Posts Tagged ‘the Federal Reserve’

Priceless: How The Federal Reserve Bought The Economics Profession

A new article "Robert Johnson: Economists As Marketeers for the Monied Interests" reminded me of this article from 2009. Here, Ryan Grim examines how the economics profession became essentially a servant to the Federal Reserve. ~ Ilene 

*****

Ryan Grim is the senior congressional correspondent for the Huffington Post and former staff reporter with Politico.com and Washington City Paper. He's the author of the book, "This Is Your Country on Drugs" and won the 2007 Alt-Weekly Award for best long-form news-story. – Ilene

Intro by Tom Burger:

alchemist

Here is a good article to consider when you are pondering how it is that nearly all mainstream economists toe the line with respect to monetary economic dogma.  

As I have so often asserted: there is a darn good reason why these people have gone to such great lengths to nail down support from economists and government: their business is extremely lucrative. They have quite literally achieved the alchemist's dream of converting lead to gold (i.e. money). The only difference is that the Fed doesn't need even a lead mine. They can convert "nothing at all" to "gold."

This article, however, might lead one to believe that this Fed influence is a recent development; the author cites people who say this is how it has been since about the 1970s. Well, maybe the Fed's total dominance of academia is that recent, but their campaign began at least 15 years before the legislation that founded the Fed.

The big city bankers of that turn of the century era put together a comprehensive program involving a blizzard of articles for the public and for economists. They founded university chairs for "right thinking" economists, they lobbied legislators. The activities described by Rothbard and others went on and on. In my opinion, none of this — then or now — was done because these people thought it would be good for the public or for the economy. They did it because it opened the door to unlimited theft. Okay … the perpetrators probably didn't admit to themselves they were thieves. They probably just believed that unlimited wealth was their destiny because they were just so much smarter than everybody else.

If you doubt the Fed's destructive control over economic thought, please read this article. – Tom
 

Priceless:
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“If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders”: Josh Rosner

Courtesy of The Daily Bail 

"If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders": Josh Rosner

 

 

 

Our favorite quotes so far from today’s FCIC report and reaction from analysts…

  • "Less than a 3 percent drop in asset values could wipe out a firm." – FCIC Report
  • "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public." – Josh Rosner
  • "The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
  • "At the time, the idea was the sucker could go down because there wasn’t enough liquidity in the system, money wasn’t moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.  In reality, she contends, those fears were overblown: There was ample money in the financial system.  Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
  • The details in the commission’s report leave Goldman "naked," she added. "It doesn’t have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that’s doing stupid credit stuff is you let them eat it, but that didn’t happen in the bailout."
  • "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders." – Josh Rosner

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Buried One Mile Deep In Economic News: Rand Paul Proposes Elimination of HUD; Churches “Walk Away”; China Hard Landing; Repeal of Davis-Bacon

Courtesy of MIsh

Many stories of significance have come my way on housing issues, state debt issues, federal debt issues, pension issues, and other economic items of note. I feel as if I am buried a mile deep news. Here are a few stories that caught my eye.

Senator Rand Paul Proposes Elimination of HUD

I am pleased to report a tremendous deficit cutting idea by senator Rand Paul: Eliminate Energy, HUD and most of Education department

In his first major legislative proposal, U.S. Sen. Rand Paul has proposed cutting government spending by $500 billion in a year, including eliminating the Departments of Energy and Housing and Urban Development and most of the Department of Education.

That is the single best piece of fiscal legislation proposed in years.

Nevada Governor Brian Sandoval Addresses Underfunded Public Pension Plans

While Illinois has jumped off the deep end with tax hikes, Nevada’s Governor says Tax increases last thing Nevada businesses need

Tax increases are the last thing Nevada businesses need now, Gov. Brian Sandoval told a receptive audience Wednesday during a speech to the Las Vegas Chamber of Commerce. "My understanding is that PERS is an $8 (billion) or $9 billion unfunded liability that Nevada can’t afford," he said. Sandoval said benefits reforms must starts with the new employees hired by the state.

I commend Governor Brian Sandoval’s ideas and his starting point. States need to scrap defined benefit pension plans for new hires immediately.

100,000 People in Oakland Expected to Apply for 650 Subsidized Housing Openings

The San Francisco Chronicle reports Oakland opens waiting list for Section 8 vouchers

Oakland’s housing authority opened up its waiting list Tuesday for Section 8 housing vouchers, drawing thousands for a coveted spot in line.

The only way to sign up was over a computer, so across the city, hundreds jammed into city libraries to fill out the forms in the hope that they might eventually get a chance to live in subsidized housing.

In the first three hours, 6,000 people filled out applications. Over the five-day application period, the housing authority expects 100,000 people to apply for only 10,000 spots on the waiting list.

The housing authority uses a lottery to determine who gets on the list. And even then it’s no more than a foot in the door. It has taken nearly five years to clear the waiting list that was


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Surprise, It Was Greenspan and Bernanke’s Fault

Courtesy of Jr. Deputy Accountant 

 

 What, Bernanke worry?

The Financial Crisis Inquiry Commission is about to tell us, in 576 pages, what many of us already know:

The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.

Anyone else running out tomorrow to get a copy?

Like the 9/11 Commission, we could have saved a whole lot of money and time by simply verifying alternative media claims instead of starting from scratch as if no one knew anything all along.

Oh well. 


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What Most People Don’t Realize About The Fed’s Superpowers

Bob Prechter’s Conquer The Crash reveals whether the Fed really can rescue the US economy 

By Elliott Wave International

Since its creation in 1913, the primary intended role of the U.S. Federal Reserve Bank has been that of protector. In theory, the central bank was bestowed with the power to shape monetary policy in a way that would keep both booms and busts in check. The two main tools at its disposal — interest rates and money creation — would provide a "ceiling of normalcy" above expansions AND a "net of safety" below contractions.

To this day, the financial mainstream holds great faith in the Fed’s ability to fulfill its save-the-day duties — as these recent news items make plain:

  • "Why Raising Fed Funds Rate Is Positive For Equities." (Seeking Alpha)
  • "Fed’s Moves Lift All Asset Classes." (Associated Press)
  • "US Stocks Erasing Losses: The aggressive moves of the Fed have been an important driver for the stabilization of stock prices." (Bloomberg)

But of all the variables the Fed creators took into account, there’s one glaring factor they neglected to consider: Namely, it cannot force consumers to spend, creditors to lend, or businesses to borrow. The events of 2007-2009 "credit crunch" and the subsequent "Great Recession" made that obvious. Remember how the government was upset at banks for sitting on the bailout funds instead of lending them out to consumers? And consumers weren’t exactly lining up on the street to get a loan, either.

The Fed’s inability to change social mood is the central theme in Chapter 13 of EWI President Bob Prechter’s NY Times business bestseller book Conquer the Crash. There, Bob describes the Fed’s strategy of lowering the federal funds rate to stimulate spending to be as effective as "pushing on a string." Writes Bob:

"The primary basis for today’s belief in perpetual prosperity and inflation with an occasional recession is what I call the ‘Potent Directors Fallacy.’ It is nearly impossible to find a treatise on macroeconomics today that does not assert or assume that the Federal Reserve Board has learned to control both our money and our economy. Many believe that it also possesses the immense power to manipulate the stock market. The very idea that it can do these things is false."

And so begins one of the most groundbreaking studies into the very real INABILITY of the Fed to fell the great bears of economic declines, or…
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Rand Paul Reintroduces Audit The Fed Bill, DeMint And Vitter Co-Sponsors

Courtesy of Tyler Durden

If there is one thing that the one-time GAO audit of the Fed disclosed, is how woefully insufficient the extremely superficial data discovery was. Another thing uncovered was just how needed this disclosure was: it provided extended material into how the Fed subsidizes banks (both domestic and international) on an ongoing basis, not to mention substantial number crunching for the blogosphere. Either way, if Bernanke was hoping that the Frank-Dodd bill would take care of the Fed opacity, pardon, transparency issue in perpetuity, he may be disappointed: Ron’s son, Rand, has just announced he is introducing legislation to, well, Audit The Fed, precisely along the lines of what his father did previously and generated massive support from everyone in Congress. Once again Ben Bernanke is about to become a major thorn on the side of the political puppetry.

WASHINGTON, D.C. – Today, Senator Rand Paul introduced legislation allowing for a full audit of the Federal Reserve. This legislation is a Senate version of similar legislation long-championed by and introduced this session in the House of Representatives by his father, Congressman Ron Paul of Texas. Co-sponsoring the “Federal Reserve Transparency Act of 2011” (S. 202), are Senators Jim DeMint of South Carolina and David Vitter of Louisiana.

“We must take a critical look at the Fed’s monetary policy decisions, discount window operations, and a host of other things, with a real audit – and not just pay lip-service to the idea of an audit,” Sen. Paul said today. “At a time when we’re seeing great volatility in small Euro-zone economies like Greece, Portugal, and Ireland, it is more crucial than ever that we have real transparency at our own central bank.“

The bill will eliminate the current audit restrictions placed on the Government Accountability Office (GAO) and mandate a complete audit of the Federal Reserve to be completed by a firm deadline, finally delivering answers to the American people about how their money is being spent by Washington.


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Stock World Weekly

Here’s the newest: Stock World Weekly Newsletter. Comments welcome! – Ilene 

Jobs Cartoon

Archives here. 


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Settling Prosecutions For Pennies on the Dollar Is a Type of Bailout

Courtesy of Washington’s Blog 

The following is an excerpt of my much longer roundup of the many covert ways the government is bailing out the giant banks.

Fraud As a Business Model

If you stop and think for a moment, it is obvious that failing to prosecute fraud is a bailout.

Nobel prize-winning economist George Akerlof demonstrated that if big companies aren’t held responsible for their actions, the government ends up bailing them out. So failure to prosecute directly leads to a bailout.

Moreover, as I noted last month: 

Fraud benefits the wealthy more than the poor, because the big banks and big companies have the inside knowledge and the resources to leverage fraud into profits. Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market. The giants (especially Goldman Sachs) have also used high-frequency program trading (representing up to 70% of all stock trades) and high proportions of other trades as well). This not only distorts the markets, but which also lets the program trading giants take a sneak peak at what the real traders are buying and selling, and then trade on the insider information. See this,thisthisthis and this.

Similarly, JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country’s derivatives risk, and 96% of the exposure to credit derivatives. They use their dominance to manipulate the market

Fraud disproportionally benefits the big players (and helps them to become big in the first place), increasing inequality and warping the market.

[And] Professor Black says that fraud is a large part of the mechanism through which bubbles are blown.

***

Finally, failure to prosecute


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“The Fed No Longer Even Denies that the Purpose of Its Latest Blast of Bond Purchases … Is To Drive Up Wall Street”

Courtesy of Washington’s Blog

The stated purpose of quantitative easing was to drive down interest rates on U.S. treasury bonds.

But as U.S. News and World Reported noted last month:

By now, you’ve probably heard that the Fed is purchasing $600 billion in treasuries in hopes that it will push interest rates even lower, spur lending, and help jump-start the economy. Two years ago, the Fed set the federal funds rate (the interest rate at which banks lend to each other) to virtually zero, and this second round of quantitative easing--commonly referred to as QE2--is one of the few tools it has left to help boost economic growth. In spite of all this, a funny thing has happened. Treasury yields have actually risen since the Fed’s announcement.

The following charts from Doug Short update this trend:

Click to View

Click to View

Click to View

 
Of course, rather than admit that the Fed is failing at driving down rates, rising rates are now being heralded as a sign of success. As the New York Times reported Monday:

The trouble is [rates] they have risen since it was formally announced in November, leaving many in the markets puzzled about the value of the Fed’s bond-buying program.

***

But the biggest reason for the rise in interest rates was probably that the economy was, at last, growing faster. And that’s good news.

“Rates have risen for the reasons we were hoping for: investors are more optimistic about the recovery,” said Mr. Sack. “It is a good sign.”

Last November, after it started to become apparent that rates were moving in the wrong direction, Bernanke pulled a bait-and-switch, defending quantitative easing on other grounds:


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Could the U.S. Dollar Rise 50%?

Courtesy of Charles Hugh Smith, Of Two Minds 

Conventional wisdom is that the Fed wants the U.S. dollar lower, so it must drop. But the dollar seems to be lacking proper obedience to the Fed’s grand commands.

Before you shout that all fiat currencies go to zero, let’s stipulate that the U.S. dollar has already proceeded 95% of the way to zero. According to the handy BLS inflation calculator, the 2010 dollar is roughly worth 4.5 cents of the 1913 dollar. Put another way, it now takes $22.10 to buy what $1 purchased in 1913.

(Interesting that the BLS inflation calculator only goes back to the birth of the Federal Reserve….)

So a 50% rise in the dollar would register as a mere blip on a 100-year chart. I mention this to put a 50% rise in perspective. It will seem like a large move in the present, but on a longer timeline it wouldn’t be that big a deal.

How could the dollar rise when the Treasury and Fed are moving Heaven and Earth to drive it down? Let’s turn to the Fed Flow of Funds for some perspective: what happened from 2007 (pre-recession) to the present?

Household Real Estate Assets: $22.7 trillion to $16.5 trillion: -$6.2 trillion

Corporate Equities: $9.6 trillion to $7.8 trillion: -$1.8 trillion

Mortgage debt: $10.53 trillion to $10.12 trillion: -$ .41 trillion

Household/non-profit Net Worth: $64.2 trillion to $54.9 trillion: -$9.3 trillion

And this is after a tremendous run-up in both bonds and stocks since early 2009. Add in whatever estimates of commercial real estate losses you reckon are semi-accurate and other impaired enterprise assets currently valued at "historical cost," i.e. marked to fantasy, and you get a number well north of $12 trillion even at conservative estimates.

The Fed has fought off this mass devaluation of assets by expanding its balance sheet by $2 trillion. First it sought to stem the collapse of the housing market by buying $1.2 trillion in impaired mortgage backed securities (taking garbage off the banks’ balance sheets) and now it is trying to suppress interest rates by buying $1 trillion in Treasury bonds (recall that QE1 already loaded the boat with T-Bills, so QE2 is simply adding another $600 billion to an already heavy cargo.)

In both cases the Fed’s campaigns are mere rear-guard actions: housing continues to slip, and the tides of higher yields and rates have started rising despite the Fed’s…
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Zero Hedge

Going Down With The Ship: After Raging At Moody's For Downgrade To Deep Junk, Masa Son Pledges 40% Of SoftBank Stake To Lenders

Courtesy of ZeroHedge View original post here.

Last October, in the aftermath of the WeWork and Uber fiasco, we asked if SoftBank, that chronic seed (and not so seed) investor in cash-incinerating zerocorns startups would be "The Bubble Era's "Short Of The Century." Subsequent events have only made our query more pressing: with the global economy frozen, with social distancing and self-quarantine now a mandatory part of life...



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Phil's Favorites

Stimulus package will remain half-baked unless local governments get more of the dough

 

Stimulus package will remain half-baked unless local governments get more of the dough

People still need baked goods even during a lockdown. Frederic Brown/AFP via Getty Images

Courtesy of Stephanie Leiser, University of Michigan

Lawmakers are pinning their hopes on a US$2 trillion package to prop up the U.S. economy and provide relief to individuals and business ravaged by the coronavirus. ...



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The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



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Kimble Charting Solutions

Broadest Of All Stock Indices Testing Critical Support, Says Joe Friday!

Courtesy of Chris Kimble

One of the broadest indices in the states remains in a long-term bullish trend, where a critical support test is in play.

The chart looks at the Wilshire 5000 on a monthly basis over the past 35-years.

The index has spent the majority of the past three decades inside of rising channel (1). It hit the top of this multi-decade channel to start off the year, where it created a monthly bearish reversal pattern.

Weakness the past 2-months has the index testing rising support and the December 2018 lows at (2).

Joe...



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Insider Scoop

Why SmileDirectClub's Stock Is Trading Higher Today

Courtesy of Benzinga

SmileDirectClub (NASDAQ: SDC) shares were trading higher on Friday, after the company announced it's now producing medical-grade face shields for health care workers amidst the coronavirus (COVID-19) pandemic.

SmileDirectClub says it has capacity to print up to 7,500 face shields per day and is accepting orders from healthcare org...



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Biotech/COVID-19

Coronavirus treatments and vaccines - research on 3 types of antivirals and 10 different vaccines is being fast-tracked

 

Coronavirus treatments and vaccines – research on 3 types of antivirals and 10 different vaccines is being fast-tracked

Scientific research on the novel coronavirus has progressed at unprecedented speed. Mongkolchon Akesin / Shutterstock

Courtesy of Ignacio López-Goñi, Universidad de Navarra

Just three months after China first notified the World Health Organization about a deadly new coronavirus, studies of numerous antiviral t...



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Chart School

Cycle Trading - Funny when it comes due

Courtesy of Read the Ticker

Non believers of cycles become fast believers when the heat of the moment is upon them.

Just has we have birthdays, so does the market, regular cycles of time and price. The market news of the cycle turn may change each time, but the time is regular. Markets are not a random walk.


Success comes from strategy and the execution of a plan.















Changes in the world is the source of all market moves, to catch an...

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Digital Currencies

Bitcoin Tested As A Safe Haven After Biggest Stock Crash Since 2009

Courtesy of ZeroHedge View original post here.

Authored by Horus Hughes via CoinTelegraph.com,

Gold and Bitcoin react to global panic

Amid all of yesterday's chaos in bond, commodity, and stock markets, with the yield on the 10-year US Treasury note dropping below 0.5% for the first time in history - a strong indicator that investors are desperately looking for safe harbors - two supposed safe-havens in 'alternative currencies' behaved qui...



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Members' Corner

Bloody Mob Sh*t: An Interview with Lincoln's Bible

 

Bloody Mob Sh*t: An Interview with Lincoln's Bible

We talk Trump, Mogilevich, Epstein, Giuliani, Fred Trump, Roy Cohn, and more.

Courtesy of Greg Olear at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

(Originally published on Feb. 21, 20.)

...

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ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.