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"I know of no severe depression, in any country or
any time that was not accompanied by a sharp decline in the stock of money, and
equally of no sharp decline in the stock of money that was not accompanied by a
severe depression." - Milton
Friedman
May 2007 Federal Reserve reports assets of about $836 billion,
92% of them are the marketable
securities.
By the spring of 2008 the values of
marketable securities had dropped to $500 billion
and total asset value had remained level until September of 2008.
September to December The Federal Reserve allowes the Monetary
Base to increase from $836 billion to $1,479 billion.
December 2008 95% of the Federal
Reserve "assets" are toxic collateralized debt obligations.
December 16 2008
Federal Reserve cuts interbank
lending rate to a range of 0% to .25%.
"The banks have exchanged $2 trillion in
toxic debt consisting of Asset-Backed Securities in
sub-prime mortgages, stocks and other high-risk credits in exchange for
cash and US Treasury bonds.
The Federal Reserve is holding some
$2 trillion in toxic debt.
Any release of information is opposed as that
might signal 'weakness'
and spur short selling or a run
by depositors.
The Federal
Reserve does not want to discuss this.
That is clearly also behind their
blunt refusal to reveal the nature of their $2 trillion assets acquired from
member banks and other financial
institutions.
Simply put, were the Fed to reveal to the public
precisely what 'collateral' they held from the banks, the public would know the
potential losses that the government may take." - F. William Engdahl
12/17/08
The interest tab to finance federal government expenditures
was $412 billion in fiscal year 2008, or about one-third of the federal
government's total income from personal income taxes which was $1,220
billion.
January
2009 Federal Reserve reportes assets of $2.1 trillion, an increase of
$1.2 trillion from September 2008.
That represents loans worth $1.2
trillion - a startling increase more than doubling the size of the Monetary
Base during the last quarter of 2008.
Ben Gisin, a former banker
tracking statistical releases, says he has never seen anything like it.
Fungible assets magically
appeared on the balance sheet of the Federal Reserve.
"The Fed Open Market
Committee authorized $300 billion in purchases of long term treasury bonds
for six months.
The central bank's latest efforts may help swell its
balance sheet to more than $4 trillion this year." - Scott Lanman, March 25,
2009
"The
Federal Reserve, like other regulators
around the world, did not do all that it could have to constrain excessive
risk-taking in the financial sector in the period leading up to the crisis." -
Ben Salom Bernanke Sunday, November 29,
2009
The Federal Reserve is paying out roughly $400 million a year for
"research" - much of it to outside economists who then advocate for the
Federal Reserve agenda without disclosing their Federal Reserve ties.
Seven of the eight economists on a 2009 anti-oversight letter to
Congress failed to note they are or were on the payroll of the Federal Reserve.
The Federal Reserve "so thoroughly dominates the field of economics
that real criticism of the central bank has become a career liability for
members of the economic profession."
"To understand the real cause of the credit crisis
and how it can be reversed, we first need to understand credit itself what it
is, where it comes from, and what the real tourniquet is that has limited its
flow.
Banks actually create credit; and if private banks can do it, so
could public banks or public treasuries.
The crisis is not one of
"liquidity" but of "solvency."
It has been caused, not by the
banks' inability to get credit (something they can create with
fungible accounting entries),
but by their inability to meet the capital requirement imposed by the
Bank for International Settlements, the
private foreign head of the international banking system.
What actually
constrains bank lending is the capital adequacy requirement, something that is
imposed not by our own central bank but by the Bank for International
Settlements.
Called "the central bankers" central bank, the BIS pulls
the strings of the private international banking system from
Basel, Switzerland." -
Ellen Brown
"The
Federal Reserve does not need slinky women in plunging necklines to peddle
money.
All it needs is low interest rates.
When rates are pushed lower than the rate of
inflation, the Fed provides a subsidy for borrowing.
If I offered
to give you $1.00 for every 90 cents you gave me in return, you would buy as
many dollars from me as you could.
The Fed operates the same way.
It generates market activity by
creating incentives for
borrowing.
Borrowing leads to
speculation, and speculation leads to
steadily rising asset
prices or asset price inflation.
The Fed is not an unbiased
observer of free
market activity.
The Fed drives the
market by fueling
speculation and controlling investment behavior by
fixing interest
rates.
The Fed IS
the market, which is
why it is foolish to talk about a "recovery".
The idea of recovery
implies a free-standing system based on supply and demand.
The bottom
line, is that the current financial architecture is not designed to work; it is
designed to make a handful of speculators very rich.
These speculators
own congress, the White House and the financial media, which is why
there has been no meaningful change in regulations." - Mike
Whitney
"The Federal Reserve will ask
a US appeals court to block a ruling that for the first time would force the
central bank to reveal secret identities of financial firms that might have
collapsed without the largest government
bailout in US history." - David Glovin 01/11/10
Freedom
of Information Act requires federal agencies to make government
documents available to the press and public.
US District Judge Loretta
Preska notes in her August 24, 2009 ruling that loan records are covered by
Freedom of Information Act
and rejected the claim that their disclosure might harm banks and shareholders.
"The Fed speculates on how a borrower might enter a downward spiral of
financial instability if its participation in the Federal Reserve lending
programs were to be disclosed. Conjecture, without evidence of imminent harm,
simply fails to meet the board's burden of proof." - US District Judge Loretta
Preska
In its appeal, the
Board of Governors of the
Federal Reserve System argued that
disclosure of "highly sensitive" documents, including 231 pages of daily
lending reports, threatens to stigmatize lenders and cause them "severe and
irreparable competitive injury."
What are they trying to
hide?"The outbreak of the current crisis and
its spillover in the world have confronted us with a long-existing but still
unanswered question, i.e., what kind of international reserve currency do we
need to secure global financial stability and facilitate world economic growth,
which was one of the purposes for establishing the
International Monetary Fund?
There were various institutional arrangements in an attempt to find a
solution, including the Silver Standard, the Gold Standard, the Gold Exchange
Standard and the Bretton Woods system.
The above question, however, as
the ongoing financial crisis demonstrates, is far from being solved, and has
become even more severe due to the
inherent weaknesses of the current international monetary system.
Theoretically, an international reserve currency should first be
anchored to a stable benchmark and issued according to a clear set of rules,
therefore to ensure orderly supply; second, its supply should be flexible
enough to allow timely adjustment according to the changing demand; third, such
adjustments should be disconnected from economic conditions and
sovereign interests of
any single country.
The acceptance of credit-based national currencies
as major international reserve currencies, as is the case in the current
system, is a rare special case in history.
The crisis again calls for
creative reform of the existing international monetary system towards an
international reserve currency with a stable value, rule-based issuance and
manageable supply, so as to achieve the objective of safeguarding global
economic and financial stability.
Issuing countries of reserve
currencies are constantly confronted with the
dilemma between achieving
their domestic monetary policy goals and meeting other countries' demand for
reserve currencies.
On the
one hand, the
monetary authorities cannot simply focus on domestic goals without carrying out
their international responsibilities, on the other hand, they cannot pursue
different domestic and international objectives at the same time.
They
may either fail to adequately meet the demand of a growing global economy for
liquidity as they try to ease
inflation pressures at home, or create
excess liquidity in global markets by
stimulating domestic
demand.
The Triffin Dilemma, i.e.,
the issuing countries of reserve currencies cannot maintain the value of the
reserve currencies while providing liquidity to
the world, still exists.
The frequency and increasing intensity of
financial crises following the collapse of the
Bretton Woods system suggests
the costs of such a system to the world may have exceeded its
benefits.
Nixon Ends Bretton Woods International Monetary
System
The desirable goal of reforming the international monetary
system is to create an international reserve currency that is disconnected from
individual nations and is able to remain stable in the long run, thus removing
the inherent deficiencies caused by using credit-based national currencies.
The International Monetary
Fund creates the Special
Drawing Rights when the defects of the Bretton Woods system initially
emerge to mitigate the inherent risks sovereign reserve currencies cause.
A super-sovereign reserve currency managed by
a global institution can be used to both
create and control global liquidity.
When a country's currency is no
longer used as the yardstick for global
trade and as the benchmark for other currencies, the exchange rate policy
of the country would be far more effective in adjusting economic
imbalances.
This will significantly reduce the risks of a future crisis
and enhance crisis management capability.
Special consideration should be given to
giving the Special Drawing
Rights (SDR) a greater role.
The SDR has the features and potential
to act as a super-sovereign reserve currency.
Moreover, an increase in
SDR allocation would help the Fund address its resources problem and the
difficulties in the voice and representation reform.
Therefore, efforts
should be made to push forward a SDR allocation.
The scope of using the
SDR should be broadened, so as to enable it to fully satisfy the member
countries' demand for a reserve currency.
The SDR, which is now only
used between governments and international institutions, could
become a widely accepted means of payment in international trade and financial
transactions.
The allocation of the SDR can be shifted from a purely
calculation-based system to a system backed by real assets, such as a reserve
pool, to further boost market
confidence in its
value.
Entrusting part of the member countries' reserve to the
centralized management of the IMF will not only enhance the international
community's ability to address the crisis and maintain the stability of the
international monetary and financial system, but also significantly strengthen
the role of the SDR.
With its universal membership, its unique mandate
of maintaining monetary and financial stability, and as an international
"supervisor" on the macroeconomic policies of its member countries, the IMF,
equipped with its expertise, is endowed with a natural advantage to act as the
manager of its member countries' reserves." - Zhou Xiaochuan, governor of the
People's Bank of China 03/23/09
"The stock of money,
prices and output was decidedly more unstable after the establishment of the
Federal Reserve than before.
Any system which
gives so much power and so
much discretion to a few men is a bad system. " -
Milton
Friedman |
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