The Age of Improv Monetary Experimentation

And absolutely nothing will change preventing the dollar's deterioration

The torch has passed and Janet Yellen has taken off where Ben Bernanke left off. She calls herself a sensible central banker, but reserves the right to ignore sensibility, transparency rules and economic formulas in favor of improvisational monetary experimentation.

As a consequence of her debut appearance on Capitol Hill earlier this week, Congress voted to raise the debt ceiling…until next year…without quibbles or conditions.

And frankly why would they quibble or protest. They have little to no knowledge of economic or monetary policy and have only experienced since 2008, that slow deleveraging of a huge bubble can be manipulated without chaos and blood in the streets.

In order to do that Washington and Wall Street had to circle the wagons and create an insider vacuum that exorcised transparency, equality and accountability. The financial system almost collapsed but none of the perpetrators was ever sent to do time in federal penitentiary. Au contraire, they were allowed to pay themselves huge bonuses for circling the wagons and kicking morality to the curb.

As the Fed fuels “excess funding” of America’s credit needs… this excess funding drives the stock market beyond any real market value.

The Fed source of funding is like manna from heaven to the 1%. No calloused hands earned it. No drop of sweat stains it. No furrowed brow figured out how to make it. Just turn on the printing presses.

Five years ago, we were certain the Fed could not expand its balance sheet to $4 trillion without grave and ghastly consequences. But month after month goes by with no such consequences showing up on the horizon as we are searching for a sign that show at least the top of their masts. So what are we to think?

The global financial crisis introduced an politician’s nightmare as it required deleveraging by paying down, defaulting on, writing down and writing off debts. This would be long and hard, we reckoned. And when that task was done, we would run into a period of inflation, maybe even hyperinflation depending on how monetary policy would be executed.

Responsible scenario: with deleveraging completed, people will begin to borrow and spend again. The Feds would facilitate this by increasing the money supply – possibly virulently, with ultra-low interest rates – and drive up consumer prices.
Irresponsible scenario: desperate and impatient to revive the go-go days before the crisis began, the Fed might resort to direct monetary stimulus (Helicopter Ben anyone?).

The US, and many Federal Bankers around the world, decided to keep on partying like it’s 1999 and simply change the formulas to reflect growth and give the appearance that we’re on a slow turn to financial normalcy, rather than living high on the hog as if ‘apres nous le deluge’ was monopolized by the French revolution, never to be repeated again.

Janet Yellen stated clearly on Capitol Hill that she would continue making policy up as she goes along, centering her efforts around the official unemployment numbers. Never mind that the Bureau of Labor Statistics in its current 6.7% unemployment estimate has eliminated almost 17% of the American workforce.

The key to understanding unemployment rates is the Labor Force Participation Rate—meaning the percentage of the population that’s officially employed. When the BLS calculates the unemployment rate, it doesn’t consider a person whose unemployment benefits have run out and is no longer looking for a job to be unemployed. With no jobs available many workers go into the black market as handymen, seasonal workers off the books etc. etc.

Current policy means if everyone quit looking for a job, the unemployment rate would be zero? The large drop in the number of unemployed mostly reflects people that have becoming ‘discouraged’ and are being statistically removed from the headline labor force, instead of finding jobs and returning to work.

Previously 6.5% unemployment was the Fed’s benchmark for raising interest rates and tapering off financial stimulus. That position is now retracted and Quantitative Easing can go on and will probably become a major Fed instrument from here on, to avoid a necessary currency collapse in the threat of social chaos.

And since we’re all still more or less and alive and struggling forward since the 2008 almost collapse there is something to be said for this approach. BUT ONLY if cautious action is taken to repair the economy and avoid uncontrolled excess for the future. But in the words of John Popper, we should all be aware: “There is a price to pay”, when the Feds announce that the age of Improv monetary experimentation has arrived.

My Personal Hangover for the Year: Fed Chairman Ben Bernanke

Ben Shalom Bernanke, the Money Man

Ben Shalom Bernanke, the Money Man

Already well on his way to going down in history as the Man who Believed that Money Grows on Trees, Time’s Man of the Year Award for Ben Shalom Bernanke should just about clinch his Wizard of Oz status, save the Magic Baton.

Not only has Bernanke nearly ‘single handedly’ overseen a fivefold increase in lending capacity and more than doubled the national debt to $2.2 trillion within the last two years, but together with his sidekick, Little Tim, he’s drowned our unborn grandchildren with debts they can’t possibly make – ever.‚Ä®‚Ä® The only thing Bernanke has done during his tenure is guarantee that every American will see their economic future gobbled up by increasingly scarce economic resources and an increasingly unstable dollar whose long-term fundamentals have been destroyed. Period.

Now I know that many people out there think that the worst is over and the economy is getting back on track and that this is due in most part to Helicopter Ben and his sponsor Barack Obama. The way I see it however is slightly more ominous. It’s like reflating a flat tire. As long as you have a pump with you you can make the tire last a while longer. Ben’s consistent attempts to pump up the tire with essentially free money (IOU’s but don’t pressure me) won’t lead to the kind of recovery the mainstream media and most economists are looking for. We will end up with a permanently flat tire, shredded by the process of pumping up and deflating.

From the outside Ben’s efforts seem as genuine and concerned as a smooth tasty Tequila shot on a tropical beach. Problem is that one smooth shot after another leads to the irreversible damage caused by a whole bottle of Patron, so as third degree burns laying in the sun, sleepless nights in the bathroom hugging the toilet and a beast of a hangover.

And this is why I see Bernanke as our collective hangover for years to come, deep into the upcoming decade. The Fed is supposed to be independent of banks and politics, as well as the markets. Well as we all know by now, this Fed isn’t.‚Ä®‚Ä® Based on nothing more than the memory of the Fed’s Depression-era mistakes, Bernanke has engaged in the reckless pursuit of bailouts and financial “engineering” (and I’m being polite here because he is the sitting Fed Chairman) that benefits the big boys – big business, big banks, big autos, big everything. ‚Ä®‚Ä®Don’t be fooled for a minute by the fact that Bank of America, Citi and even Wells Fargo are paying back their TARP funding. Yes it’s good news and yes it makes for positive market conditions. But remember, it’s business as usual for those guys. The only reason they’re paying back their funding is because they don’t want the bonus restrictions or further Fed meddling. Nothing’s changed. ‚Ä®‚Ä®In reality, big banks just played the biggest round of liar’s poker in history.

By going to Washington and pleading for their very survival, they created the perception that their future was essential to ours. And Bernanke bought it hook, line and sinker despite the fact that history is littered with failed financial institutions. What people fail to realize is that the big banks were making the ultimate bet that regulators, legislators and Fed would not have the guts or be intelligent enough to do the thorough house cleaning that the markets were ready to do. And, guess what, the big guys won, also assisted by the political vote facilitation that comes with a presidential election. Don’t rock the boat, especially not the one with campaign contributions stacked on them.

Meanwhile, average Americans and small business continue to be treated like indigent morons by the very institutions whose collective rear ends we just bailed out of the hoosegow. Credit is tough to come by unless you’re doing cash for clunkers, cash for big business or soon, cash for caulkers. Evidently, bailouts are great if you encourage spending by creating incentives that cause consumers to go further into debt!‚Ä®‚Ä®Isn’t it ironic that Time named Bernanke Man of the Year for having saved the day when the Fed’s failure to adequately supervise the nation’s banking system was the overriding cause in the meltdown.

Did Time’s editors somehow miss that picture or do they not understand the economic reality of $2.2 trillion in debt either? Probably both.‚Ä®‚Ä® Neither salt nor pepper, fish or fowl, fruit or vegetable, republican or democrat,¬† a one-shot wonder nor truly evil, Bernanke fits best into the category of “delayed” losers, people whose achievements seem plausible at the time, but over the longer term come to be recognized as spurious, causing more harm than good.
The Bernanke Hangover will foreseeably become an entry in Webster’s for¬† generations to learn from. The future is a race between education and catastrophe. The race is on.

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The Merger of Fiscal Policies with Federal Banking – Part 4

Nebuchadnezzar and the Tower of Babel

Nebuchadnezzar and the Tower of Babel

From a small deserted island economy to today’s complex world order takes years of mismanagement and dishonesty. For our civilization, it started in Babylon. Babylonian Emperor and Warlord, Nebuchadnezzar understood the power of banking and he and his fellow-dictators discovered that war was the best way to gain and maintain control over a nation’s people and the most profitable way to make money.

War as a technology is highly efficient, because it totally uses up most of the goods (munitions, armaments) and services (men and women in military forces) it involves. With many technologies for example, the manufacture of goods, machinery and tools are not completely used up. They merely depreciate over time. War materiel is destroyed, requiring a constant re-supply, necessitating a “military industrial complex” to furnish the objects and personnel involved.

Beginning with old Nebu (perhaps even before) the ruler or rulers of a state decreed what the official policy would be as to money and finances. In most centuries and in most countries, this has meant that only the rulers of a state are allowed to issue money and everyone in that state–and economically related states–must use the money created.

The power to issue currency and coins and to set a nation’s fiscal policy resides either in a monarch, the elected officials of a state, or a private group of financiers. In 1666, the profligate King Charles II and a corrupt Parliament sold the British fiscal powers to the East India Company (a group of financiers), pretty much in the same way as President Woodrow Wilson gave the fiscal control away to the privately operated Federal Reserve in 1913. The East India Company established the policy that goods could only be purchased by the colonies, including America, by goods of exchange (tobacco, timber, fish, furs, rum) or coins.

As the American colonies moved out of barter into a more complex economy, they had a dire need for currency, “bills of exchange.” The colonists had very little in the way of coins, since most of their exports were traded for goods, not coins. So with the encouragement of men such as Benjamin Franklin, the colonies began to issue their own currencies to facilitate domestic and foreign trade.

The importance of American domestic currencies is not often emphasized in American history books and we are not made aware that one of the major reasons for the revolt of the American colonists against the British is that the English Parliament in 1751 and 1763 made it illegal for the American colonies to issue currency. Had Americans accepted this British mandate, domestic trade would have ground to a halt and the colonists reduced to barter, a very inefficient method of exchange.

After the United States was established, a national bank was chartered in 1791: the Bank of the United States. Only about twenty percent of the national bank was actually owned by the government, the rest by foreign investors. It soon became clear that the Bank was being operated for the benefit of foreign investors, so Congress did not renew the Bank’s 20-year charter in 1811.

A second national bank was given a federal charter in 1816, but like the first one, it too was largely controlled by foreign investors through such front men as John Jacob Astor, Stephen Girard, and David Parish, a New York agent for the Vienna branch of the Rothschild money interest. This second national bank was controlled by Nicholas Biddle who administered it according to the aims of its foreign owners and contrary to the welfare of Americans.

In 1836, President Andrew Jackson vetoed the bill, which would have renewed the national bank’s charter, which expired that year. In his veto message, President Jackson said:¬† “The bold efforts the present bank has made to control the government, the distress it has wantonly caused, are but premonitions of the fate which awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.”

Americans were well rid of the foreign-dominated second national bank. But they were left in the vulnerable position of having no national bank to further their interests for the next 80 years, a time period which the foreign financiers, especially such moneyed groups as the Rothschilds, saw their opportunity and soon sent their agents to America to begin setting up state banks.
The Rothschild’s primary agent in America was August Belmont, who established a large bank in New York City, but also a large number of state banks in the south. The Rotshchilds and other European financiers loaned money to state banks at high rates of interest and controlled loan decisions.
By the time the 20th century came around they had virtually all the power and means to control the politics.

Many of these state banks were also supported by state bonds. The state of Mississippi, for example, sold $5 million in bonds with which to subscribe a third of the $15 million capital of the Union Bank. The promoters of the Union Bank made ill-advised loans and within a short time the bank failed. The state officials in Mississippi realized that the foreign financiers had hoped to reap windfall profits and had been largely responsible for the failure of the Union Bank, so these officials refused to repay the money owed the foreign vultures.

The European financiers bought up “repudiated” southern state bonds and then began to use their financial power to have the United States federal government compel the southern states to pay off the disputed claims. The Rothschilds and the other foreign financier groups also thought they might be able to use their money power to force the U.S. federal government to assume the debts of the southern state banks as federal obligations. At its inception, the newly formed United States had assumed the debts of the colonies; so the foreign vultures thought they might be able to force the federal government to pay off the southern states’ debts. The issue of “states’ rights” versus a “strong central authority” became a national crisis point and the American civil war was the result.

When reviewing the technology of war above, we saw that this is a very profitable stratagem for rulers. The Rothschilds and other European financiers had exacerbated the discord and hostility between the North and the South. Knowing full well that war was their best means of reaping huge profits, these vultures did everything in their power to instigate an American civil war. They worked both sides of the street, as usual.

The Union commissioned Jay Cooke to act as selling agent for its bond issues and Cooke arranged with August Belmont, the New York agent of the Rothschilds, to sell Union bonds in Europe. In 1861 the Confederacy sent James M. Mason to England and John Slidell to France to borrow money. Slidell was a nephew of Belmont’s wife. In Paris, John Slidell entered into negotiations with the Erlanger Company, confidential representatives of the Rothschilds. Slidell’s daughter married Erlanger’s son. Even though most investors in confederate bonds lost their shirt, the Erlangers reaped huge profits.

The American Civil War cost the Union about $3.2 billion and the Confederacy close to $2 billion, all money loaned on interest. August Belmont, the Democratic National Chairman, sabotaged the Democratic presidential candidate, Horatio Seymour, through derogatory statements made in his New York World newspaper, assuring the election of the Republican candidate, General Ulysses S. Grant.

The so-called Credit Strengthening Act of March 18, 1869 was passed immediately upon the assembling of the new Congress elected in the 1868 election. It was the first act passed by that body and signed by the new President Grant. The passage of that Act was equivalent to the payment to the Rothschilds and their banker satellites in America and abroad of at least $275 million over and above the amount they otherwise would have received in the form of interest and principal for the bonds they owned or controlled.

At least since the American presidential election of 1868, the financiers who rule the USA have made sure that they have handpicked presidential candidates in both the Democratic and Republican parties. Whichever party wins, they have their puppet in power.

“The structure of financial controls created by the tycoons of ‘Big Banking’ and “Big Business’ in the period 1880-1993 was of extraordinary complexity, one business fief being built on another, both being allied with semi-independent associates, the whole rearing upward into two pinnacles of economic and financial power, of which one, centered in New York, was headed by J. P. Morgan and Company, and the other in Ohio, was headed by the Rockefeller family. When these two cooperated, as they generally did, they could influence the economic life of the country to a very large degree and could almost control its political life, at least on the Federal level.”

Where the Republic turned Empire

Where the Republic turned Empire

After almost 80 years of Wild West Banking and building absolute control points in the financial systems, the bankers elite designed a Federal Reserve Act that on December 23, 1913 was signed into Law by President Woodrow Wilson, effectively creating the Federal Reserve, a private banking organization that controls the fiscal policies of the United States.

Noted economist John Maynard Keynes said in 1920: ‚ÄúBy a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.¬† By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some … The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.‚Äù

Sadly, that is very true.  Keynes is one of the two original architects of our present monetary system.  Most citizens will never know what hit them as the current monetary and economic crisis plays out.  There will be plenty of finger pointing and scapegoating in years to come, but only the most discerning citizens will understand exactly when and where we went wrong.
As people of the United States of America we were never supposed to understand.

Another famous quote is from Thomas Jefferson: ”Banking establishments are more dangerous than standing armies.”  He, and a majority of our Founding Fathers knew well the dangers of submitting the Republic to “central bankers.”  Still, Jefferson could have never conceived what a witches’ brew our current banking hierarchy has brought upon us.

1913 was an ominous year.  That’s when both the Federal Reserve and the income tax laws were thrust upon the U.S.  This dynamic duo has wrought nearly a century of damage upon us and the rest of the world.  They are nothing more than financial predators.

Our current status of debts, desperation, dishonest money, bailouts, extreme institutional greed, and weird finance took root in 1913.  In hindsight, the present quagmire is the inevitable consequence of straying from the natural disciplines of honest money, but it’s all we’ve known in our collective lifetimes. The US government has yielded control of both money creation and economy to elitist insiders with no consideration for anything but themselves.

In closing, and I’m not saying this lightly, nor do I pretend to know it all or project my self as an alarmist, but

The global monetary system, with the U.S. dollar as its “reserve currency,” is crumbling.  The dollar has been abused so much by this Elite, that the rest of the world is no longer oblivious to its fundamentals.  A major form of change is on the horizon.

What we now recognize as “money” will enter the history books, even if only because it has been tainted to the point where it has lost the confidence it once had.  It’s reasonable to expect the coming monetary order to, once again, be backed by tangible substances.  Gold is the frontrunner and the U.S. will go along … kicking and screaming, threatening and bullying.
Until then we are in uncharted territory.

In the context of this foregoing you may want to spend some extra time understanding my fellow contributor The Market Man’s take on silver today in the story The “Silver Bullet”. It could give you the opportunity to make some real money.

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