Tag Archives: federal reserve

Michael Snyder ~ Will It Be Inflation Or Deflation? The Answer May Surprise You

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Economic Collapse blog May 22 2013

Is the coming financial collapse going to be inflationary or deflationary?  Are we headed for rampant inflation or crippling deflation?  This is a subject that is hotly debated by economists all over the country.  Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation.  Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts.  So what is the truth?  Well, for the reasons listed below, I believe that we will see both.  The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis.  This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money.  We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first?  The following are some of the major deflationary forces that are affecting our economy right now…

The Velocity Of Money Is At A 50 Year Low

The rate at which money circulates in our economy is the lowest that it has been in more than 50 years.  It has been steadily falling since the late 1990s, and this is a clear sign that economic activity is slowing down.  The shaded areas in the chart represent recessions, and as you can see, the velocity of money always slows down during a recession.  But even though the government is telling us that we are not in a recession right now, the velocity of money continues to drop like a rock.  This is one of the factors that is putting a tremendous amount of deflationary pressure on our economy…

Velocity Of Money

The Trade Deficit

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Michael Snyder ~ 100 Years Old And Still Killing Us: America Was Much Better Off Before The Income Tax

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Economic Collapse blog April 14 2013

Did you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax?  Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since.  Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old.  But there was no fanfare, was there?  There was no celebration because the federal income tax is universally hated.

Sadly, most Americans just assume that there is no other option to an income tax.  Most Americans just assume that it has always been with us and that it will always be with us.  This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes.  That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year.  At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.

But wouldn’t the federal government go broke if we didn’t have a federal income tax?  No, actually the truth is that the federal government did just fine before there was an income tax.  In fact, the U.S. national debt has gotten more than 5000 times larger since the federal income tax and the Federal Reserve were created by Congress back in 1913.  As I have written about previously, the Federal Reserve system was actually designed to trap the United States in a debt spiral from which it could never possibly escape, and the federal income tax was needed to greatly expand the size of the federal government and to soak the American people of the funds necessary to service that debt.  But it doesn’t have to be this way.  America was once much better off before the income tax and the Federal Reserve were created, and we could easily go to such a system again.

What we desperately need to do is to teach the American people a little history lesson.  The truth is that the greatest period of economic growth in U.S. history was between the Civil War and 1913 when there was no federal income tax at all.  The following is from Wikipedia…

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Paul Craig Roberts ~ The Assault On Gold

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Paul Craig Roberts April 4 2013

For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

The Federal Reserve realized that its massive purchase of bonds in order to keep their
prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in US bond and stock prices.

Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from offshoring millions of US middle class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.

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Ellen Brown ~ Who Owns The Federal Reserve?

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Global Research January 29 2012

NY Federal Reserve Building

The Fed is privately owned. Its shareholders are private banks

“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.” – The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:

“The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2

This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Yahoo Finance reported on September 17:

“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”

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Michael Snyder ~ Federal Reserve Money Printing Is The Reason Why The Stock Market Is Soaring

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Govt Slaves | January 28 2013

You can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.

When the Federal Reserve does more “quantitative easing”, it is the financial markets that benefit the most.

The Dow and the S&P 500 have both hit levels not seen since 2007 this month, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?  Of course not.

Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding.

So quantitative easing has definitely not made things better for the middle class.  But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs and luxury estates in the Hamptons are selling briskly.  Unfortunately, this is how things work in America these days.  Our “leaders” seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

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GE Christenson ~ Non-Predictions For 2013 & 2014

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 Deviant Investor | January 14 2013

More of the Same

  • More money printing by central banks. A trillion here and a trillion there, printed money everywhere.
  • More deficit spending. $3 Billion per day, but who cares?
  • More useless commentary about controlling spending, but the result will be increased spending and more useless commentary.
  • More and higher taxes. More consumer price inflation.
  • More QE. Printing money props up the stock market, but for how long?
  • More debt. More student loans, more credit card debt, more mortgages, more sovereign debt, and eventually some nasty defaults.

Less of the Same

  • Less Congressional credibility – low and going lower.
  • Less belief in a better future. It is difficult to believe in a brighter future when the food stamps and welfare payments just don’t buy what they used to.
  • Less employment. People continue to drop out of the employment statistics because they have given up hope of finding work. This is called “structural unemployment.”
  • Less purchasing power for the dollar. The more the central banks print, the higher the cost of food, fuel, beer, and wine.
  • Lower standard of living. With much higher costs, the standard of living for most Americans will continue to decline.

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Michael Snyder ~ The Federal Reserve Shows Barack Obama Who The Real Boss Is

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The Economic Collapse Blog | January 14 2013

Barack Obama has greatly expanded the powers of the presidency during his time in the White House, but there is one institution that he simply will not mess with.  There is one organization that is considered to be so sacred in Washington D.C. that Obama will not dare utter a single negative word against it.  That organization is the Federal Reserve. 

Even though he has shown that he is unafraid to pick a fight with just about everyone else in Washington, Obama flat out refuses to criticize the Fed and he even reappointed Ben Bernanke for another term as Fed Chairman even though Bernanke has a track record of failure that would make the Chicago Cubs look good.

Perhaps Obama is aware of what has happened to other presidents that have chosen to tangle with the Fed.  In any event, it has become clear that Obama submits to anything that the Fed says without question, and the controversy over the “trillion dollar coin” is another perfect example of this.

For weeks, there has been much speculation in the mainstream media about the possibility that the Obama administration may print up a one trillion dollar coin that it would use to keep paying the bills of the federal government if an agreement to raise the debt ceiling is not reached.  But on Saturday the Federal Reserve killed that idea, and we shouldn’t be surprised by that because under no circumstances will the Fed ever accept a threat to their monopoly over money creation in the United States.

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JG Vibes ~ The Federal Reserve Makes At Least $90 Billion Per Year In Profits

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Govt Slaves | January 3 2013

Many people believe that the Federal Reserve is an organization that operates as a public service. There are not many out there who realize that this is a for profit business.

Of course, there is nothing wrong with providing a service and turning a profit, but there is something wrong with using the government to monopolize a vital aspect of society, forcing the whole society to use a particular service whether they like to or not.

It turns out that The Federal Reserve makes billions per year through this coercive monopoly, and this much activists and researchers have known for a long time.  However, until now there has been very little hard evidence or sources to reference, which tell us exactly how much money they really do make.  Recently, some numbers were revealed that can at least shed some light on a portion of their income, and these preliminary figures amount to at least $90 Billion per year.

Marketplace.org reported that:

“While leaders in Washington stare down the fiscal cliff, let’s not forget the fiscal fact that brought us to the edge: The annual U.S. government deficit of more than a trillion dollars.  But through it all, one government-related entity has been hauling in record surpluses. New data capture the scope of profits at the U.S. Federal Reserve, estimated to be $90 billion this year.”

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Breakdown Of The $26 Trillion The Federal Reserve Handed Out To Save Incompetent, But Rich Investors

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John Hively’s Blog | December 5 2011 | Thanks, Vernie

Below is letter from former Congressman Alan Grayson. It’s a breakdown of the money the Federal Reserve gave out to save rich investors from their own incompetence. Everybody assumes the Federal Reserve was out to save the banks. That’s not true. The Fed was out to save wealthy investors. If they hadn’t, a lot of rich people would be applying for jobs at Seven-Eleven. A ton of political campaign money would have dried up. A lot of money that corrupts the political system would be gone. A ton of corruption would have died. Goldman Sachs would’ve disappeared into bankruptcy. So while saving rich investors from their own stupidity, the Fed was also ensuring the continued corruption of the corporate wing of the supreme court, congress and the presidency.

There is one other matter I disagree with Congressman Grayson about in regard to the Fed’s actions. The Fed says most of the money it lent out has been paid back. That may not be true. If fact, it’s probably not true. The Fed may, or most likely, have simply cooked its own books to make it appear so. Maybe that’s why corporate profits are at record highs during this period of suppressed demand. How could they have record profits? How could they have paid back $26 trillion in loans in such a short time? That’s almost twice the domestic product of the entire United States. There’s only one answer. It’s not possible. They didn’t pay the money back, at least not most of it. The loans that were not paid back are being used to increase corporate earnings. The higher profits are going toward higher dividends and enhanced share prices for the wealthy. That makes the loans another conduit of unearned income for wealthy investors, as well as another pipeline for government corruption. Corruption is rampant, so don’t think the Fed is immune from it, since it saved the corrupters of Democracy, and likely made them richer in the process.

There’s something significantly more to this scandal and it goes something like this. But first, we need a definition.

A credit default swap is an insurance policy, usually provided on bonds backed by home mortgages. According to some sources, there were $60+ trillion worth of these insurance policies at the beginning of the housing collapse in the summer of 2006.

You didn’t need to own any of these bonds to insure them. It’s the same as being able to insure your neighbor’s house, without their knowledge, even if you don’t know the owner. Needless to say, you’d have a fair degree of incentive to burn your neighbor’s house down.

Institutions such as Goldman Sachs and a ton of unregulated investment firms called hedge funds took out insurance policies on mortgage backed bonds. These people were betting the market would collapse. They were right, even though some of them were selling the bonds up to the housing collapse and even a little after it began, even while telling hapless and really stupid (but wealthy) investors what wonderful investments the bonds were.

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Paul Craig Roberts ~ The Fiscal Cliff Is A Diversion: The Derivatives Tsunami And The Dollar Bubble

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Paul Craig Roberts | December 17 2012

cartoon_fiscalCBOThe “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.

The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget. http://www.guardian.co.uk/world/2012/nov/27/fiscal-cliff-explained-spending-cuts-tax-hikes

More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washington’s wars.

The Derivatives Tsunami and the bond and dollar bubbles are of a different magnitude.
Last June 5 in “Collapse At Hand” http://www.paulcraigroberts.org/2012/06/05/collapse-at-hand/ I pointed out that according to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.

Prior to financial deregulation, essentially the repeal of the Glass-Steagall Act and the non-regulation of derivatives–a joint achievement of the Clinton administration and the Republican Party–Chase, Bank of America, and Citibank were commercial banks that took depositors’ deposits and made loans to businesses and consumers and purchased Treasury bonds with any extra reserves.

With the repeal of Glass-Steagall these honest commercial banks became gambling casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.

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Lee Rogers ~ Power of the Purse (full length) [Video]

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Ahijab

A long (4 hrs plus) documentary that investigates the money powers throughout history, namely American history. From ancient times to present day, money has been used by the elite as a tool of enslavement over the masses. Never before has this been more true with privately run central banks creating money out of nothing and manipulating its value to engineer economic depressions consolidating wealth in fewer hands. This film shatters the illusions of the modern financial system and reveals the wizardry behind it all.

  • “Debt is Slavery of the Free”
  • Power of the Purse Volume explores the following topics and much more:
  • The Knights Templar’s International Banking System,
  • The Rise of the Rothschild’s European Banking Empire,
  • How the Federal Reserve and other Central Banks create money out of thin air to drive nations and people into debt,
  • 

How both sides of major wars and conflicts have been funded and engineered by powerful banking interests,
  • The 1970s And Inflation,
  • The Creation Of The Phony State Of Israel

,
  • 9/11 – The lies surrounding the official story of the September 11th, 2001 attacks and how it has been used to justify endless war,
  • How the manipulation of the value of money has been used to create economic depressions,

and more.

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Nora Claypool ~ The Fiscal Cliff Hoax: A Ruse To Rob Us

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End The Lie | December 5 2012 | Thanks, Vernie

Image credit ~ Anthony Freda

Mainstream media is having a field day with the fiscal cliff threat, with its usual flourish of fear mongering on tax matters and all things budget related.

However, the voices of reason are resonating among some who deny any real financial dangers exist since the government is hiding trillions of dollars from us in the usual esoteric way they do business.

Enter Walter Burien and the Comprehensive Annual Financial (CAFR), a second set of books hidden from the public that fully discloses the massive amounts of liquidity governments at federal, state and local levels have squirreled away and carefully not mentioned to us.

These off-budget funds are composed of profits our government has made through investing our tax dollars in large corporations. The federal government owns 70 percent, in some cases, of the global corporations who suck huge profits out of the world economy and engage other nations in conflict for nefarious reasons, such as control of key resources.

Some ten years have passed since Walter Burien, an accountant in New Jersey, stumbled upon the CAFR while looking over the Budget and Finance reports of that state.

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