Banks Looting US Treasury $85 billion a month with Toxic Mortgage Bond Swaps until Triggering a Greek Style Collapse.

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The One Percent Power Elite and their proxy political party argue austerity to justify automatic budget sequester cuts (except for what inconveniences Congress) of $2.4 Trillion dollars, cutting food stamps by $40 billion dollars, de-funding CHIP child health care by $13.3 billion dollars, government furloughs--and all the while 47 million Americans are in poverty.

And yet while enacting all these cuts to aggregate demand the Federal Reserve (Fed) has printed about $4 trillion dollars for the banks in a “stimulus” program called “Quantitative Easing (QE). This is free money transferred to Wall Street banks as the Fed buy collapsed mortgage bonds above their pre-collapse market values. The exact price is a secret. If we add to QE, special auction give aways and zero interest rate money the Fed has made available to Wall Street since 2008 it is estimated between $10 to $20 trillion dollars have been given to the banks with no strings attached.

Some economists call this money given away by the Fed to private banks a “stimulus” but it is really a massive scam by the banks off loading their toxic mortgage bonds onto the American people which will mean austerity and depression forever. The scam can be done in broad daylight because people don’t understand QE purchases; the off loading of bad debt is disguised as “stimulus” so the victims think they will somehow benefit from the mysterious bond purchases; and QE is administered as monetary policy by monetary specialists that isn’t subjected to critical review by democratic processes unlike fiscal budgetary policies. The empirical evidence shows that the four doses of QE in the last five years and provided very little stimulus.

QE is frequently called a Keynesian stimulus remedy, but Keynesians like James Galbraith disagree. If anything, the monetary policy of QE is closer to Milton Freidman’s school of economics. The economic collapse isn’t just a down turn of the classic business cycle, but goes much deeper to being a creditability trap. The 2008 economic collapse was the result of massive systemic fraud many times larger than the Enron scam. Keynesian economist, James Galbraith, believes the remedy to this economic collapse must be more radical, more systematic, and more overreaching than simply applying a fiscal stimulus fix.

James Galbraith - A Study of the World Economy Just Before the Great Crisis.

“I have considerable difficulty with framing desirable policy simply in terms of stimulus. I am sensitive to medical metaphor. This one is a jab with a syringe full of amphetamine. It is something you might doe to wake up an otherwise healthy individual that is lethargic, or sleeping in. It is not an effective approach for organ failure. The metaphor implies if you just spent taxes, cut interest rates, build up the money supply, or whatever your favorite stimulate of choice is, and do this for a short period of time then the system will kick back into motion and you will have a sustained and substantial recovery. I don’t think this is true. I don’t think this was true from the beginning of the meltdown. We suffered something we have not experienced since the thirties which was the collapse of the stability of the financial sector, the viability of the financial sector, its trustworthiness, and of the solvency of the American Middle Class because their housing values fell below their mortgages. They are not in the market to borrow so there isn’t a foundation for private sector to takeover. What you need instead? You need something which is a strategic approach. Something which is a long-term approach that builds new institutions. And we will have to dismantle some banks to make way for them which is not something that gives me a great deal of heartburn. We should of done it when the political opportunity was there and not waiting five years until they are entrenched once again with their bonuses and lobbyists…Roosevelt did not miss that opportunity in March of 1933. We are going to have to build up institutions that will let us do things that need to be done: jobs, the foreclosure crisis, energy, environment and climate change—the challenges we all know we face.” (40:00 to 42:50 minutes).

So what are the real purposes of the Fed’s QE buying of toxic bank mortgages besides getting rid of these bad bank loans? The Wall Street banks are getting billions of dollars from the US government treasury and at the same time loading the government down with bonds that will eventually implode in a Greek style collapse. This is not a bug, but a feature. The unregulated shadow-banking sector with $1.2 quadrillion in derivatives provide a infinite set of financial triggers that can be pulled at anything to start an economic collapse by which the banks will profit immensely thanks to Congress. Obama and the Democrats are oblivious to the trap the nation has stepped into. An amendment to the Bankruptcy Reform Act of 2005 called “Safe Harbor” guarantees banks special bankruptcy protection by giving derivatives “super-priority” over all other claims, “including tax, and wage claims, deposits, real secured credit and insurance claims. Critically, it ensures immediacy (liquidity) for their holders.”

This is Wall Street’s true end game. This is why Wall Street is withholding credit and not investing in productive domestic businesses because they know the future plan. With the US government collapsed, banks will have trillions of dollars to buy up government assets (privatization) for pennies on the dollar. It will be Disaster Capitalism amplified to the level of Armageddon chaos. Wall Street will not have to worry about government interference into shadow banking speculative activity. No more government deficit spending, or troublesome corporate taxes. The national economy will become a “toll booth” rentier state economy. The new laws of the Trans-Pacific Partnership (TPP) Agreement will become the new standards for global corporate behavior. The One Percent Elite will have their money safely stored in offshore havens, with their heavy industrial capital assets overseas. The local police forces have been trained in urban warfare for decades, and militarized with Pentagon weaponry at their disposal to keep domestic order once the populace realizes what is happening. Most of government spending will have already been shutdown by Congress with a series of de-funding legislation so transition from a government ran by Washington to a gangster quasi-government on Wall Street will be seamless. The American Coup by Wall Street’s weapons of financial mass destruction will have been completed and a new era of Neoliberalism begun.

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Former US Treasury Official - Terrifying US Collapse Ahead

"Today a former US Treasury Official warned King World News that the U.S. is now headed toward a terrifying collapse. He also cautioned that, despite mainstream media propaganda, the Fed and other Western central planners are now desperately trying to keep the current financial system from imploding. This is without question one of the most powerful interviews Dr. Paul Craig Roberts has ever done."

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Robert Prasch: The “Lessons” that Wall Street, Treasury, and the White House Need You to Believe About the Lehman Collapse

No One Saw It Coming: Of all the falsehoods being circulated, this one is in many ways the most egregious and damaging. It systemically denies the attribution of credit and thereby voice (and political power) to those who in fact did see “it” coming even as it provides blanket exoneration to those whose ignorance–or more likely–cowardice combined with self-interest prevented them from perceiving what was happening in the financial sector....

The Crisis was Almost Exclusively About Liquidity: Wall Street, Treasury, the White House, and the Congressional leadership of both major political parties (who came together to support the infamous bailout legislation that created TARP), desperately want you to believe that in the Fall of 2008 America’s largest and most prominent financial firms were illiquid as opposed to insolvent (for the record, insolvent financial firms have made this claim since the beginning of time)....

TARP was the Only “Responsible” Choice in 2008: Besides being self-serving, this falsehood is rendered even more audacious when Congress’ vote for TARP is described as a “difficult choice” that required “courage.” Apparently we are to believe that voting for a federal program that lends money at below market rates to major campaign supporters with effectively no accountability is “courageous.” Amazing....

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Antifascist
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Dude, dude ... AntiFa my friend, this has been going on for a year.

A trillion dollars have been created and spent out of thin air - by fiat - all to the banksters [!!!???!!!] And alll for naught, not even inflation because it is all priming a fullly functional pump. $85,000,000,000 per motnth, half for mortgage backed-securities [MorBS] and half to extend the nationall debt [austerity support?] at $500 billion each [a.k.a. $500,000,000,000] per year. In personal terms approx. $1.250 per erso n the US. Woulda fixed alotta teeth and cars...

If applied to the real economy.

The funny thing is that Bernancke (and presumably the antecessors) willl continue this bogus policy until 'the economy improves' ... as if they are directly related.

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LeMoyne
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Jul. 31, 2007 4:01 pm

And all of the $1,000,000,000,000.

ALL. OF. IT.

Proves that PMMT works.

If the USGovt spent our money into existence by taking care of kids and elders this world would begin to truly accelerate along the long arc towards justice... we would begin to move back to the garden - instead of towards mass extinction.

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LeMoyne
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Jul. 31, 2007 4:01 pm

And , apologies but I must again disagree, the banks are not looting the treasury of US, they are stealing the bread and breath from our mouth. The money of the US is a commons. Like the language it is a medium of exchange. It is the way by which people feed their kids. It is the primary way things get done. Like a God, it rules alll measures of exchange. Because people say they need $$$, money is necessary for all things and dominates all of nature and the life which spawned us. The corporate hierarchical form has created a new feudalism that must dissolve for humans to survive. Ya basta!!

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LeMoyne
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Jul. 31, 2007 4:01 pm

but there's "no" inflation so it's all good.

Just go work some flips, gangsta.

chilidog
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Jul. 31, 2007 4:01 pm

This is an excellent article about Quantitative Easing used as a stimulus post 2008 crash. I have argued that QE is not a Keynesian policy for stimulus. During the 1930’s depression Keynes viewed the policies of manipulating the interest rate as an ineffective tool. However, Conservatives and their economic guru, Milton Friedman later sold monetary policy as less intrusive than Keynesian fiscal policy. John K. Galbraith describes the rise of monetary policy during the 1970’s as unfortunate. He writes, “Money: Whence It Came, Where It Went” the following early history of monetarism.

The final flaw was this revival, during these years, of faith in monetary policy. In light of the history of this instrument it was as surprising as it was damaging…
Nevertheless, offstage faith in monetary policy was growing. Partly this was the result of the fading memory of earlier failures. Partly it was the normal human hope that salvation might somehow be found in magic, sorcery or witchcraft as these are revealed to experts. Partly it reflected the unsinkable prestige of central bankers in general and the Federal Reserve System in particular, something to which readers of this history will no longer react with surprise. In the small world of economics the failures of monetary policy, though fully conceded, continued to be a reflection not of fundamental fault but of interesting aberration. The text-books and teaching still told in refined detail of how movement in the rediscount rate and the purchase and sale of bonds, notes and bills could increase or decrease the supply of money, thus encourage or restrain the economy. Discussion of movements in the money supply became especially fashionable, although subject somewhat inconsistently to growing doubts…as to what should be included in the monetary aggregates. And best of all was the fee dome of monetary policy from interference from any of the inconveniences of public process. Monetary policy “…enjoys a degree of flexibility which fiscal policy does not enjoy: The decisions of the Board of Governors are not subject to the time-consuming procedures which characterized congressional action or to the time lapse which may occur between the enacting and the applying of fiscal policy.” Footnote 13 (Campbell R. McConnell, Economics, 4th ed. (New York:McGraw-Hill Book Co., 1969, p. 332.)

But much of the revival was owing to the effective evangelism of the most diligent student of monetary policy and history during these years, Professor Milton Friedman. As a devout and principled conservative, Professor Friedman saw monetary policy as the key to the conservative faith. It required no direct intervention by the state in the market. It elided the direct management of expenditures and taxation, not to mention the large budget, which was implicit in the forgiving the errors of the Federal Reserve or minimize role of government—for returning to the wonderfully simpler world of the past. Professor Friedman did not forgive the errors of the Federal Reserve or minimize their importance. On the contrary, he emphasized them, and thus he took no responsibility for past misfortune or non-fortune…Professor Friedman’s case was not casually advanced; it was supported by massive evidence which, as necessary, was arranged to serve the author’s purpose. (Substantial changes in the velocity of money use had especially to be explained away. There was also the serious and unresolved problem just mentioned of what was to be counted as money.) In the years to come, Professor Friedman’s breathtakingly simple solution would not, in fact, be tried. But it would powerfully support the hope that all problems could be solved by the magic of monetary management. Alas. (Money: Whence It Came, Where It Went, by John Kenneth Galbraith, 1975, Bantam Press, p. 338-342.)


With the election of Reagan in the 1980s Freidman’s simple solution was tried resulting in great pain for the middle-class and extreme income inequality.
With this early history of monetary magic in mind, read the article below--written some 38 years after Galbraith’s criticism--about how monetarism has failed to stimulate aggregate demand directing the income flow to the 1% elite. Also note how this conservative monetarist policy of QE was enacted without the inconvenience of democratic processes—this is called euphemistically “flexibility.” (Bold highlight is my emphasis)
The Regressive Politics of Quantitative Easing

From Unconventional Economist, who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. Cross posted from MacroBusiness, originally published at The Conversation.

When financial markets stood on the verge of collapse in the summer of 2008, two of the world’s most important central banks, the US Federal Reserve and the Bank of England, began considering unorthodox policy measures. They turned to Quantitative Easing, or QE: injecting money into the economy by purchasing assets from the private sector, in the hope of boosting spending and staving off the threat of deflation. These were desperate measures for desperate times.

With signs of a fragile economic recovery gathering enough momentum to reassure policymakers in the US, the policy was expected to be wound down. But in a move that caught commentators off guard, the Fed instead committed to continue with its existing level of asset purchases. For the foreseeable future, at least, QE is here to stay. What began as a short-term crisis measure has now become a key component of Anglo-American growth strategies. It’s important, then, to take stock of QE and the central role it has played within the Anglo-American response to the financial crisis.

The way the Fed led the policy response to the financial crisis is important in two ways. First, it reflects the extent to which the Anglo-American economies have become financialised: credit-debt relations are pervasive throughout all facets of contemporary economic activity and there has been a deepening, extension and deregulation of financial markets commensurate with this development. In that context, with the increased competitiveness, scale and global integration of financial markets intensifying the risk of financial instability, the crisis management capacities of central banks have become increasingly important.

Second, central bank leadership of the policy response also reflects a key feature of neoliberal political economy in practice. Despite all the rhetoric of free markets, competition and deregulation that has been the mainstay of neoliberalism, there is a central contradiction at its heart: neoliberalism has been extremely reliant upon the active interventions of central banks within supposedly “free” markets.

The crisis has been warehoused on the expanding balance sheets of central banks, demonstrating just how much scope for policy manoeuvre there is when governing elites want it. Government debt and private assets, including toxic mortgage-backed securities, have been indefinitely transferred onto central bank accounts. This strategy highlights the role of arbitrary accounting processes, shaped by state institutions, at the heart of supposedly “free market” economies.

Given this room for manoeuvre, there is no doubt that a much more expansionary fiscal policy and a progressive taxation system could have been implemented in response to the crisis, but that response is foreclosed by the ideological confines of the prevailing neoliberal orthodoxy. Instead, we have monetary expansion and fiscal austerity.

Incubated within the crisis conditions of the 1970s, the neoliberal revolution in the West was birthed during the 1980s with the landmark electoral victories of Margaret Thatcher and Ronald Reagan. The early years of their tenure were marked by proactive central bank policies, fighting inflation through high interest rate regimes that were justified with monetarist dogma. Those policies had mixed results, but, crucially, they signified the strong emphasis upon monetary policy within the new paradigm, which now prioritised price stability, rather than the traditional post-war commitment to full employment.

By 2008, the challenge faced was markedly different. Now it was deflation and a shortage of liquidity, not inflation, which threatened the functioning of financial markets. Yet, in common with the inflationary crisis of the early 1980s, monetary policy has again been emphasised as the proactive component of the policy response. The common element in both crises is this combination of monetary activism, through extreme tightening (in the 1980s) or loosening (from 2008) of the credit flow, plus of course fiscal austerity.

What have the effects of this combination been? In the 1980s, the high interest rate regimes aggravated unemployment, boosted bank profits and accelerated the growth of income inequality. When the Anglo-American economies did return to growth they were markedly different than they had been before.

In the present period, we’ve witnessed a similar form of wealth redistribution. Recent estimates by Berkeley professor Emmanuel Saez, an influential scholar of income inequality, suggest that 95% of wealth gains since 2009 have accrued to the top 1% of the US income distribution pattern. In Britain the experience has been very similar, with the Bank of England’s own report in 2012 suggesting that QE had benefited Britain’s richest 5% the most.

These two major crises – the first inflationary and the second deflationary – have been the defining moments of the neoliberal period within the Anglo-American sphere and it’s remarkable that they have led to a similar pattern of policy response.

They have also both produced “regressively redistributive recoveries”: by this I mean that where and when growth has returned the benefits have been highly skewed towards the upper percentiles of wealth holders. That was the case in the 1980s, when the acceleration of income inequality really got underway. And it has been the case, once again, in the wake of the 2008 crisis.

Today’s “recovery” has largely been confined to rising stock prices and asset values. Meanwhile, average incomes have continued to stagnate or decline and income inequality has intensified. Quantitative easing has been central to this regressively redistributive recovery, boosting balance sheets and stock market values without providing a commensurate recovery throughout the economy as a whole. These measures have disproportionately benefited those who already own financial assets on a large scale.

Quantitative easing is thus exposed. It’s not merely a technical remedy to a malfunctioning financial system, but rather a deeply political policy programme. There are winners and losers just as with any economic policy that affects the overall distribution of wealth and resources within society. The conventional fixation with GDP obscures these dimensions of the recovery and ignores key questions about the distribution of wealth within society.

As the statistics about the uneven benefits of economic activity since the final crisis show, it’s important to remember that recessionary periods are not simply dead-spaces: even while the pie may be shrinking, the slices held by different groups within society can expand and contract in a very uneven manner with serious social consequences. There is no small irony in the fact that the banks, whose indiscretions lay at the heart of the original financial crisis, have been the major winners during the recession.

If we keep on following these same neoliberal policy paths we will only end up with ever more deeply divided and highly unequal societies. These are not firm foundations for healthy democracies.

Article by Jeremy Green, Research Fellow, Sheffield Political Economy Research Institute (SPERI) at University of Sheffield

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Jul. 31, 2007 4:01 pm

Anti, a lot of people can't understand monetary policy, but they do understand the rich getting richer by their blood, sweat, and tears, while they get poorer. They can also wonder why the Fed isn't printing money for them, only the brain-dead believe "trickle- down" work. Maybe that's why the psycho 1% representives are acting so crazy, to keep the people from focusing on solutions to the problem? Even a N-War couldn't keep the blind from seeing the injustice of this economic system. But if there is war, the 99% must aviod being "cannon folder", let the psycho 1% fight their own wars.

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Here is an eye-opening article of how the same scam of QE and Neoliberal policies are being applied to the Japanese economy. The effects are very much the same on the Japanese economy as on the American economy. Most Japanese are clueless to what is being done to them because they are accustomed to the government's postwar policies much like Americans who took for granted New Deal reforms like Glass-Stegal and social safety net programs. Notice how the Japanese QE money giveaway to the Japanese banks ellipses the fiscal stimulus which is much more effective for increase aggregate demand, but is only a one shot deal while QE will continue indefinitely. I extracted key paragraphs from Whitney article, but the entire piece is a very good descriptions of QE effects and how it's sold to the public in both America and Japan.(My bold for emphasis).

The Abenomics Flimflam
Neoliberalism, Japanese-Style
by MIKE WHITNEY

Abenomics is largely a bunko-scam wrapped in public relations gibberish. It has no chance of producing a strong, sustainable economic recovery. The real aim of the policy is to temporarily juice GDP with a sizable blast of fiscal stimulus ($100 billion) so the Bank of Japan can stealthily transfer more money to its chiseling investor friends via its bond buying program called QE. In other words, the program works the same way it does in the US, the only difference is the scale of the operation and a number of anti-worker provisions touted as “critical reforms”. Sound familiar?...

...Haruhiko Kuroda has taken a “damn the torpedoes” approach and pledged to double the money supply in two years in an effort to pull the economy out of 15 years of deflation. Kuroda figures that raising prices will boost spending and corporate investment laying the groundwork for more activity and hiring, greater demand and stronger growth. The only bugaboo is how to get all that newly-minted money into the economy. As Fed chairman Ben Bernanke has discovered, the liquidity that flows into bond purchases stays locked in the financial system making stocks bubbly, but leaving the real economy largely unaffected. That’s why unemployment in the US is still above 7 percent and GDP is in the 2 percent-range even while the Fed’s balance sheet has ballooned by $3 trillion. It’s because trickle down doesn’t work for shit.

...So what was gained by cutting the yen? A big, fat nothing, that’s what. The situation for the average working stiff is worse than ever. Why? Because everything’s gone up except his lousy wages. How does a cheap yen help if gas just jumped from $4 to $6 bucks a gallon but you haven’t gotten a raise in 5 years? Explain that to me? The only way inflation can have a positive effect is if wages rise at the same time as other prices and generate more spending, otherwise it’s a bust.

...Okay, so wages are in the toilet, we know that, but what about growth? At least GDP is improving, right?

Sure, it is, in fact, second quarter GDP was just revised upwards to an impressive 3.8 percent. But that’s mainly because the wily Abe frontloaded his program with $100 billion in old fashioned fiscal stimulus. Unfortunately, the fiscal component is a one-shot deal scheduled to run out next year, so the wheels of activity should slow considerably in the months ahead.

None of the knucklehead analysts talk about the Keynesian part of Abenomics because it detracts attention from Kuroda’s QE-fireworks. We can’t have that! The media wants everyone to believe that it’s actually possible to grow the economy by pumping up bank reserves and stuffing the pockets of shady speculators with more boodle. Isn’t that what QE amounts to; a big freaking giveaway to silk stocking plutocrats and their fatcat buddies?

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Antifascist
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Well, an audit of the Fed showed about $17 trillion pumped into finance so far. I guess the 161 individuals who own well over half of the planet's $200 trillion in wealth require a larger share.

Controlling the world's major financial institutions, Central Banks and governments does seem to have its rewards.

Some in the U.S. hope for a restoration of the Glass-Steagal Act. Naive.The pillage has just begun. The Trans Pacific Partnership will give them veto power over any mere nation state that attempts to put the brakes on them.

In the meantime, back to discussing which impoverished person can marry which impoverished person. Important stuff.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Again, I do not see it as just a coincidence that the Federal Reserve and the 16th Amendment (reversing the intent of the original proposers of the U.S. Constitution) to implement personal income tax were initiated in the same year......

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Kerry
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You have got to read this article on the coming debt ceiling showdown. I extracted the most interesting paragraphs. If the Tea Party and Republicans wants to crash the economy, they just might do it this time.

The Nightmare Scenario: A Repo Implosion by MIKE WHITNEY

President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media. Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17. Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fund which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.

Repo is at the heart of the shadow banking system, that opaque off-balance sheet underworld where maturity transformation and other risky banking activities take place beyond the watchful eye of government regulators. It is where banks exchange collateralized securities for short-term loans from investors, mainly large financial institutions. The banks use these loans to fund their other investments boosting their leverage many times over to maximize their profits. The so called congressional reforms, like Dodd Frank, which were ratified after the crisis, have done nothing to change the basic structure of the market or to reign in excessive risk-taking by undercapitalized speculators. The system is as wobbly and crisis-prone ever, as the debt ceiling fiasco suggests. The situation speaks to the impressive power of the bank cartel and their army of lawyers and lobbyists. They own Capital Hill, the White House, and most of the judges in the country. The system remains the same, because that’s the way the like it.

US Treasuries provide the bulk of collateral the banks use in acquiring their short-term funding. If the US defaults on its debt, the value that collateral would fall precipitously leaving much of the banking system either underwater or dangerously undercapitalized. The wholesale funding market would grind to a halt, and interbank lending would slow to a crawl. The financial system would suffer its second major heart attack in less than a decade.

...Keep in mind, the US government does not have to default on its debt to trigger a panic in the credit markets. Changing expectations can easily produce the same result. If the holders of US Treasuries (USTs) begin to doubt that the debt ceiling issue will be resolved, then they’ll sell their bonds prematurely to avoid greater losses. That, in turn, will push up interest rates which will strangle the recovery, slow growth, and throw a wrench in the repo market credit engine. We saw an example of how this works in late May when the Fed announced its decision to scale-back its asset purchase. The fact that the Fed continued to buy the same amount of USTs and mortgage-backed securities (MBS) didn’t stem the selloff. Long-term rates went up anyway. Why? Because expectations changed and the market reset prices. That same phenom could happen now, in fact, it is happening now.

...So the Obama team isn’t worried that Joe Homeowner won’t be able to refi his mortgage or that the economy might slip back into recession. They just don’t want to see Wall Street take it in the shorts again. That’s what this is all about, the banks. Because the banks are still up-to-their-eyeballs in red ink. Because they still don’t have enough capital to stay solvent if the wind shifts. Because all the Dodd Frank reforms are pure, unalloyed bullsh** that haven’t fixed a bloody thing. Because the risks of another panic are as great as ever because the system is the same teetering, unregulated cesspit it was before. Because the banks are still financing their sketchy Ponzi operations with OPM (other people’s money), only now, the Fed’s over-bloated balance sheet is being used to prop up this broken, crooked system instead of the trillions of dollars that was extracted from credulous investors on subprime mortgages, liars loans and other, equally-fraudulent debt instruments.

Can you see that?

This is why the media is pushing so hard to end the debt ceiling standoff; to preserve this mountainous stinkpile of larceny, greed and corruption run by a criminal bank Mafia and their political lackeys on Capital Hill. That’s what this is all about.

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Antifascist
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Jul. 31, 2007 4:01 pm

We all had a chance to stop the monthly gift to the banks and Wall Street. Somehow I heard no support for Larry Summers for Fed. chief from the left.

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Dexterous
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Apr. 9, 2013 9:35 am

Anti, good post. The psycho 1% get three birds with one stone(self implosion) in defending their corrupt non-sustainable systems. # 1, the WMD was a first warning, now the world economic threat. # 2, show government addiction to private markets # 3, in your face to the 47% who depend on government. The only response i see for the 99% is, become allies with the family that's in the police state and "Occupy the Fed". Power respect power.

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tayl44
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Jul. 31, 2007 4:01 pm

In following up on post #13 above about Repo implosion as we approach debt ceiling default...

Blackrock Joins JPMorgan And Fidelity - Sells All October And November T-Bills

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Antifascist
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Jul. 31, 2007 4:01 pm

Anti #16, remember the James Bond movie "Goldfinger"? You think the Fed is fix like the World Trade buildings were for 9/11?

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tayl44
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Like many Americans, the world is fed up with American Casino Capitalism. Wall Street pawned off exploding securities to the European Union which caused a massive worldwide financial meltdown, and then American allies are told by Edward Snowden that everyone’s electronic communications are being monitored and stored by the National Security Administration; and if that wasn’t enough, on a whim Washington DC plays a game of chicken with the world’s reserve currency threatening even more severe economic hardship for everyone. The nations of the world have serious concern of the stability the American economic and political system. They have a clearer understanding of how precarious the situation is than most Americans (see System Failure: US Democracy Is Nearing its Limits by Sebastian Fischer and Marc Pitzke, Spiegel Online). Read what the Germans think in this Spiegel article.

...the political crisis has turned out to be a systemic crisis.

America's 237-year-old democracy is approaching its limits. Its political architecture was not designed for long-lasting blockades and extortion, the likes of which have been enthusiastically practiced by Tea Party supporters for almost the last four years. The US's founding fathers proposed a system of checks and balances, not checks and boycotts.

In hardly any other western democracy are the minority's parliamentary rights as strongly pronounced as they are in the US, where a single senator can delay legislation, deny realities, and leverage the system.

China is leading the BRIC countries (China, Russia, India, and Brazil) have already taken concrete steps to “De-Americanize” international trade by building a new system not dependent on the rigged American currency that acts as a universal monetary standard for exchange among countries (see article, China To Unleash The Worst Nightmare For The US--October 17, 2013). Foreign creditors all around the world are dumping United States Treasuries bonds that store income from exports sold to America and choosing instead currency swap deals, gold, and even bartering to exclude the corrupt American middlemen. In fact they are selling USTreasuries at a rate greater than even when Lehman failed in 2008. Last June 2013 some $40.8 billion dollars worth was returned to the US Casino Gulag.

Foreigners Dumping USTreasury Bonds, Jim Willie, Oct. 17,2013

Foreigners sold more US$-based securities in June than after the Lehman Brothers bankruptcy. The USFed must lap up what is dumped. Big pressure is on primary dealers, which the USFed must relieve. The Taper Talk [the USFeds reduction of buying Wall Street’s toxic securities] will reverse into an acceleration of official bond purchases. A global USDollar rejection is in full swing. The new threat is the seizure of the REPO market, the vast overnight credit window device. In June and July, the Jackass [Jim Willie’s moniker] indicated that the USFed would eventually be forced to buy up all the foreign dumping of USTreasury Bonds. It happened. The TIC Report is compelling. Paul Mylchreest added a great point regarding the tighter capital requirements imposed by Basel III Rules. He said, "Leverage ratio regulations might preclude banks using REPO's to accommodate sudden influx of Treasury [being dumped by foreigners.] Maybe they will use the Exchange Stabilization Fund if BRICS start swapping USTreasurys for Gold as you suggest." So the big US banks, and London banks too, might not be able to withstand the huge flood of USTBonds returned to the sender from foreign sources due to stricter rules on stretched capital.

A recent Treasury Investment Capital (TIC) Report showed every single type of US$-based securities sold on a net basis, a rare occurrence. The big culprit Treasurys sold a record setting net $40.8 billion, the largest single month sale of USTBonds in history. The consolidated foreign sale in June 2013 was greater than either month when Lehman failed, September or October 2008. The conclusion is simple and staring the nation in the face. The USFed must accelerate the QE bond monetization program, not reduce it. The public statements and declared rationale will be interesting, if not a comedy in lies, and an exposure of failure. The bigger conclusion is that the USGovt debt default is within view, no longer over the horizon.

Not only are foreigners returning America’s bad monopoly funny money, they are opting out of America’s security surveillance state panopticon by building a de-Americanized internet. Already, IBM is reporting a 50% drop of Internet hardware and software business in China with the same trend appearing in Russia, Brazil, Germany, and other countries.

Wolf Richter: NSA Revelations Kill IBM Hardware Sales In China, Oct. 17, 2013

Snowden’s revelations started hitting in May. Not much later, the Chinese security apparatus must have alerted IT buyers in government agencies, state-owned enterprises, and major independent corporations to turn off the order pipeline for sensitive products until this is sorted out. As Mr. Loughridge’s [IBM CEO] efforts have shown, it’s hard to explain any other way that hardware sales suddenly collapsed by “40%, 50%” in China, where they’d boomed until then.

This is the first quantitative indication of the price Corporate America has to pay for gorging at the big trough of the US Intelligence Community, and particularly the NSA with its endlessly ballooning budget. For once, there is a price to be paid, if only temporarily, for helping build a perfect, seamless, borderless surveillance society. The companies will deny it. At the same time, they’ll be looking for solutions. China, Russia, and Brazil are too important to just get kicked out of – and other countries might follow suit.

As an American, I am glad that the world is standing up to the American triptych mafias based on Wall Street, in the Chicago Mercantile Exchange, and in the Washington DC cesspool.

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Antifascist
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In the minds of the desperate, losing "control" means utter wipeout. What they fail to remember is our own Marshall Plan good sense that restoring a world order does not mean squatting all over it. It means having others in the game.

I hear cons worry about China running the world to justify the massive MIC. China might just have gotten the message from our story about the futility of imperial domination. They might see a more practical way to profit from trade and establish security by other means as well. They might even find a way to integrate freedom into their world.

It makes no sense to think that the rest of the world will stand around and let its fate be settled by our peculiar mix of farce and soap opera.

drc2
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Apr. 26, 2012 12:15 pm

Anti #18, i think the old money pass the empire football to China during Clinton terms. Now the new money rats are threating the economic world, because their economic world(MIC, Oil kings, Paper kings) is base on corruption/nothing. They have the most to lose with a economic world moving to a eco-sustainable system base on economic equality & justice. The only option to keep them from going totally insane, "promise a safety net" for those displace by a new economy, and justice for those that commit the worse crimes.(we want to be civilize) Drc2 #19, i agree, and China is proving they have "learn lessons", with controlling their money being #1.

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tayl44
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Here is a good explanation of unregulated "Repo" financial instruments and how these caused the Crash of 2008.

How Unregulated Banking Triggered the Crash of '08 : Repo, Baby, Repo by MIKE WHITNEY

Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”

Regrettably, the Federal Reserve’s nontraditional monetary policies (ZIRP and QE) have succeeded in restoring the repo market to it’s precrisis level of activity, but without implementing any of the changes that would have made the system safer. Repo is as vulnerable and crisis-prone today as it was when the French bank PNB Paribas stopped redemptions in its off-balance sheet operations in 2007 kicking off the tumultuous bank run that would eventually implode the entire system and push the economy into the deepest slump since the Great Depression. By failing to rein in repo, the Fed has ensured that financial crises will be a regular feature in the future occurring every 15 or 20 years as was the case before banks were more strictly regulated and government backstops were put in place. Repo returns us to Wild West “anything goes” banking.

...let’s give a brief explanation of repo and how the system works.

Repo is short for repurchase agreement. The repo market is where primary dealers sell securities with an agreement for the seller to buy back the securities at a later date. This sounds more complicated than it is. What’s really going on is the seller (primary dealers) are getting short-term loans from money market funds, securities firms, banks etc in order to maintain a position in securities in which they’re suppose to make markets. So, repo is like a loan that’s secured with collateral. (ie–the securities) It is a “funding mechanism”.

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Antifascist
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Ahhhh....gotta love it. Debt to make a contract to buy financial paper backed by nothing except the hopes that it will go down in price so you can buy it cheaper than the loan taken out for the contract....and sell it to another fool at a profit.

When did banksters stop making loans for cars and washing machines and switch to gambling loans?

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm
Quote polycarp2:

When did banksters stop making loans for cars and washing machines and switch to gambling loans?

Retired Monk - "Ideology is a disease"

When the Fed started pumping $85,000,000/month into them, and yet not a word supporting Larry Summers who would have by most accounts, slowed or completely stop the practice.

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Anti #21, when a system can't produce anything, the only thing left is "feed on itself". Poly #22, to answer your question "when banks stop making produstive loans"? Read above. Dex #23, if the Fed wasn't printing money, the world would have been "HISTORY"! The epitaph "We Die to Spend Our Money In Hell"!

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tayl44
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The Fed is not printing money.

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Dexterous
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No. It is BORROWING money from the banksters. We don't have to. We could just print it.

drc2
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Good stuff here. It all adds up to, once again, our political system is owned by big corproate. My only gripe is that this topic should have gone on the economics board.

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Combad57
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May. 29, 2012 12:50 pm
Quote drc2:
Quote Dexterous:

The Fed is not printing money.

No. It is BORROWING money from the banksters. We don't have to. We could just print it.

I'm confused. Are you two both referring to Bernanke?

chilidog
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Jul. 31, 2007 4:01 pm
Quote Dexterous:
Quote polycarp2:

When did banksters stop making loans for cars and washing machines and switch to gambling loans?

Retired Monk - "Ideology is a disease"

When the Fed started pumping $85,000,000/month into them, and yet not a word supporting Larry Summers who would have by most accounts, slowed or completely stop the practice.

Actually, Summers, who helped Clinton de-regulate banking made his own fortune as a hedge fund manager afterwards, and helped to engineer the first bailouts. His own personal fortune was at risk if he didn't.

Banksters are still trying to gamble themselves out of insolvency so their worthless financial paper held as an asset can be given its true value...zilch. The final winning banksters will leave a trail of losing, collapsed banks in their wake.

Even with fractional reserve banking, their fractional reserves aren't high enough to loan money back into the economy in the amounts required. If they gamble with the money, the gambling paper is held as an asset It doesn't lower their reserves. Money that doesn't exist is counted as money.

The Fed is continuing to prop banks up. It's probably better than your trying to access an empty ATM.

Our banking and monetary system is the best ever devised. We don't dare change it. LOL

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Dex, where does the Fed money come from? Remember, congress ask that question during the first bailout, i never forget the look on the Fed chairman face when he answer the question. Look it up on C-SPAN.

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tayl44
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Jul. 31, 2007 4:01 pm

Jim Willie CB - Gold-Gas, Goodbye to the Petrodollar

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Antifascist
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Jul. 31, 2007 4:01 pm

Here are a series of charts showing the increase in the money supply, and the transfer of trillions to the banks while everyone else get austerity cuts.

Adjusted Monetary Base Is On a Tear Again - Efficient Markets Policy Error

I think that history may view the co-opting of the urge to reform the banking system, and the outrage at the Wall Street bailouts, into the Tea Party's strong popular backing for financial repression of the victims, and the centering of the political debate on throttling government spending for the public good while propagating a financial system that heavily favors and subsidizes the wealthy financiers, to be one of the great propaganda coups of the 21st century.

Almost as good is running a populist presidential candidate, packaged as a progressive reformer and widely denounced by the opposition as a socialist, who in policy practice is the virtual reincarnation of Herbert Hoover, but without his many prior logistical accomplishments.

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Antifascist
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Jul. 31, 2007 4:01 pm

The Fed simply adds created credits to the banks reserve accounts in exchange for Mortgage backed securities and Treasury bonds from the banks

In theory, it is presumed that it will keep interest rates low, and therefore more loan money will be available.

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Dexterous
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Apr. 9, 2013 9:35 am

Anti #31 & 32, i think we 99% get our act together, we can say "goodbye to gold & gas-dollar". It hard not believe that Obama is ignorant of Soviet Union collapse history? All the money the 1% have, can disappear over night. Would it be hard to imagine the 99% creating a new currency, each country to its own? Dex #33, what's the difference between "created credits and printed money"?

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tayl44
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Jul. 31, 2007 4:01 pm
Quote tayl44:

Dex #33, what's the difference between "created credits and printed money"?

One does not involve a actual printing press and paper.

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Dexterous
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Apr. 9, 2013 9:35 am

What do they have in common? To be worth anything, they have to represent real value creation/engaged productive capacity. Printing money to fund a stupid war is pure waste, but money is made/stolen. Credit created to finance real value creation comes back as profit. Money is now energizing the economy to its systemic utility for human society. There is a huge difference.

The one caveat here is that we do need to avoid the myth of perpetual growth as well as the idea that starving the beast will leave us lean and mean instead of malnourished and weakened.

drc2
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Apr. 26, 2012 12:15 pm

I'll take a few of those "created-credits-of-questionnable-worth."

chilidog
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Jul. 31, 2007 4:01 pm

Dex #35, you trying to aviod the answer? "if one doesn't involve printing money, what does it involve"? Drc2 #36, you have my vote to run the Fed.

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tayl44
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Jul. 31, 2007 4:01 pm
Quote tayl44:

Dex #35, you trying to aviod the answer? "if one doesn't involve printing money, what does it involve"? Drc2 #36, you have my vote to run the Fed.

Printing money involves a printing press, ink, and paper, that is paid to banks in return for Mortgage backed securities and Treasury bonds. Thus allowing the banks to loan more money.

Credits, or digitized money, is just transferring computer created numbers into a banks account in return for Mortgage backed securities and Treasury bonds. Thus allowing the banks to loan more money.

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Dexterous
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Most money, Tay, isn't in the form of a currency. It's simply a credit to an account. The credit is spendable as money. You can have it converted into currency if you want to. Most people don't bother. They just write a check on the monetary credit that exists in their account.

The U.S. Treasury can simply credit its own account with money without first issuing a bankster an I.O.U. for it.

A bankster simply credits the Treasury account with money in exchange for a Treasury Bond. Prior to that, the money doesn't exist either as a credit or as currency. It's called the fractional reserve system. Through fractional reserve banking, banks can loan money they don't have in exchange for an I.O.U....a promise to pay.

The Treasury borrows money from banksters that doesn't exist...until it issues a Treasury Bond (an I.O.U.) for it.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Tay, it turns out a degree in theology is better than an MBA for understanding this piece of metaphysical nonsense. I'll let Poly run the Fed. Or the reciprocal economy. I like the two to three hour work day.

drc2
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Apr. 26, 2012 12:15 pm

Dex #39, to say the Fed print money is true in relation to where it goes, by the time it's use, "it's paper". Poly #40, thank you, but i know the Fed info, i just wanted to get around the "word game", its less confusion for education of the "dumb down we need to reach".

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tayl44
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Jul. 31, 2007 4:01 pm

Drc2 #40, what about a "degree in twilight zone" to understand the criminal economics? Poly, you have my vote to run the Fed, but i want 2 or 3 hr a week(no joke)

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tayl44
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Quote tayl44:

Dex #39, to say the Fed print money is true in relation to where it goes, by the time it's use, "it's paper".

No word games involved, and no, by the time it is used it is "paper" in incorrect. It can circle the globe forever as bits and bytes and never see a printing press.

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Dexterous
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Apr. 9, 2013 9:35 am

Yes, the two are interchangeable, but one is traded in paper and the other online. Banks did not ship gold back and forth, and used "checques' to represent what it would have been had they. The meme
"printing money" is used to suggest that the debt created had no real economic value. I would suggest that this belongs to the games of Wall St. and not to what the government ought to be doing to finance the Commons and the infrastructure of prosperity and security.

The creation of "phantom wealth" instead of real value is where the sins of finance are today. Were the government to declare their crap what it is and issue the script to cover our real productive capacity, including the investment in needed infrastructure and human services, we would be on the way to both prosperity and security.

drc2
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Apr. 26, 2012 12:15 pm

Dex #44, if what you say is true, "why do we need paper money"? Why is the Fed "creating money"?

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tayl44
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Jul. 31, 2007 4:01 pm

There is no need for "paper money". The government will just deposit bitcoins to your account every month.

I will leave you to research that thought all by yourself.

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Dexterous
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Apr. 9, 2013 9:35 am

Drc2 #45, i agree and would go further and say the government should declare itself a "cooperative". And use "democracy as a business plan". The people government have every right as a private business to be competitive in the market, "who has the right to deny"? It's way pass time to bury that big lie that government isn't as effective/efficient at organizing (anything) as the private sector. We been throught capitalism, communism, and socialism and none responded to all the needs of the people. Only thing left is a system "run by the people", then we have nobody to blame but ourselves, which is the way it should be. It would be even better to let "Mother Nature" run things, but in due time, we still have a lot of things to "unlearn".

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tayl44
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Jul. 31, 2007 4:01 pm

Dex #47, i know about bitcoins, and trust that computer money as much as i trust "voting machines". Thank you for leaving me to myself.

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tayl44
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Andrew Huszar: Confessions of a Quantitative Easer: We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street.

…Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank's bond purchases had been an absolute coup for Wall Street. The banks hadn't just benefited from the lower cost of making loans. They'd also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed's QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.

You'd think the Fed would have finally stopped to question the wisdom of QE. Think again. Only a few months later—after a 14% drop in the U.S. stock market and renewed weakening in the banking sector—the Fed announced a new round of bond buying: QE2. Germany's finance minister, Wolfgang Schäuble, immediately called the decision "clueless."

That was when I realized the Fed had lost any remaining ability to think independently from Wall Street. Demoralized, I returned to the private sector.

Where are we today? The Fed keeps buying roughly $85 billion in bonds a month, chronically delaying so much as a minor QE taper. Over five years, its bond purchases have come to more than $4 trillion. Amazingly, in a supposedly free-market nation, QE has become the largest financial-markets intervention by any government in world history.

And the impact? Even by the Fed's sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn't really working.

Unless you're Wall Street. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets….

Mr. Huszar, a senior fellow at Rutgers Business School, is a former Morgan Stanley managing director. In 2009-10, he managed the Federal Reserve's $1.25 trillion agency mortgage-backed security purchase program.

Antifascist's picture
Antifascist
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Jul. 31, 2007 4:01 pm

I suppose the better question is, how are these "created credits" reflected in the financial statements of the banks/sellers of the MBS's/garbage? I'm guessing they're reported on Line 1, "Cash."

An even better question is, how is the TRANSACTION reflected in the financial statements of the banks? Is it a gain? Is it a loss? The MBS had a value when the bank acquired it. Did the value change from the time they acquired it and the time they sold it to Bernanke? In the real world the banks lost money, and then had a gain when they sold it (cross reference - banks' stock prices.) In FASB world, who knows?

Furthermore, the MBS had some fair market value at the time Bernanke bought it. It was obviously less than what Bernanke paid. How is this "excess" reported in the financial statements? An unforeseeable "Act of God" like a hurricane or earthquake?

chilidog
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Time to Rethink the War on Terror

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When Eric Holder eventually steps down as Attorney General, he will leave behind a complicated legacy, some of it tragic, like his decision not to prosecute Wall Street after the financial crisis, and his all-out war on whistleblowers like Edward Snowden.

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