Tag Archives: Federal Reserve

The emerging market mess and US manipulations

Anyone who wants to understand present-day geopolitical phenomena must pay attention to former Assistant Treasury Secretary, Dr. Paul Craig Roberts. Roberts is one of a handful of people who understands what is going on–and is willing to tell people about it. Explore his website http://www.paulcraigroberts.org/, and be sure to listen to his recent interview with Eric King, here.

In that interview, Roberts tells the story of how and why the US interferes in money and securities markets, and the effects those manipulations have on others around the world. He also predicts that the Federal Reserve will soon be faced with the choice of either saving the banks or saving the dollar, perhaps as early as the end of this year. But I suspect that the Fed may not quite yet have exhausted their bag of tricks. Because banking corporations dominate politics in most of the world, and because the dollar’s role as the global reserve currency has served the purpose of Western dominance, the Fed, in alliance with other central banks, will try to save both the banks and the dollar for as long as they can.

What is actually being protected is the global usury-based debt-money regime, that unholy alliance between politicians and top level banks that enables central governments to spend far in excess of their tax and other revenues, thereby thwarting democratic government and the popular will, while enabling banking institutions to privatize our collective credit and charge us interest (usury) to access it.

So what do the central banks have left in their bag of tricks as they taper off their massive amounts of  “quantitative easing” (currency inflation)? That’s the question to ponder. I think it’s obvious that they will (1) try to corral everyone’s savings and all surpluses into government securities and Wall Street equities (think, privatization of Social Security), and (2) outright confiscation of bank deposits via selective bank failures and assessments on depositors (ala the recent Cyprus trial balloon).

Still, those can only be, at best, delaying tactics, and not without serious social and political repercussions. The real solution will continue to be denied and delayed by the powers that be. Thus it must emerge from the bottom, from the creative instincts and talents of innovators in many fields who are bringing to market better ways of mediating the exchange of value and financing the creation of sustainable, Earth-friendly, and life-supporting products and services. –t.h.g.

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FED: “your gold is safe with us, just don’t ask for it back.”

The global banking farce is becoming ever more hilarious (if you can ignore the tragic consequences of this monumental fraud). Germany is seeking to repatriate its gold that is supposedly held by the US Federal Reserve, but the Fed says, “Nein, you cannot even examine it.”

 Watch this RT report to get the story:

Do Banks Create Money out of Nothing?

One of my correspondents recently referred me to an article and asked for my opinion about it. The article is Creating Money out of Nothing: The History of an Idea, by Mike King, dated April 2012 .

I read the abstract, the conclusions, and part of the body text, but could not bring myself to make a detailed read. “The history of an idea” is not relevant to my interests nor to the debt crisis that plagues civilization. Verbose and tedious, it seems to be an academic exercise that I doubt  will be of interest even to historians.

On the positive side, it did prompt me to write a few words of clarification on the question, words that I think are both pertinent and helpful to those who truly wish to understand the nature of money and the role of banks in today’s world.

The accusation that banks create money out of nothing has, according to King, been made by many famous economists, including Schumpeter, von Mises, and Keynes. I too must admit to having once or twice used that statement as a sort of shorthand criticism of the global money and banking system.

It is surely true that saying that banks make “money out of nothing” is an exaggeration that can be misleading to the uninitiated.

Bank actually create money out of something. The question is, what is that something, and what is wrong with it?

The short answer is that banks create money on the basis of the promises of their borrowers to repay.

Mr. King would have us believe that banks simply take in money from savers and lend it out to borrowers. That is clearly wrong. Even the Federal Reserve, in its own publications, says that,

The actual process of money creation takes place primarily in banks.(1) As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.–Modern Money Mechanics

As I’ve pointed out in all of my books, banks serve two primary functions. They act as both depositories, reallocating funds from savers to borrowers, and banks of issue that monetize the promises of their borrowers. I’ve explained that in detail in Chapter 1 of my book, Money: Understanding and Creating Alternatives to Legal Tender, and in Chapter 9 of my latest book, The End of Money and the Future of Civilization.

But not all promises provide a proper basis for creating money. As Edward Popp, describes it, banks create both bona-fide and non-bona-fide money. (See Money, Bona Fide or Non-Bona Fide at http://www.reinventingmoney.com/documents/bonafidePopp.pdf).

The vast majority of the non-bona-fide money that banks create, is created on the basis of loans made to national governments (when banks buy government bonds). Further large amounts of non-bona-fide money are created when banks make loans to finance purchases of consumer goods and real estate (see my books for details). This is a violation of the principle that money should be created on the basis of goods and services on the market or soon to arrive there, which includes promises of established producers who are ready, willing and able to sell for money the things they ordinarily offer.

The bottom line remains: the present global, interest-based, debt-money system, is dysfunctional and destructive.

The creation of money on the basis of interest-bearing loans is the cause of the growth imperative, and the creation of non-bona-fide money is the cause of inflation.

If we are to achieve a sustainable society and assure the survival of civilization, we must transcend the present money and banking paradigm and reinvent the exchange process.  – t.h.g.

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Lie more about LIBOR—Giethner’s claims “not credible”

Here’s a video from Yahoo! Screen featuring an interview with Neil Barofsky, former Special Inspector General in charge of the TARP bailout and author of a new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.

In this interview, Barofsky says that Treasury Secretary Tim Geithner’s claims about his LIBOR whistle-blowing are “not credible,” and that the entire regulatory process has become “captured to the interests of the banks.”

Barofsky says that LIBOR was built into the bailout plan, so the fraud means the taxpayers are being repaid less than they should be, and added “I hope we see people in handcuffs.”

Watch it here.

Who buys US bonds when foreign countries and investors won’t?

Answer: The Federal Reserve

Question: Where does the Fed get the money to buy the bonds?

Answer: It creates it.

That’s right, the Fed has no money, but the Congress long ago empowered the Federal Reserve Bank to create money by buying government (and other) securities. This is known as “monetizing the debt,” which amounts to nothing more than “legalized” counterfeiting of dollars, and it has the same results as the injection of any other form of counterfeit money—the dilution of purchasing power of all the dollars already in circulation and the erosion of the value of all dollar-denominated assets.

Currency inflation must ultimately result in price inflation as those empty dollars (based on empty promises) work their way through the economy. Further, as those Fed-created dollars get deposited in banks, the banks are able to multiply their lending on the basis of these new “reserves.”

In an opinion article that appeared in the Wall Street Journal last Wednesday, a former Treasury official says that:

“The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.”

You might consider that to be a stealthy form of “quantitative easing.”

You can find out more about that, along with some pretty good analysis in an article that appears on the Money News website.

Hurrah! Free Money once again a topic of debate in U.S. politics

Once more, Congressman and Presidential candidate, Ron Paul has championed the cause of honesty and freedom, this time by introducing a bill (H.R. 1098) that would promote free competition in currency and end the monopoly control of money and finance by the banking and political elite. Seth Lipsky’s article below tells the story.

I’ve not read the bill, so I don’t know the details, and I don’t expect it to get very far in a Congress that is, by and large, bought and paid for by the same interests that the bill seems to challenge, but its very existence and the fact that is getting some media coverage could go a long way toward educating the public about the vital issues and systemic flaws that are involved in the money system.

The survival of democracy and the future of civilization depend on, one way or another, on liberating the credit commons from monopoly control. Action from the bottom up (the organization of private, free exchange alternatives) combined with action from the top down (popular pressure for legislative action) might eventually be sufficient to crack the nut.—t.h.g.

Ron Paul, Upping the Ante in His Campaign for Liberty, Hoists the Flag of Hayek

Offers a Bill To Allow Free Competition in Currencies

By SETH LIPSKY, Special to the Sun | September 29, 2011


The first time I met Friedrich Hayek was in 1980 at California, where he was staying at the home of another economist. Then a young editor for the Wall Street Journal, I’d asked to call on the Nobel laureate for a book review I was writing. His host invited me for dinner. Before the meal, Hayek and I retreated, alone, to the far end of the host’s living room, for a chat.

We were but a few minutes into our conversation when, suddenly, Hayek clapped a hand over his nose and mouth and started coughing convulsively, before slumping onto the couch. I raced back to the host to exclaim that Professor Hayek seemed to be in trouble, only to be told that it was okay, he was just taking his snuff. A jolt of the divine herb, it seems, and the sage was back on his feet.

Hayek died 12 years later at the age of 93. I never came to know him well. But this week I found myself imagining that were his long-ago collapse-into-a-coughing fit to occur in front of me today, I’d whip out a copy of a new bill in Congress, H.R. 1098, called the Free Competition in Currency Act of 2011, and wave that under the great economist’s nose. It’s hard to think of anything, even a pinch of the strongest snuff, being a greater pick-me-up for his spirits.

For Hayek was an advocate of, among other things, private money — competing currencies — and HR 1098 would end a ban on them that has obtained here in America since the Civil War. The new bill in Congress, introduced in March by Rep. Ron Paul, would repeal the legal tender laws, prohibit taxation of certain coins and bullion, and clean up other sections of our coinage laws.

It is not a measure the Congress is going to pass in a hurry. But it is being nursed by advocates of monetary reform, and it would be unwise to discount it entirely. Few, after all, gave Congressman Paul much of a chance to win passage of a measure to audit the Federal Reserve, but when it eventually passed it was with an overwhelming, bipartisan vote. It may yet be enforced by the courts.

The Free Competition in Currency Act is far more important. It comes amid a historic collapse in the value of the dollar to less than a 1,600th of an ounce of gold. The dollar has gained a bit of value in recent days, but it is still worth less than a sixth of what it was worth as recently as, say, the start of President George W. Bush’s first term.

One of the things the government has done in the face of that collapse is seek to enforce a prohibition against private “uttering” — that is, putting into use — of coins of gold, silver, or other metal as current money and making or even possessing likenesses of such coins. H.R. 1098 would end the ban on private uttering of coins and, presumably, stop any current prosecution of such uttering.

The drive for the bill is animated, if only in part, by the case of Bernard von NotHaus, who was convicted in March of issuing a private medallion called the Liberty Dollar. The government prosecuted von NotHaus even though the coins he issued were made of silver and are today worth much more, in terms of Federal Reserve Notes, than when they were issued.

What the government is doing in the Von NotHaus case is seeking to suppress sound money in order to protect the unsound, fiat money the government has been issuing via the Fed. A federal judge in North Carolina has agreed to consider post-conviction motions to throw out the von NotHaus verdict, partly on the argument that the Constitution does not enumerate a power of Congress to outlaw privately-minted coins, which were widely produced in America’s early decades.

H.R. 1098 would go way beyond the Von NotHaus case, by asserting the virtue of the idea of private money as a system. The idea was sprung by Hayek not long after he won his Nobel Prize, in the mid-1970s. He started with a lecture. He later wrote, in a slim volume called “Denationalization of Money,” that he’d been in “despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation.”

“The further pursuit of the suggestion that government should be deprived of its monopoly of the issue of money opened the most fascinating theoretical vistas and showed the possibility of arrangements which have never been considered,” he wrote. He came to the view that a plethora of privately issued money would enable mankind’s millions to find their own mediums of exchange, and good money would end up driving out bad.

Hayek concluded “Denationalization of Money” by calling for what he termed “a Free Money Movement comparable to the Free Trade Movement of the 19th century.” He came to the view that the gold standard was not the solution, though it was “the only tolerably safe system” if the management of money were going to be the preserve of the government.

The Free Competition in Currency Act got an early hearing in Congress this month in the House Subcommittee on Monetary Policy. The hearing wasn’t widely attended, but there was testimony by the president of the Foundation for the Advancement of Monetary Education, Lawrence Parks, and by a professor at George Mason University, Lawrence White, who talked about how FedEx and UPS’s private competition with the Post Office has brought benefits to American consumers. He extended the analogy to money.

It’s too bad Hayek couldn’t have been at the hearings. He viewed the denationalization of money as the “cure” for “recurrent waves of depression and unemployment that have been represented as an inherent and deadly defect of capitalism.” In other words, as a cure for ills like the current crisis. How Hayek, who once called for a global debate on socialism versus capitalism, would have thrilled to the moment, pausing only for the occasional pinch of his favorite snuff.

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One thing the Huffington Post, Ron Paul and Glen Beck all agree on


We need more transparency in how the money and banking system is managed, and an independent audit of the Federal Reserve is a start. There is widespread agreement on that point as pointed out in this Huffington Post article. But what will it take to make it happen?

Whose interests does a central bank serve?

There’s an old adage that says “the best way to rob a bank is to own one.” Well, take a look at what the owners of the Federal Reserve are doing with your money. And, this is, I’m sure, the mere tip of a very ugly iceberg.–t.h.g.

From Rolling Stone

The Real Housewives of Wall Street

Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

By Matt Taibbi
April 12, 2011 9:55 AM ET

America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.

Why Isn’t Wall Street in Jail?

Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.

This article appears in the April 28, 2011 issue of Rolling Stone. The issue will be available on newsstands and in the online archive April 15.

Read the rest of it here.

The banker’s con job, MSNBC’s Dylan Ratigan gets it, sort of.

With the thievery becoming so blatant, even the mainstream media can no longer ignore it. Some reporters are actually beginning to understand how the con job works. In this video Ratigan takes a shot at explaining it.

Yes, bankers run the government, yes, the Federal Reserve is a private company operated by and for the banking establishment, yes, they are robbing us blind by means of their control of the money creation process.

The thing that almost no one understands yet is the fundamental flaw in the system, which is the creation of money on the basis of interest-bearing debt loaned to individuals, businesses, and governments.   The interest burden creates the necessity of ever-expanding debt so that the money supply does not collapse, hence, the dot-com bubble, the real estate bubble, and every other financial bubble throughout our history. That debt imperative gives rise to a growth imperative, which drives artificial growth of the economy, resource consumption, and virtually everything else, for that matter.

Don’t believe it? Well, just look at the empirical evidence. The phenomenon I describe is clearly seen in the worldwide debt statistics of the past several decades. We’ve reached the point of no return.–t.h.g.

Ron Paul calls for competition in currency, attacks central bank’s “independence” as “unaccountability.”

Submitted by cpowell on 09:44AM ET Monday, January 10, 2011. Section:Daily Dispatches

Toward Sensible Monetary Policy

By U.S. Rep. Ron Paul
Monday,January 10, 2011


Last week the 112th Congress was sworn in. I am pleased that I will be chairing the Monetary Policy Subcommittee of the Financial Services Committee, which has oversight of the Federal Reserve. Obviously, this position will facilitate my efforts to ensure that the Fed provides the American people with more information about what they have been doing with and to our money.

Not surprisingly, since my chairmanship was announced, apologists for the Fed have been recycling the old canard about how increased transparency threatens the Fed’s so-called political independence.

By independence, they are referring to the Fed’s ability to greatly impact the economy with virtually no meaningful oversight. We only recently learned that the bankers at the Fed were able to use the latest financial crisis to bail out Wall Street cronies and foreign central banks with billions of dollars that were created and wasted, instead of appropriated and voted on by representatives of the people.

The Fed and its supporters in Congress fought even this small bit of transparency and without this one-time provision in the financial reform act forcing disclosure, we would still not have this information. Indeed, we are in the dark on so much of what the Fed has done. This is extremely dangerous for our country, yet this power and secrecy are defended as some kind of public good, which is patently ridiculous.

Our government is based on a system of checks and balances. With no check on the Fed, it is no surprise it has thrown the economy wildly off balance.

The solution is not to re-inflate the bubbles the Fed created, or to continue to devalue the currency, or to throw billions at failing banks and corporations. The solution is to return sanity and freedom to monetary policy. Forcing the entire country to use a medium of exchange that is subject to the whims of elite bankers and their cronies on Wall Street is not sanity. Hoping that an unchecked, all-powerful, behemoth banking cartel will solve any economic problem is not sanity.

The problems the Fed was created to solve now look miniscule compared to the problems it has created. If “political independence” erodes the purchasing power of the currency by 98 percent and destabilizes the economy with radical booms and busts, all while increasing unemployment and tipping us ever closer to hyperinflation, perhaps it is time to try a little transparency and accountability instead. Better still — we should try giving the people true economic freedom.

Make no mistake: The Fed is not truly independent of political pressure. Its chair is appointed by the president, and it is a creature of Congress. Congress has a duty, albeit a neglected one, to exercise oversight of the Fed. However, even if it was politically independent, it is not independent of the influences of Wall Street. One has to look only at the revolving door between the Fed and the big banks to know that. Disclosures on TARP funds confirm this.

It is nothing short of cruel and criminal for Congress to stand idly by while the life savings of Americans are inflated away to nothing. It is high time that Congress insist on getting complete information on what the Fed has been doing, and for whom. My hope is that exposing the truth will demonstrate the insanity of the status quo and more people will call for sensible changes, such as legalizing competing currencies.