any time in history before the beginning of “QE”. But while the supposed “stimulus” was never anything but a lie, the bubbles which were created by all this reckless money-printing are very, very real.
As a matter of basic arithmetic/economics, all bubbles implode/deflate without a steady stream of new money to keep the bubble inflated. Because (by definition) all bubbles represent unsustainable price levels, no bubble can ever be stable. It is with this context in mind that we can view this recent headline in the NY Times:
Quantitative Easing is Ending
It is a headline which no thinking adult could possibly take seriously. The Federal Reserve deliberately/explicitly/openly inflated the U.S. Treasuries bubble and the U.S. equities bubbles with its “quantitative easing”. The Federal Reserve claims to be withdrawing the fuel/support for those bubbles, and so those bubbles must implode.
Except the bubbles have not imploded.
This is not even theoretically possible, and so, ipso facto, “quantitative easing” continues – in some form. But the difference is that while the Federal Reserve is still conjuring new $trillions (to keep the bubbles pumped-up), it no longer admits to all this newly conjured funny-money. There is a very well-known legal/financial term for this practice: counterfeiting.
This isn’t speculation, since it is supported by more, obvious empirical evidence. In the spring of 2013, B.S. Bernanke first began talking about beginning to reduce his “QE”, and by the tiniest of amounts: a paltry/trivial $5 billion per month.
Even just talking about beginning to ease the newly conjured funny-money caused the interest rate on U.S. ten-year Treasuries to double over a six month period. Merely talking about “tapering” was costing the U.S. government $100’s of billions in additional interest payments (alone), further crippling this dying economy. And so in September of last year, Bernanke got in front of the microphones to admit that the U.S. government could not even begin to “taper” the money-printing.
Yet today we are told that “quantitative easing is ending”, but the U.S. bond-bubble has not even wavered. What changed?
The second time that the Federal Reserve pretended to begin to “taper” its money-printing, the economic terrorists of Wall Street first attacked the economies of all the world’s other nations – by sabotaging their currencies. With all the economies of the Rest of the World economically crippled, and thus the U.S. economy appearing “healthy” in comparison, the bond-bubble didn’t waver the second time the Fed pretended to begin “tapering”.
Again, this isn’t “conspiracy theory”, it is conspiracy fact. As noted in a recent commentary, this endemic currency-rigging has finally come out of the shadows. After two years of (informally) “investigating” individual FX-traders employed by these Big Banks, we now see formal, criminal investigations of these Big Banks/bankers for serially rigging the world’s currency markets (and currencies).
First, some context. In the lawless United States, its criminal Big Banks are never criminally charged for the laws they break. When they openly/deliberately falsified tens of millions of U.S. mortgages, turning the entire U.S. land-title registry into a cesspool of fraud, no bank was charged.
When they scammed investors around the world for $trillions in countless, serial acts of open/sleazy securities fraud, no bank was charged. When they are caught (on a daily, ongoing basis) laundering $trillions for known drug cartels, and known terrorist groups, no bank is ever charged.
However, the currency-rigging of these same, criminal Big Banks has been so blatant, so egregious, and so massive in scale that two of these Big Banks have now publically acknowledged that they are already under criminal investigation – JPMorgan and Citigroup. Meanwhile, the Corporate media has already warned us that “the Justice Department may seek guilty pleas from several firms” (i.e. tentacles of the One Bank).
The previous (unpunished) financial crimes of these Big Banks were already a hundred times larger than any financial crimes ever perpetrated in financial history, yet (by the actions of the U.S. government, and the words of the Corporate media) we see that their currency-rigging has been even worse. And all this was done so that merely talking about “tapering QE” would not burst the U.S. Treasuries bubble, all by itself.
When we scrape away all of the fraud, all of the crime, all of the lies, and (now) all the criminal investigations, we are left with a simple truth. As the Federal Reserve (publicly) takes its “quantitative easing” to zero, what it is actually doing is taking its counterfeiting of U.S. currency toward 100%.
There is no other, possible explanation for the fact that U.S. bond and equities bubbles have survived…for the moment. To prove this, we merely need to look at what the Corporate media claims to be an “explanation” for this economic impossibility – i.e. the best lie which they could fabricate.
Very simply, the Liars claim that the U.S. Treasuries market is the first-and-only stable bubble in the history of human markets – a bubble which can (permanently) remain inflated without a steady stream of new capital injections. It is a lie just as preposterous as the preceding, impossible lie: that “QE is ending”.
Understand that if it were possible for bubbles to remain stable then we would have seen numerous, previous examples of other “stable bubbles”: markets with prices permanently floating high above sustainability (and sanity). It has never happened before in human history, because it cannot happen.
The Treasuries-bubble remains, with current “prices” for Treasuries much, much higher than any other time in U.S. history. It is not merely a “bond bubble”, it is the largest bond-bubble in the 228-year history of the United States. Thus we know that the Federal Reserve has replaced every dollar of (old) “QE” with new counterfeiting.
It’s not “conspiracy theory”. It’s simply more conspiracy-fact.
Jeff Nielson for Sprott Money
Good article, except it misses an additional very important part of the story. The federal reserve has NOT tapered QE... not at all, not in any way.
What the federal reserve has done is to reduce their visible QE while they increase their [nearly] invisible QE even faster. Actually, ZH has had articles about some of the ways this has been implemented. Recall stories about how Belgium all of a sudden was buying more US government debt than their GDP (or something like that, some enormous number).
Other similar factual acts for the same purpose have been recognized in alternate media like ZH. The acts are factual (nobody denies that), the only thing the mainstream media ignores (or scoffs-at, or denies if pressed), is who is the source of these enormous actions, and what is their purpose.
The source is obvious... the federal reserve. The purpose is obvious... to keep the bond and stock markets in the USSA from collapsing.
Had the author added these details to the article, he would have totally nailed it.
PS: I assume everyone at ZH understands the following. Since there is NO objective much less honest individual on the "factory floor" of the federal reserve (much less in the accounting office), there is no way anyone (except a few predators at the fed itself) whether new fiat dollars are being created without debt attached to manipulate these markets. I also assume everyone knows that the only reason and only fig leaf that keeps large investors from cashing out and fleeing the US markets is... the fairy tale that every US dollar created must be paid back (meaning, every US dollar is debt). But as the situation gets more desparate (which it is, big time), the predators-that-be at the federal reserve know they got a LOT more mileage out of printing and spending new dollars that do not have the "drag" of debt attached to them. Of course, the only thing that has stopped hyperinflation from happening is... the drag of that debt attached to every dollar. My point being, nobody outside the few elite at the federal reserve know when no-debt dollars started to be created, or how much, or how much more will be created how quickly in the coming months. Which means... physical gold, silver, platinum and other real, physical goods in our own grubby paws looks like the best freaking deal in a long, long time... especially at current PM
Submitted by Tyler Durden on 11/06/2014 12:54 -0500
Submitted by The Consumer Price Illusion
Manipulating the Consumer Price Index: Hedonic Quality Adjustments
Have you heard the one about CPI?
Suppose that a TV manufacturer retires a product and replaces it with a newer, better, and much more expensive one. If the new TV costs 5 times more than the old one, how can we manipulate the hell out of massage the price of the old TV to make it look like the price fell? By using the dark arts of econometrics, my son!
If you believe the public comments made by the world’s central bankers, the prices that consumers pay for items are not rising fast enough; in some places like Europe they worry that prices might actually fall (a tragedy for the possessing classes, as their manic one-way long bets might not work then). Central bankers are terrified of this outcome. Setting aside for a second the apparent insanity of this logic for your average consumer, who experiences price rises on a near continuous basis, let’s examine in detail one of the jokes gauges economists use for measuring prices: the Consumer Price Index (CPI).
Ostensibly, the CPI is a linear combination of the “prices” of things/stuff consumers could actually purchase weighted by a percentage that the “ideal consumer” spends on any particular stuff/thing in his “ideal” basket. The main problem here is that the “prices” used are not the prices a consumer would actually pay; instead the real price for an item is scaled by what the BLS calls a “Hedonic Quality Adjustment (HQA)”. The HQA was designed to solve a real world problem economists face: the market keeps pumping out new and better devices. In practice the HQA is used to artificially depress the prices used in the calculation of the CPI.
Intuitively, the HQA scales prices by their “perceived” quality. We’re not talking about human perception here, but that of a kitchen sink regression model created by BLS economists. Essentially it throws every quality an item might possess into a linear model and performs a regression of these qualities against the prices found in the market for a given product. The prices that feed into the CPI can be intuitively modeled as:
This means that as far as the CPI is concerned, prices can “decrease” for three reasons:
The BLS neatly illustrates this effect with an example from their website (emphasis is mine):
Few modern people would consider progress to be a bad thing. Quality improvements should be celebrated and technological change embraced. Yet when a policymaker says that she wants inflation to pick up and trots out the CPI as evidence, she doesn’t care whether that comes about from actual price inflation or quality decreases. Given the accelerating pace of technological improvements, it’s hard to imagine an outcome besides hyperinflation that will satisfy central bankers and their slavish dependence on indicators which have been so far abstracted from reality as to have little actionable value.
Alternatively, causing a complete economic meltdown by manipulating the price of money and inflating the mother of all bubbles will probably slow down technological development, so either way, fuck you John Q well played.
Since economists are largely concerned with “real” prices (actual prices scaled by inflation as measured by the CPI), any error in the calculation of real prices introduces a bias that propagates to every corner of economic thought. This is a central flaw in economics that largely explains the gap between actual human experiences (“Wow! Things are expensive!”) with central bankers gambling our collective future on fighting deflation.
More than likely the deflation is used as cover for the agency problem faced by central bankers every day. Most market practitioners know we are in a classic debt-fueled bubble initiated by wildly loose monetary policy – central bankers included. Given that the public will rightfully blame policymakers when the bubble bursts, no central banker wants to run the risk that it pops on their watch. That would make them look stupid, and might endanger their future lives as highly paid consultants. In that context printing endless supplies of money makes perfect sense.
Federal Reserve Counterfeiting Approaches 100%
Jeff Nielson for Sprott Money
At the end of 2008, the U.S. Federal Reserve embarked upon a monetary policy so extreme and so reckless that it had to invent a (new) euphemism for what it was doing, since if it simply used the old euphemism, even the puppet-politicians of the U.S. government would have rebelled at this monetary insanity.
At that time, the Federal Reserve began “monetizing debt” (the old euphemism). What that economic jargon actually means is that the Fed (on behalf of the U.S. government) simply began conjuring its currency out of thin air – without any pretense of backing or value – as the only means of being able to continue to pay the interest on the exploding U.S. national debt. It was (is) the last refuge of a bankrupt government: the choice to hyperinflate its currency rather than officially declare bankruptcy.
Obviously neither the bankers nor the Corporate media were prepared to admit what they were really doing, so they invented a new euphemism for this old insanity: “quantitative easing”. But conjuring “money” out of thin air (by the $trillions) to pay the interest on U.S. debt was only the beginning. After that, the Fed “expanded” this monetary insanity – and began openly buying-up $trillions in U.S. Treasuries, as well as the “bad debt” (i.e. fraud) hidden on Wall Street balance sheets.
We were explicitly told by the bankers, media, and U.S. government that it was engaging in this “QE” to pump-up the U.S. Treasuries market (and thus manipulate interest rates lower), and to pump-up U.S. equities markets, to supposedly “stimulate the economy”. This was, of course, total nonsense.
Only the bankers still hold U.S. Treasuries, and only the wealthy still hold U.S. stocks (roughly 85% of all stock), and those two demographics were already wealthier than at any time in history before the beginning of “QE”. But while the supposed “stimulus” was never anything but a lie, the bubbles which were created by all this reckless money-printing are very, very real.
As a matter of basic arithmetic/economics, all bubbles implode/deflate without a steady stream of new money to keep the bubble inflated. Because (by definition) all bubbles represent unsustainable price levels, no bubble can ever be stable. It is with this context in mind that we can view this recent headline in the NY Times:
Quantitative Easing is Ending
It is a headline which no thinking adult could possibly take seriously. The Federal Reserve deliberately/explicitly/openly inflated the U.S. Treasuries bubble and the U.S. equities bubbles with its “quantitative easing”. The Federal Reserve claims to be withdrawing the fuel/support for those bubbles, and so those bubbles must implode.
Except the bubbles have not imploded.
This is not even theoretically possible, and so, ipso facto, “quantitative easing” continues – in some form. But the difference is that while the Federal Reserve is still conjuring new $trillions (to keep the bubbles pumped-up), it no longer admits to all this newly conjured funny-money. There is a very well-known legal/financial term for this practice: counterfeiting.
This isn’t speculation, since it is supported by more, obvious empirical evidence. In the spring of 2013, B.S. Bernanke first began talking about beginning to reduce his “QE”, and by the tiniest of amounts: a paltry/trivial $5 billion per month.
Even just talking about beginning to ease the newly conjured funny-money caused the interest rate on U.S. ten-year Treasuries to double over a six month period. Merely talking about “tapering” was costing the U.S. government $100’s of billions in additional interest payments (alone), further crippling this dying economy. And so in September of last year, Bernanke got in front of the microphones to admit that the U.S. government could not even begin to “taper” the money-printing.
Yet today we are told that “quantitative easing is ending”, but the U.S. bond-bubble has not even wavered. What changed?
The second time that the Federal Reserve pretended to begin to “taper” its money-printing, the economic terrorists of Wall Street first attacked the economies of all the world’s other nations – by sabotaging their currencies. With all the economies of the Rest of the World economically crippled, and thus the U.S. economy appearing “healthy” in comparison, the bond-bubble didn’t waver the second time the Fed pretended to begin “tapering”.
Again, this isn’t “conspiracy theory”, it is conspiracy fact. As noted in a recent commentary, this endemic currency-rigging has finally come out of the shadows. After two years of (informally) “investigating” individual FX-traders employed by these Big Banks, we now see formal, criminal investigations of these Big Banks/bankers for serially rigging the world’s currency markets (and currencies).
First, some context. In the lawless United States, its criminal Big Banks are never criminally charged for the laws they break. When they openly/deliberately falsified tens of millions of U.S. mortgages, turning the entire U.S. land-title registry into a cesspool of fraud, no bank was charged.
When they scammed investors around the world for $trillions in countless, serial acts of open/sleazy securities fraud, no bank was charged. When they are caught (on a daily, ongoing basis) laundering $trillions for known drug cartels, and known terrorist groups, no bank is ever charged.
However, the currency-rigging of these same, criminal Big Banks has been so blatant, so egregious, and so massive in scale that two of these Big Banks have now publically acknowledged that they are already under criminal investigation – JPMorgan and Citigroup. Meanwhile, the Corporate media has already warned us that “the Justice Department may seek guilty pleas from several firms” (i.e. tentacles of the One Bank).
The previous (unpunished) financial crimes of these Big Banks were already a hundred times larger than any financial crimes ever perpetrated in financial history, yet (by the actions of the U.S. government, and the words of the Corporate media) we see that their currency-rigging has been even worse. And all this was done so that merely talking about “tapering QE” would not burst the U.S. Treasuries bubble, all by itself.
When we scrape away all of the fraud, all of the crime, all of the lies, and (now) all the criminal investigations, we are left with a simple truth. As the Federal Reserve (publicly) takes its “quantitative easing” to zero, what it is actually doing is taking its counterfeiting of U.S. currency toward 100%.
There is no other, possible explanation for the fact that U.S. bond and equities bubbles have survived…for the moment. To prove this, we merely need to look at what the Corporate media claims to be an “explanation” for this economic impossibility – i.e. the best lie which they could fabricate.
…But quantitative easing is the gift that keeps on giving. Even after the purchases end, its effects will persist. How could that be? The Fed will still own all those bonds it bought, and according to the agency itself, it’s the level of holding that affects the bond market, not the rate of addition to those holdings. [emphasis mine]
Very simply, the Liars claim that the U.S. Treasuries market is the first-and-only stable bubble in the history of human markets – a bubble which can (permanently) remain inflated without a steady stream of new capital injections. It is a lie just as preposterous as the preceding, impossible lie: that “QE is ending”.
Understand that if it were possible for bubbles to remain stable then we would have seen numerous, previous examples of other “stable bubbles”: markets with prices permanently floating high above sustainability (and sanity). It has never happened before in human history, because it cannot happen.
The Treasuries-bubble remains, with current “prices” for Treasuries much, much higher than any other time in U.S. history. It is not merely a “bond bubble”, it is the largest bond-bubble in the 228-year history of the United States. Thus we know that the Federal Reserve has replaced every dollar of (old) “QE” with new counterfeiting.
It’s not “conspiracy theory”. It’s simply more conspiracy-fact.
Jeff Nielson for Sprott Money
Good article, except it misses an additional very important part of the story. The federal reserve has NOT tapered QE... not at all, not in any way.
What the federal reserve has done is to reduce their visible QE while they increase their [nearly] invisible QE even faster. Actually, ZH has had articles about some of the ways this has been implemented. Recall stories about how Belgium all of a sudden was buying more US government debt than their GDP (or something like that, some enormous number).
Other similar factual acts for the same purpose have been recognized in alternate media like ZH. The acts are factual (nobody denies that), the only thing the mainstream media ignores (or scoffs-at, or denies if pressed), is who is the source of these enormous actions, and what is their purpose.
The source is obvious... the federal reserve. The purpose is obvious... to keep the bond and stock markets in the USSA from collapsing.
Had the author added these details to the article, he would have totally nailed it.
PS: I assume everyone at ZH understands the following. Since there is NO objective much less honest individual on the "factory floor" of the federal reserve (much less in the accounting office), there is no way anyone (except a few predators at the fed itself) whether new fiat dollars are being created without debt attached to manipulate these markets. I also assume everyone knows that the only reason and only fig leaf that keeps large investors from cashing out and fleeing the US markets is... the fairy tale that every US dollar created must be paid back (meaning, every US dollar is debt). But as the situation gets more desparate (which it is, big time), the predators-that-be at the federal reserve know they got a LOT more mileage out of printing and spending new dollars that do not have the "drag" of debt attached to them. Of course, the only thing that has stopped hyperinflation from happening is... the drag of that debt attached to every dollar. My point being, nobody outside the few elite at the federal reserve know when no-debt dollars started to be created, or how much, or how much more will be created how quickly in the coming months. Which means... physical gold, silver, platinum and other real, physical goods in our own grubby paws looks like the best freaking deal in a long, long time... especially at current PM
The Magic Of CPI: Watch How Economists Transform A 400% Price Increase Into A 7.1% Decline
Manipulating the Consumer Price Index: Hedonic Quality Adjustments
Have you heard the one about CPI?
Suppose that a TV manufacturer retires a product and replaces it with a newer, better, and much more expensive one. If the new TV costs 5 times more than the old one, how can we manipulate the hell out of massage the price of the old TV to make it look like the price fell? By using the dark arts of econometrics, my son!
If you believe the public comments made by the world’s central bankers, the prices that consumers pay for items are not rising fast enough; in some places like Europe they worry that prices might actually fall (a tragedy for the possessing classes, as their manic one-way long bets might not work then). Central bankers are terrified of this outcome. Setting aside for a second the apparent insanity of this logic for your average consumer, who experiences price rises on a near continuous basis, let’s examine in detail one of the jokes gauges economists use for measuring prices: the Consumer Price Index (CPI).
Ostensibly, the CPI is a linear combination of the “prices” of things/stuff consumers could actually purchase weighted by a percentage that the “ideal consumer” spends on any particular stuff/thing in his “ideal” basket. The main problem here is that the “prices” used are not the prices a consumer would actually pay; instead the real price for an item is scaled by what the BLS calls a “Hedonic Quality Adjustment (HQA)”. The HQA was designed to solve a real world problem economists face: the market keeps pumping out new and better devices. In practice the HQA is used to artificially depress the prices used in the calculation of the CPI.
Intuitively, the HQA scales prices by their “perceived” quality. We’re not talking about human perception here, but that of a kitchen sink regression model created by BLS economists. Essentially it throws every quality an item might possess into a linear model and performs a regression of these qualities against the prices found in the market for a given product. The prices that feed into the CPI can be intuitively modeled as:
- The price actually decreases, holding quality constant
- The “quality” as measured by the Hedonic Quality Regression (HQR) could go up, holding price constant
- The “quality” goes up by more than prices go up (<<<<<< WE’RE HERE RIGHT NOW)
The BLS neatly illustrates this effect with an example from their website (emphasis is mine):
Item A is a television that is no longer available and it has been replaced by a new television, Item B. The characteristics in bold differ between the two TVs. There is a large degree of quality change and there is a very large (400%) difference in the prices of these TVs. Rather than use the 400 percent increase in price between Item A and Item B, the quality adjusted rate of price change is measuredby the ratio of the price of Item B in the current period ($1,250.00) over an estimated price of Item B in the previous period – Item B’.
Here is an example of a hedonic regression model (including coefficients) for televisions.
This is just an OLS linear regression model. The dependent variable is the natural log of prices for televisions, the explanatory variables and their coefficients are listed in the table below (most are dummy variables)
To put it another way, the HQR extrapolates a price for the new TV using the Hedonic Quality model estimated from the population of old TV’s
Where PB,t+s-1 is the quality adjusted price, PA,t+s-1 is the price of Item A in the previous period, and is the constant e [SIC], the inverse of the natural logarithm, exponentiated by the difference of the summations of the ßs for the set of characteristics that differ between items A and B. The exponentiation step is done to transform the coefficients from the semi log form to a linear form before adjusting the price.
To derive the estimated price of Item B’, we use the following equation:Oh good! You see, my neighbor, John Q., thought that prices were going up and was about to riot in the streets because he couldn’t buy anything now. How relieved he was to live next to an economist and mathematician; I merely explained that even though he couldn’t afford the new TV (or anything else) it was actually less expensive once quality was taken into account. Boy was his face red. He went home and explained it to his wife and kids and they laughed and laughed about their mistake.
For our television example, [the equation above] looks like this:
When this quality adjustment is applied, the ratio of price change looks like this:
The resulting price change is -7.1 percent after the quality adjustment is applied.
Few modern people would consider progress to be a bad thing. Quality improvements should be celebrated and technological change embraced. Yet when a policymaker says that she wants inflation to pick up and trots out the CPI as evidence, she doesn’t care whether that comes about from actual price inflation or quality decreases. Given the accelerating pace of technological improvements, it’s hard to imagine an outcome besides hyperinflation that will satisfy central bankers and their slavish dependence on indicators which have been so far abstracted from reality as to have little actionable value.
Alternatively, causing a complete economic meltdown by manipulating the price of money and inflating the mother of all bubbles will probably slow down technological development, so either way, fuck you John Q well played.
Since economists are largely concerned with “real” prices (actual prices scaled by inflation as measured by the CPI), any error in the calculation of real prices introduces a bias that propagates to every corner of economic thought. This is a central flaw in economics that largely explains the gap between actual human experiences (“Wow! Things are expensive!”) with central bankers gambling our collective future on fighting deflation.
More than likely the deflation is used as cover for the agency problem faced by central bankers every day. Most market practitioners know we are in a classic debt-fueled bubble initiated by wildly loose monetary policy – central bankers included. Given that the public will rightfully blame policymakers when the bubble bursts, no central banker wants to run the risk that it pops on their watch. That would make them look stupid, and might endanger their future lives as highly paid consultants. In that context printing endless supplies of money makes perfect sense.
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