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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 Federal Reserve's 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."
"Under a misguided set of international
rules that took hold toward the end of the 1990s, banks were allowed use
their own internal risk measurements to set their capital requirements." - Joe
Nocera
"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.
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 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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