Happy New Year, everyone. 2012 went out with a bang as we saw the Fed run away with monetary policy (again!), a record fine levied against HSBC for drug money laundering, terror financing and being the banker to many of the world’s worst dictators and, finally, the run-up to the “fiscal cliff.” It’s a good thing December wasn’t any more exciting! All of you following along know I had a lot to say about all this and, it turns out, so did you…
Remember, you can share your own comments and questions with me by posting them to the bottom of any article, or emailing them to: email@example.com.
What’s on your mind?
December 6, 2012: Socialism’s Ultimate Tool
Q: What is amazing is that the prophecies laid out in [“The Creature from Jekyll Island”] all came to be. The banker’s master plan continues. The ultimate objective is to make serfs of us all. The only thing slowing the process is that the perpetrators die about every 75 years. God help us. ~ Dennis H.
A: It’s hard for most people to believe in conspiracy theories that no-one can prove. Maybe it’s because we don’t want to believe there is a “dark side,” but after reading The Creature from Jekyll Island, I am a believer. What’s so plainly laid out in the book, as fact, can all be confirmed. Once you know what the “game” is it’s impossible not to see how we are being used just like pawns.
Q: I [suggest] that the head of the Federal Reserve should be an elected position. The “FedHead” should have to answer to the general public. An election every 4 years or so would solve a lot of issues surrounding the abuse of that position. Heck, even every 3 years. That way the “FedHead” would be even more accountable to the public. ~ Jeff P.
A: I’m not sure that’s the answer Jeff. After all, we elect all the members of Congress and the President, which goes to show that things aren’t always what they seem. Here’s another thought: the FedHead should be a strict “academic” in the old fashioned English school headmaster mold who has not had his cane taken from him. The whole Fed apparatus should be in that mold. The banks are their wards and have to be kept in line -not coddled and allowed to run wild.
Q: In this quarter you are preaching to the choir and those who are evenly modestly well-read have been aware of this scenario for decades. I appreciate your attempt to create awareness, but without a solution we are engaged in just a word exercise. What are your ideas??? ~ Tom
A: The sad truth is that the argument for the Fed is most eloquently made by our Congress. Can you imagine if they had direct control of the money supply and got to stuff banks with more money directly? Theoretically, I’m for eliminating the Fed, but giving their powers to Congress is more frightening. Therefore, the only answer is for us,the People, to demand that Congress eliminate the Fed’s dual mandate, to have regional Fed bank boards, and to have all decision-making members of the Fed be elected “local” academics and not bankers. The Fed’s role should be a simple one, control the expansion and contraction of money and credit within a defined, transparent band that results in a “goldilocks” scenario where cash and credit aren’t too tight, aren’t too loose, but are just right.
Q: Another book you may find just as enlightening (if much shorter) is “Crisis by Design,” by John Truman Wolfe. It covers similar ground, but is focused on the recent financial crisis and does a brilliant job of uncovering the true machinations that have landed us in this current mess. Kudos to you for standing up and spreading some truth around. ~ Bruce
A: Thanks Bruce, I’ll read it.
December 13, 2012: The Fed’s Cloak of Invisibility
Q: This is a worldwide problem. There is only one way to stop the rot, and that is for everyone to go on a tax payment strike and force a referendum to have the role of banks, the Federal Reserve and elected politicians to heel. They haven’t got enough courts or prisons to counter such an action. ~ Frank P.
A: Frank, I love your idea.
Q: Can anyone tell me where the Federal Reserve gets its own money to buy massive amounts of bonds issued by the government? The way I see it, either the Federal Reserve’s regional banks have all the funds, or the Federal Reserve cooks its books. ~ P.C.
A: P.C. the Fed’s regional banks don’t provide the Fed with the trillions of dollars they employ to buy government bonds and private debts; they don’t have that kind of money in their vaults. They hold banks’ reserves and other deposits, parked there by commercial banks and other institutions under the Fed’s control. The New York Federal Reserve Bank is the bank that conducts the Fed’s open market operations, meaning it conducts the buying and selling that the Fed does with “primary dealers,” governments and all “outside” entities, though the NY Fed mechanically directs the regional banks to effect the Federal Open Market Committee’s policies when it comes to providing money to banks in geographic regions. The Fed has what’s commonly referred to as a “printing press.” And while that’s not exactly true, the U.S. Treasury controls the actual printing presses that prints dollars, it is true in the sense that the Fed doesn’t need to create money by printing it, they simply “cook their books” by making a notation to “create” the credit necessary to buy however many government (or other) bonds or securities, or hard assets, they want. If you sell them bonds you get a credit in your account. You can take that credit anywhere and get cash. It’s the same thing as a Federal Reserve note. Look at your money, your dollars. They are not issued by they Treasury (they are “printed” by the Treasury), they say right on them, Federal Reserve Note. The Fed therefore “prints” money to buy what it wants. The problem with that is that there’s no control over how much they print or how much of the government’s debt they buy. That means there’s no control on how much the government spends, because the Fed can just keep buying their bonds to finance their spending. That’s the problem with the Fed. There are no controls on it. None.
Q: This whole scenario reminds me that in the end, no one is going to ride to the rescue. It’s on me to try to survive what’s coming! Thanks, as usual, Shah! ~ Frank B.
A: Sorry to be the bearer of such bad news Fred, but now that you get it, do what you have to do.
December 21, 2012: The Comedy of John Boehner’s “Plan B”
Q: Do you know that the only successful economies seem to be the so-called socialist economies or those partially socialistic: Norway, Sweden, Denmark, Finland, China, Canada, Australia, etc. etc? Now look at the dolorous state of the so-called capitalist countries. What is one to think? If all capitalism can produce is our Congress and Bank that are too big to fail, then why do you hate socialism? You must hate success. ~ Ashley G.
A: Ashley, I don’t think that any of those countries would call themselves socialist, even China. They are all “democratic” and in China’s case “communist.” There’s a big difference between having huge social programs and being a socialist country. I am for social safety nets and some “socialized” programs. But I am 100% for capitalism and not for any centrally planned economy – no way, no how.
Q: I really look forward to each newsletter because you have an uncanny way of exposing the games – charades would be a better term. You are a delightful and refreshing analyst who tells the real story and believe me there are VERY few who actually have integrity anymore! Thank you for being in the people’s corner….. ~ Debra
A: Thank you, Debra. I don’t know why more people aren’t speaking the truth. There are a lot of people who know what’s going on and just remain silent, that’s frightening to me. Personally, I’m a little afraid. I know I rub a lot of powerful people the wrong way. I’ve been told to back-off, but I’m not going to. It’s not that I’m stupid; it’s that I’m an idealist who still believes in America and freedom of speech. And if the only way to prove that the Constitution is still alive is to test the waters, so be it.
December 23, 2012: Too Big To Jail
Q: I could not agree more… We need to stop giving corporate criminals a pass. People made these decisions, did the deed and can do the time. If a few bankers joined Madoff, maybe the rest will think twice before hiding behind the corporate veil to commit fraud. Of course, we would still need a Justice Department with some stones and the good judgment to go after the real bad guys and send them to jail. ~ Bruce M.
A: Corporations don’t commit crimes, people commit crimes. What’s wrong with us that we’ve ceded personal responsibility to corporations so crooks and cronies and fat-cat political donors can hide behind some veil of invisibility and invincibility? That’s not what these structures are for. If the Supreme Court of the United States deems corporations people with all attendant rights and vice versa, we’ll know we have crossed the river and are now on the other side. Where’s the outrage against the Supreme Court’s Citizens United decision? Sickening, I tell you, it’s just sickening.
Q: I wish we could get the politicians to realize the damage they are doing to our whole system. The whole thing is collapsing, and these guys are trying to grab all the marbles. I doubt that they would want to live in the world they are creating, but they are too stupid to see the end results. ~ Kenneth G.
A: They are not stupid, unfortunately. They don’t have to live in the world they are creating. They make enough money using their elected positions to become rich and move into the protected class. That’s why most of them “serve”. They are serving themselves.
Q: I think that instead of a meaningless monetary fine, the penalties should be: “you have 2 years to sell off or close down 50% of your assets” every time they participate in one of these scams. Maybe an even better fine would be Chapter 7. ~ Joe B.
A: That’s a simple plan, I think we can refine it a little and make it work!
Q: I’m going to invest in more prisons. We will need them if we get this right! ~ Tim
A: That would be a mistake. Put you money into golf communities, that’s where all the crooks end up.
December 27, 2012: Make the Banks Pay the Mortgage
Q: I’m not one to help investors profit from their failures. The system was corrupted when some boobs in Washington “decided” that there would be a banking system bail-out because some doofuses that failed were suddenly “too big to fail.” If capitalism is to have a chance at success, then the concept of “there’s a chance that this will fail,” needs to be re-instated. ~ Kevin B.
A: And that, Kevin, is the absolute truth!
Q: I think the situation is more nefarious. Loans sold to [Fannie & Freddie] are ultimately “owned” by the govt., including the assets they are backed by. When the decision comes to finally collapse the system, it is the government that owns your house… and you will be reminded of that when in the eviction notice arrives and “redistribution of wealth” takes on a whole new meaning. I have friends from the old Soviet bloc countries shaking in their boots… they’ve been down this road before… and they recognize all the warning signs. ~ DBH
A: DBH, if it comes to that, I’m outta here!
December 31, 2012: The Fiscal Clifff… and How You Can Profit from It
Q: I love your comment about politicians waving our money in our faces promising to do stuff for us. It is true, and you are right on point. I really appreciate your common sense and clear messages. I would love to see you do an article on why you think the general public does not understand what is happening, or if they don’t want to understand as long as “Operational Entitlement” continues. ~ Paul M.
A: The sad truth Paul, I think, is that it’s not that most people don’t care (I think they really, really do care), I think that they just don’t “know.” Wherever you look there are opinions being thrown at you. There are very few facts, mostly opinions being bandied about on our televisions and in our newspapers. You’ve seen it; all the political TV shows are jaded. And the ones that aren’t have both sides of evey argument on to debate their opinions. It’s all so confusing to so many people. The bottom line is that most people grab a hold of something they can touch stone with and hold on – right or wrong. Most people don’t even know what the real issues are. What’s the answer? I don’t know. Maybe a fact channel? Maybe a channel and a paper that lays out issues and lines up all prominent points and counterpoints so viewers and readers can dispassionately learn what’s really at issue and the pros and cons of both sides of what’s being said about the issues. We need objectivity. Facts and objectivity.
Q: I believe you when you say that U.S. politicians are “corrupt and greedy.” But I don’t believe that we will have a financial Armageddon or “Lehman moment.” There will be some program or some policy change and most everything in the market will rebound and we’ll keep this ball rolling. We always do; politicians and the Fed won’t let financial markets tank. Not being overly optimistic, just realistic. Then again, I don’t have any money in the markets or banks because of other reasons (mostly because I don’t have any money). ~ Edouard D.
A: Well, you are right. We got enough of a fix to keep the ball rolling. That was some rally yesterday! I figured we’d get something done because a Lehman Moment was definitely on the table and no-one wanted to be blamed for another Armageddon. But I figured it’s better to be safe than sorry.
Q: If you give an alcoholic a case of beer, what do you expect him to do with it? He’ll drink the whole thing straight away and go looking for more. If you give a politician hundreds of billions of other people’s money, what do you expect him to do with it? ~ Fallingman
A: And that, children, is the moral of the story. Good night and sleep tight.
Until next time,