Saturday, March 21, 2009

Shut Down the Federal Reserve

During the Great Depression over 3,000 banks failed; interest only home loans and 90% stock loans, were major factors. When people started runs on the banks, the institutions started to collapse because there was no central authority that could bring in reserves. The Federal Reserve did not insure deposits. It was pretty much a zero sum game. The speculators that made money and the people who borrowed it, got wiped out if their funds were in a bank.

When you examine the 1930’s scenario, one person buys a home for 100K and then sells it later for 500K. There is 400K created in speculation that no one really had to work for. So when the house is sold for 500K the seller puts it back in the bank. If the buyer defaults, the bank goes insolvent and the home later sells on the market for the original 100K. The 400K that no one worked for goes poof and disappears.

In today’s market, with FDIC insurance, it works differently. First the Federal insurance will cover most deposits. Now also, the Fed will guarantee the value of the home loan notes by Freddie and Fannie. The speculative money created by the housing bubble is allowed to exist. Also since it wasn’t destroyed in the collapse, the banks have to be made whole by honoring the bad loans. So all of the money created by the housing bubble still exists (money that no one worked for) and on top of that we are going to cover the amount that the banks lost in this bubble (nobody worked for this money either). So in effect, the government will double the money created by the original bubble. No one has lost a dime. That pretty much takes care of the banks.

The mutual funds and retirement accounts are a little different. There is no FDIC insurance. About half of the money in these accounts can be withdrawn without penalty, the other half can’t. The only reason Bernie Madoff’s Ponzi scheme worked so well, was that no one needed the money they had invested with him. This group of investments’ is very suspect right now. These investment funds are probably selling Treasuries to raise funds for payout. If you happen to be in the half that can’t draw their money out without penalty, you can share the pain of Bernie’s depositors.

Here is a quote from the Feds FOMC meeting.
To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.

What the Federal Reserve is attempting to do is wrong, insanely wrong. This is stepping way beyond their mandate. They have to be stopped from doing this. They are exercising implied powers that go beyond their reason for creation.

I am beginning to see why Andrew Jackson shut down the Second Bank of the United States, which I believed up until now was a mistake. These actions to print money should violate some law of the land and it seems as if they don’t. If this bank cannot be controlled, it needs to be destroyed. Its new policies will destroy our financial system and ruin the retirement plans of many already on a fixed income.

In my humble opinion, the present policies of our government are devoted to preserving the status quo of the obscenely rich by destroying the middle class wealth by way of inflation. The poor lose nothing since they have nothing. Using the Federal Reserve in this sleigh of hand is unconscionable and despicable to say the least. Sadly I guess is what it boils down to is "Who cares?"

63 comments:

Anonymous said...

Does anyone think that the population of America in general posseseses 1) the intelligence and awareness to understand what is going on, and 2) the proactiveness to do something about it?

Does a majority of the population exist that could influence their representatives to do the things necessary to save the American empire?

Such as:

Abolish the Fed Reserve and central banking system?

Abolish our fiat currency and base the USD on some mix of gold, natural resources, commodities and assets?

Abolish income tax and support (instead of penalize) production by switching to some sort of consumption tax?

Get rid of lobbyists?

Stop campaign fund donations?

Clean out the corruption and gaming that is rampant in the house and senate?

Make government smaller and get it out of education, business, our personal lives, etc?

Repeal the Patriot Act?

Etc. etc. etc?

I don't think so.

Let's face it. We are at the beginning of the fall of the American empire.

Empires are cumbersome, lumbering, complex and slow moving forces... 50 years to an empire is like one day of an individual's life.

It may take decades, 50 years or a century before it is confronted and agreed upon by the majority that the empire is gone, but it will happen. And historians will write all about it and attempt to pinpoint what the causes and catalysts where and when they began.

The New Deal? Creation of Federal Reserve and income tax? Going off gold standard in 1971? Greenspan cutting interest rates and deregulation? The Bush and Obama administrations' attempts to stop this deflationary depression?

This is a complex disease. At what point in our 350 year history did our health take the significant turn for the worse and begin the dwindling spiral?

What will we who are living RIGHT NOW inherit VERY SOON in our lifetimes as a result of the current Fed's actions?

Losing the purchasing power of our money (heavy inflation)... destruction of our savings and retirement income... very high taxes... very high interest rates... very high prices and cost of living... socialism... social services becoming inferior in quality... food and water scarcity... energy problems and scarcity... high crime... a stricter more totalitarian form of government... to name a few.

Do we rise up and reinstall sanity and liberty, or do we succumb to the dark side?

This can't be fixed. I think it all eventually falls apart and a new society rises out of the ashes.

Jim in San Marcos said...

Hi Anon 2:53

My call to arms has nothing to do with fixing the political fabric of our nation. There are three things that are a waste of time to debate sex religion and politics.

This whole article is about government tampering with our financial system in an illegal way.

We are well on our way to destroying the hard earned savings of the middle class. Without it there is no reason for Democracy to exist.

A little more foot dragging by Congress can slow these new programs to a crawl where hopefully they will collapses.

I think what you need to realize is that we are in an economic cycle brought about by greed. That part of the cycle is self destructing. Once we clean the mess up by marking all this stuff to market, the quicker life can resume in normal form.

Thank you for your comments

AIM said...

Jim,
Right, I agree. And I agree with the the first poster's key point:

WHO is going to stop or abolish the Fed? WHO will answer the call to arms? WHO will arrest the government's knee jerk, unthinking solutions?

You?
Me?
Joe sixpack?
A group of Congressman?
Entrepreneurs?

How can this be changed?

Tyrone said...

We are well on our way to destroying the hard earned savings of the middle class.

Which is why each of us must protect what we have.

Jim in San Marcos said...

Hi AIM

Maybe after three years, my blog has some credibility that others will listen to.

I read a lot of different information, and I think sharing it with other bloggers, we can point out the future consequences. We pointed out the housing fiasco and got laughed at. We are not newspapers, but we are becoming a source that is a force to reckon with.

My crystal ball hasn't been wrong much, but for the government "to do nothing" is just not "politically correct" (no matter what party was in office).

Congress has always lived up to my expectations. "When in serious doubt, do nothing." Just maybe the bloggisphere community can raise some doubt. I'm doing my part.

Jim in San Marcos said...

Hi Tyrone

That's my biggest gripe with what's going on right now. Smart money is getting out of town. The crap is being unloaded and we the people (the government) are buying it up to save ourselves.

At present we can pull what we can and stick it in the banks and if the government stops the bail out, we would still have our bank funds while losing the mutual and retirement funds. If they keep up what they are doing, only hard assets like homes cars, gold silver and maybe stock certificates would have value. Printed money would have little value.

What this would do to retired people is not a pretty picture. An 80 year old that loses everything might want to take a Congressman or two with him when he decides to end it all.

Anonymous said...

HEY! I LIKE THAT IDEA. GIVE THESE VERY OLD RETIREES WHO'VE LOST PRETTY MUCH EVERYTHING, AND WILL SOON LOSE WHAT LITTLE THEY HAVE LEFT, GIVE THEM A LOADED .45 AND SEND THEM ON A VACATION TO VISIT THE CAPITAL BUILDING IN D.C.

LOVE TO SEE THE CONGRESSMEN AND WOMEN GET WHAT THEY DESERVE. HOT LEAD.

Jim in San Marcos said...

Hi CAP LOCKS Anon

I agree, I think that there might be a problem though. You might have to wait in line to discharge your gun (which could be a drag) and at that point, the intended victim might have already died of lead poisoning.

You can't kill them twice.

As a footnote:
You do need to purchase the hand gun 14 days in advance before the day you want to use it in California, so plan ahead.

I sure hope we are only talking humor here.

Gone Soon said...

I am okay with shutting down the FED. One could see that erroneous FED actions have amplified this historic implosion.

Yet for all their powers & mistakes, the FED is a role player in this fiasco. The entire government structure, at all levels over decades, has contributed substantially. On top of it all, the American people have piled on to get what they think they deserve.

No one could play the part of an innocent victim here. The debt-induced boom benefited all who have been alive. Times were good. Jobs were plentiful. Wealth was easily created. Many people with hardly any skill or diligence could live well. The entitlement mentality took hold. Poor Bob would get an SSI check for being old. Lazy Suzy would get food stamps because she wouldn't work for food. Disinterested Joe could get a college loan even though he failed high school. Ma Sixpack could buy a humongous SUV just by scribbling her initials.

In one way or another, everyone has benefited. Now everyone has to pay. But just as the benefit during boom times was unevenly distributed, the pain will be unequally shared. The smart and corrupt will always get a better deal.

Rob in NS said...

Jim

It sounds like a good idea but by the time things could be wound down at Fed I suspect Bernaked will have sold everything for a sack of bean seed. By that time axes will be outlawed.

rob

Anon On A California Mountain said...

Jim has put out a call to arms to “shut down the Federal Reserve”. I applaud him for his intelligence and concern.

People. We CAN make this change happen. But ONLY if there is a deep change in EACH of our consciousnesses. One must truly realize that NO ONE is going to do this for them. Waiting and hoping for for someone else to do something is a mistake that will inevitably cause all of us to succumb. The only person that can do anything about this is YOU. You must realize that if everyone reading this blog did the steps below and ensured that everyone they contacted with this did the same, we’d have a monumental grass roots movement that would change the course of history and save this nation. We CAN make this change happen—if we act while we still have the power. This is our last chance. There isn’t much time left. It starts with YOU. NO ONE ELSE.

1) Here is a site for signing a petition to abolish The Fed.

http://www.petitiononline.com/fedres/petition.html

Sign it. Then send the link to all of your family, friends and business associates. AND HAVE THEM DO THE SAME.

2) Here is also another petition to sign to abolish The Fed through the Campaign for Liberty:

Sign it. Then send the link to all of your family, friends and business associates. AND HAVE THEM DO THE SAME.

3) Ron Paul’s bill to audit the Federal Reserve, HR 1207. Go to this site and sign it:

http://www.campaignforliberty.com/campaigns/auditthefed.php?projid=20

Also, donate as much as you can to the Campaign for Liberty to help fund their efforts to audit The Fed.

4) Go to this site to discover who your representatives are:

http://www.visi.com/juan/congress/

Call, fax and send them a letter informing them of what you want them to do. Then send this link to all of your family, friends and business associates. AND HAVE THEM DO THE SAME.

5) In addition to the above, Ron Paul is writing and will soon publish his book “End The Fed”. All you need to do is buy as many of these books as possible and distribute them to as many of your family, friends and business associates as possible. AND HAVE THEM DO THE SAME.

Also, donate as much as you can to the Campaign for Liberty to help fund more printing and distribution of the book, as well as their ongoing efforts to abolish The FED.

-----------------

This WILL happen if ALL of us do this. It WILL NOT happen if we don’t.

Jim in San Marcos said...

Hi Gone Soon

I agree the Fed has been a major necessary player in the economy in the past.

The trouble is, this new use of the Federal Reserve is not going to solve our problems.

We can't borrow our way out of bankruptcy. The idea that we mise well try it because we have nothing to lose isn't straight thinking.

If it's any consolation, I think the rest of the world might drop dead before we do and I think we are only talking weeks here.

Grab some pop corn and enjoy the show.

Jim in San Marcos said...

Hi Anon on CM

I'm not really pushing for the end of the Federal Reserve. If we were to do it, it would also mean that we would have to repudiate the national debt.

With what the Fed is now doing, will lead to just that. We won't be able to pay even the interest on it.

Ron Paul has too much political baggage. I'm not putting the guy down, when I was writing the present article I googled Andrew Jackson because I could recall the bank name that he killed and brought up a Ron Paul page that was similar in thought to what I had just written.

I don't think we have much time to do much of anything except write your congressman and complain about what is being foisted off on us.

I would steer clear of using Ron Paul's name, you tend to get labeled as "he's one of them."

Congress does respond better to written mail. If you have time to write, they will assume you also have the time to vote.

Sometimes we think our letters don't do much, but when a lobbyist comes through that congressman's door, he gets shown those letters. Only 2% of the people will write in, so it gives Congress a pretty good idea of where the other 98% stand. I'll supply the ammunition you have the weapon, the pen.

Thank you for your concern and the web links.

Anon On A California Mountain said...

Jim,
I'd like to point out that Jackson actually closed down the central bank for personal reasons, mostly revenge. His primary reason was not for the good of the people. He was at war with the president of the bank, the board, and the bank's backers. He wanted to end the cronyism and threat to his programs. We benefitted on a collateral level.

Personally, I am apolitical. I am not pushing Ron Paul or any politial party. He just happens to be the only one in government doing something about it. He challenges Bernanke constantly and points out the folly continuously.

I believe waves of communication coming in via phone, email, fax and letters is necessary. I agree with you that letters are most optimal.

This must be done (whether via Ron Paul's petitions or others). We as individuals must ALL take this action to stop any further damage or delay in righting this economy.

Personally I don't think the country can grow and expand as a power as long as The Fed, fiat currency and income tax exists. They've been the key ingredients for the downfall of most all national economy experiments.

My ideology—more a civilization or societal ideology than a political ideology—is a mix of ideas (based on "take the best and leave the rest"). Some of the best ideas I've adopted are the Austrian or Classical ones based on a strong currency controlled by the people via the Treasury and small government that does not interfere in business or personal life.

To me, just stopping the Fed from doing what it is doing to "solve" the current crisis would be the equivilent of taking a match away from from the arsonist, but not his match box... he may not light the fire he was aiming to, but he's still has plenty of matches left to go and light others... and burn the whole bloody city down.

Sackerson said...

The MSM is finally tuning in to the real, great and growing anger of the people - see these normally very sobersides journalists...

http://www.dailymail.co.uk/debate/article-1163655/WILLIAM-REES-MOGG-Trust-bankers-Youd-safer-Titanic.html

http://www.dailymail.co.uk/debate/article-1163623/MAX-HASTINGS-Seize-Porsches-throw-jail-Shameless-bankers-worse-Train-Robbers.html

ca said...

Jim -

Could you expand on the following statement:
"I think the rest of the world might drop dead before we do and I think we are only talking weeks here.'

tHANKS

Jim in San Marcos said...

Hi Ca

I think that the rest of the world is in worse shape than we are. Iceland went bankrupt. There are riots in Russia and Eastern Europe. Every place that took our dollars for goods produced are now facing very high unemployment.

Venezuela has nationalized just about everything. Italy Spain and Greece are basket cases. Once a few of these countries collapse, it will go like dominoes.

Things are getting worse at a progressively faster rate

Anonymous said...

C'mon people, wake up. This is a planned assassination. The whole thing was set up. The key points being...

The Community Reinvestment Act.

Greenspan making credit cheap.

Repeal of Glass-Steagle Act.

Hank Paulson leading the other 4 major investment banks to convince the SEC to reduce their reserve requirements.

And the final coup de grace... the Bank of International Settlements (BIS) enacting the accounting rule that all banks must mark to market. This is known as Basel II. (They used Lehman Bros. as the excuse to enact it when Lehman sold off a lot of their assets at firesale prices.)

C'mon. Paulson with an MBA from Harvard knew what he was doing. He knew with TARP the banks wouldn't be able to lend due to the BIS destroying their asset value. He knew by setting up a clause that the FED would pay interest to banks on their holdings that they'd just sit back and keep their money at the FED and not lend.

This whole created credit crunch is going to decimate the economies of all major countries. When it is out of control with food problems, bankdruptcies, foreclosures, homeless, riots, etc. etc. they will have set the stage for their next move...

The BIS will become the Global Monetary Authority. An international financial control organization dedicated to ensure "a crash like this never happens again".

It's in the works and being talked about all the time. Referred to as the Bretton Woods II.

You want to know who your real enemy is? Who pulled the trigger and will finally put the last nail in the coffin? It is the IBS. They are the privately owned central bank in Switzerland (that the Swiss government has no jurisdiction over)
that controls all the private central banks in most all developed and some undeveloped countries.

This is the US Federal Reserve's daddy. Most people don't even know they exist. No one knows who the shareholders or board of directors are in the US Fed Reserve and no one knows who they are at IBS either. The current front man for IBS is Jaime Caruana.

Geithner last year suggested publicly that we need a Global Monetary Authority.

Sound too Orwellian? Too conspiratorial? Too silly to believe? Exactly... and that is why they are going to move right in on top of you and take over.

Anyone in stocks or bonds is gonna be sorry. GET OUT.

Cash and some precious metals is your only hope.

Some are going as far as investing in farm land, seeds, gold and ammo. More will follow as the water gets hotter.

Watch the news as we go forward and you will see that the above scenario I laid out here is manifesting.

Rob in NS said...

You can add conspiracy theories to the list along with sex politics and religion.

Jim in San Marcos said...

Rob

I'll make a mental note to add it to the list;>)

AIM said...

I wouldn't be so quick to say that it is a conspiracy theory. You might wind up eating crow. Jim: 3 years ago many people who visited this blog thought that what you were writing was far removed from reality. They are eating crow now.

The ideas from Anon 6:38 seem a bit far out, but... everything that is going on seems pretty far out to me as well.

I'm not going to condemn his/her idea. He could be right.

Jim in San Marcos said...

Hi Anon 6:38

I came close to deleting your post but I thought that would be rude on my part.

I would like to point out that the Bank for International Settlements is a think tank where world monetary heads meet to discuss policy. If there was attempt to forge a new Brenton Woods agreement, they would probably host it. They primarily deal with transfers between foreign central banks. Its real boring stuff. You can download the company hierarchy chart. Ben Bernanke is on the board of Governors.

As for the Fed and nobody knowing who the share holders are is pure myth. Denninger and I have been debunking this myth. I guess if enough people repeat it, it has to be true. Here is a link

Your fear and convictions of a conspiracy theory could lead you into some bad financial decisions.

Jim in San Marcos said...

Hi Sack

Thanks for the links. I liked the Titanic and Iceberg picture. Looks like everyone uses that analogy.

I was watching your PM Gordon Brown get a roasting from the House of Commons on TV. Looks like the stimulus packages aren't working any better there than they are here. He was later making a statement about health care and stated quite positively that every Brit that needed surgery wouldn't have to wait more than 18 weeks to get it performed--did I hear that right? The reason I ask is that they are pushing for universal health care for us.

Jim in San Marcos said...

Hi Aim

Rob and I were having a laugh. I said in my post to anon 2:53 "There are three things that are a waste of time to debate sex religion and politics."

Rob was suggesting that we ad conspiracy theories to the list.

Anon 6:38's total lack of understanding of the BIS and their rating systems of banks in regards to Basel II requirements and his lack of understanding of the Federal Reserve, didn't leave his theory a leg to stand on.

I didn't delete the post, plus the kid is pointed in the right direction for all of the wrong reasons--go figure;>)

I'm Not POTUS said...

If people really want to put the final nail in the coffin for this circus we are in you could do the following.

Max out your withholding exemptions, move your money to demand accounts at the bank so they can't use it to leverage.
SAVE SAVE SAVE every penny.

This will kill the feds cash flow. When they don't have enough tax revenue to pay off the debts, the lights go out and we can start over.

This is the ultimate act of subversion. They would have to change the laws to force ably make J6P to keep paying up. And that will really piss off J6P.

The only thing that is allowing them to abuse the system for their gain is tax collection. If you force them to wait for April 15 to settle your bill they will have to find the money someplace else until then. I wouldn't put it past them to sell off Yellowstone Park to prevent a bond market collapse.

Rob in NS said...

AIM

The problem with conspiracy theories is that it implies we have no power. We all still live in democracies and it is our individual responsibility to make things better. To effect change we need to convince Joe Sixpack that he can make a difference. If in trying to convince him we use the argument that there is an all seeing all knowing global clique ruling the world we will fail. I do not discount what Anon 6:38 stated and he could be proven right. However it is not the time to be looking for monsters under the bed.

rob

Anonymous said...

Hi Jim,

I am a long time reader of your blog and would like to thank you for your always honest, well explained critique of the world financial and economic system.

I found this post very interesting, and thought I might offer you some documentaries that are, I must admit, on the extreme end of the world-view spectrum. They do, however, deal with the illegality of the Federal Reserve banking system, the people behind said controlling institution and a general overview of the hegemonic geo-political-economic environment so long forced by imperial America.

Zeitgeist - The Movie:
http://video.google.com/videoplay?docid=7065205277695921912

Zeitgeist - Addendum:
http://video.google.com/videoplay?docid=-594683847743189197

I hate to post links on a blog, but I really feel these films are incredibly important at this time of existence. I must warn - if you are religious, believe in your government or leaders, trust the systems that govern your life, American lead capitalism, money and all things related - then these films will blow a hole through your societally shaped mind.

I know this post is not on the topic of a global depression - but I have long believed this was inevitable and feel no need to argue the reasons why in a comment - the reality of life on this planet provides enough proof from past to future.

Thanks again for the great read,
T.

Anonymous said...

I'm glad that you didn't delete my earlier post. That would be unfair to do just because you have a conflicting opinion. Glad you run an unbiased editorial approach. I may be wrong in the details but not in the concept that financial elite are attempting a one world economy that they control. People refused to believe that the Nazi's were actually taking over until their doors were finally kicked in and they were hauled off into the night.
I think most people on this site are discussing the veneer and don't have the ability to confront the evil that does exist and what is behind the scenes.

What about this?

FDR was talking about the Fed and the BIS.

On November 21, 1933 President Franklin Roosevelt told Edward M. House 'The real truth .. is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson - and I am not wholly excepting the administration of W[oodrow]. W[ilson]. The country is going through a repetition of Jackson's fight with the Bank of the United States - only on a far bigger and broader basis.

Anon 6:38

Jim in San Marcos said...

Hi T

Thank you for the Complement glad you like the blog

Links are great, the reader has the option to continue to the link or read on.

Anonymous said...

This article made me angry. I'm angry and scared. I wasn't before. I was - perhaps ignorantly - putting my faith in the solutions being proposed. Now I am confused, scared and angry.

I'm trying hard to focus, but the thought of losing all or most of my assets is disheartening. The thought of the perpetuators of this scandal benefiting and profiting from the situation is maddening. I want to do what I can to protect myself and family, but what? We've lost most everything already.

Fear, Greed and Anger...all great motivators. But what to do?

Part of me wants to withdraw. To admit that as a human I have been too greedy and associated my own well being with the level of possessions I own and accumulate. Perhaps I need to disassociate from material possessions and focus on relationships and spiritual health.

My desire has caused me much unhappiness. But I doubt I can change. Is there any hope?

Jim in San Marcos said...

Hi Anon 11:29

I don't see you losing your toys. All your debts would gone. Your home would probably be free and clear as would your vehicles.

With your saving and investments, diversify. Nobody really knows what will happen next. We have a pretty good idea of the end result, but there could be some good deals out there.

Things usually are never as bad as our imagination makes them out to be.

Anonymous said...

Jim and others:

While the link you posted about the Fed is solid, I would urge people to look up Dr. Edwin Vieira.

This man knows more than anyone on the subject of constitutional money, aside from the deceased founders.

At last count, that I know of, he tried 5 cases and won 3 at the Supreme Court, which is astounding.

His Pieces of Eight is a massive 2-volume work, which has more than 6,500 footnotes, for those that need the backup.

He is no conspiricist, but he knows more about this subject than anyone living.

As an aside, I read the first 300+ pages of his work and he is right on.

Of course, he is a strict constructionalist, so his POV may differ from yours.

However, it is interesting that now people call for the end of the FED.

Where were you guys 5, 10, 15 years ago?

Pfffffffftttttttttttttttttttttttt!

We get what we deserve!

And anyone eho thinks writing letters is going to solve the issue, WAKE UP!

98% of these congressthieves are lifers and owned by coportae D'uhmeriKah!

Get real, people!

Go ahead and keep writing those letters.

See what they will get you!!!!!!!!!!!


BWHAHAHAHAHAHAHAHAHAHA!

AIM said...

Anon 6:38

To have credibility...

Present the documentation that shows the revision or addition to the Basel II Accord regarding banks needing to mark to market. And... the documentation that the USA Fed Reserve has accepted this rule and is forcing all member banks to comply.

If there is proof of the above two points that would definitely be something to be very concerned about.

Jim in San Marcos said...

Hi Anon 6:38

I see it a little different. The financial elite (obscenely wealthy individuals) have the most to lose if the banking system collapses. Most of their wealth is a bunch of zeros on a bank ledger. Loss of wealth means loss of power. I don't see them acting as a group either. Greed is not a principle built upon sharing, I want it all!

The Kondratieff Wave theory suggests that we are in the final phase of wealth destruction. The rich right now are trying to save the system, they have the most to lose. Figure that everyone loses 90%, that effectively destroys the middle class. The super rich become barely functional. At that point being rich doesn't play too well with the Hoi Polloi. The French Revolution is a testament to that.

As for Roosevelt's quote, I really don't understand it, it is out of context. It's hard to grasp his meaning.

Andrew Jackson killed a bank that was printing money when the common man saved gold and silver in a tin box. Banking was a concept little understood except in financial circles back then.

Our government is not going to kill the Federal Reserve, it cuts off Congress's ability to spend more than they bring in in taxes. This spending plan of theirs will ruin the Federal Reserve. We won't be able to pay the interest on the national debt.

Jim in San Marcos said...

Hi An Inquiring Mind

I think that it is academic whether or not BIS and the Basel II Accord are being followed by the US. The BIS rates banks and they are using that criteria as part of their rating system from what I understand. They can read each bank's balance sheet and figure it out.

It's a little like a Car and Driver Magazine telling GM that a certain model sucks. In this case, investors will vote with their feet.

Deutsche Bank also does a lot of ratings like that. Someone once gave me a link to some of their intra office goodies, maybe they will again. It's a good site to peruse for financial info.

I don't think that mark to market is even on the table-- That is the final solution and it will be painful to say the least.

Anonymous said...

Halleluiah, Jim. Abolish the FED!!! I didn’t think that I would ever hear you say that. I read the Creature From Jekyll Island by G Edward Griffin twice several years back. The week before last I read The Case Against the FED by Murray Rothbard and The Mystery of Banking also by Murray Rothbard. This past week I also reread the latter two. I plan on reading Tom Wood’s Meltdown this week as well as Rothbard’s What Has the Government Done to Our Money. I have become very interested in Austrian Economics and go to the Ludwig Von Mises Institute site as well as Lew Rockwell’s site on a daily basis. Keynesian Economics is nothing but a bunch of baloney and so is fiat currency. Money based on debt is nothing but a house of cards and apparently is tumbling down as we speak; and the FED is nothing but an engine of inflation and everyone needs to know this. I encourage everyone to go to

http://www.mises.org/

http://www.lewrockwell.com/

http://www.campaignforliberty.com/

BTW, I don’t consider myself to be a libertarian but I do have a lot in common with them and am certainly an ally of theirs on numerous occasions. I am more of a constitutionalist. I really believe that Ron Paul is also more of a constitutionalist as well. We were offered a ‘true change’ in direction with Ron Paul and I wish that we had taken it. We’ll never see anything but bigger and more powerful governments and more and more debt with the Republicans and Democrats.

BTW, I enjoy your blog.

AACC

Aka: an anonymous concerned citizen

Anonymous said...

Per what I've read on this blog, Jim is in agreement with the existence of the Federal Reserve and the whole central banking system. He is just in disagreement with how the Federal Reserve is dealing with our economic problems at this time. Now we are seeing the worst of this destructive quasi-government agency (when the Chairman of the Federal Reserve can make a few keystokes in a computer and add 300B to the Fed's balance sheet and then use it to buy US treasuries there is now no stopping the destruction). What Jim and others who agree with him need to understand is that the Federal Reserve is a direct enemy of the people of this country. Controlling interest rates and bank reserves, utilizing fractional reserve lending, quantitative easing (printing money! inflating the economy and destroying the dollar!) and having a currency backed by absolutely nothing is a formula for total destruction. There is no hope of ever having a truly strong and growing economy with the above points in existence. Income tax and government's strong interference in business are the other two nails in the coffin. These are the reasons for the Great Depression and will be the reasons for Great Depression II. We ignore history and don't learn from its lessons.

Anonymous said...

Hi, Anonymous 8:53,

You’re preaching to the choir. If you have read most of my posts you will know that I have been trying to convince Jim and others that the FED is unconstitutional and is in fact responsible for our inflation instead of being the main fighter of inflation as it claims to be. It also distorts what is left of the free market in all sorts of unhealthy ways. It is operated for the benefit of bankers by allowing FRB to thrive for almost a hundred years under what is essentially a government sanctioned cartel and gives irresponsible politicians a ready source of newly created money by monetizing government debt when not enough buyers of government securities are available. Our money is totally fiat. It is the nature of fiat currency to eventually end in disaster and I’m just thrilled that Jim is beginning to see some problems with the FED. Perhaps this new awareness will lead him and others to do some further research at places such as the Ludwig Von Mises institute.

AACC

Anonymous said...

AACC:
Yes, we are both on the same page of our economic hymnal and singing in harmony. You've got the low part, I've got the high part. Now let's get Jim to take the middle part and we'll be sounding like the Beach Boys!

Anon 8:53

Anonymous said...

of course the fed (the printer of fiat money backed by nothing) is the source of inflation and the myriad of ills that emanates from it. for decades they've used disinformation propaganda to give the polulace the false data that inflation is caused by such nonsense as: "increased prices", "wage increases", "speculation", and on and on and on. what a joke. How gullible we've been. the public is waking up to this now. anyone who thinks otherwise is in the dark ages. the arson who lit your house on fire, has told you that it was caused by the toaster oven short circuiting, and now he is pretending to be your compassionate friend and the hero who will put out the fire and help you rebuild. everybody on this blog better wake up and start recognizing cause and effect.

Jim in San Marcos said...

Hi AACC

I disagree that the Fed is unconstitutional and that the Fed is responsible for inflation. Congress is responsible for the currency and they created the Fed. Congress is the source of inflation, the Fed does not spend money our government does. What thrill would the Federal Reserve get out of inflating the dollar?

Congress says when they raise the national debt, it is being passed on to the future. That is pure bull, each and everyone of us is paying for it right now. From an economic point of view, you cannot pass it on to the future. You pay the tax now, it is called inflation.


The Federal Reserve is a machine used by Congress to spend more than they collect in receipts.

It takes Congress to spend the money that they don't have, the Treasury to sell the bonds, and then the Fed has to come in and pay cash (print money) to buy the bonds to keep this blood sucking Congress in funds.

The deficit is at 10 trillion and I submit once it hits 18 trillion we as a country cannot pay the interest on the debt and are bankrupt. At that point you have destroyed the Federal Reserve and our entire financial system.

My call for the destruction of the Federal Reserve was one of "Stop what you are doing!" They are committing financial suicide with the blessing of that all knowing body call Congress.

Be very careful of listening to anyone that attributes this mess to one political party or the other. The logical assumption made when it is blamed on one party and you accept the premise, it follows that the other party can get us out of the mess. It doesn't quite work that way.

We the people with the help of Congress made this mess and we can't print our way out of it. What is so hard about that concept to understand? I'm not posing that question to you AACC, but rather venting my frustration with this rather absurd financial bail out plan.

Take care and thank you for your comments.

Anonymous said...

A very astute observation Jim. Basically what I think you are asserting is that The Fed IS responsible for inflation and messing up the natural or human balance of the economy... YET, it is only the TOOL of Congress. No matter how the amendment got passed or snuck by in 1913... Congress let it pass AND they never repealed it. They have always been the spendthrifts... Repubs and Dems alike.

Congress is like a drug addict and would never abolish the Fed because it allows them to violate the household or economic 101 rule with impunity... never spend more than you make.

Congress needs to be put on a withdrawal program and their drugs taken away and a whole new approach to the financial handling of this government needs to be implemented based on sound basic economic principles.

Rob in NS said...

Jim

I enjoy reading your comments. The reason I like coming to this site is that it points out the problems we have without getting off track. There is alot of unfairness and inequality in the world but as you point out we elect these people. If people don't like what they are doing don't vote for them.

rob

AIM said...

Let's keep it simple. Congress is a foundational entity of our government structure. It was created by and originally intended that it follow the Constitution. The Fed is a johnny-come-lately, only been with us less than 1/3 of our history. A central banking system was attempted 2-3 times earlier in time but failed to manifest and maintain a hold.

We the people, thru Congress, allowed The Fed to come into existence. Congress is senior to The Fed and can mandate it out of existence if it desired. It won't, because Congress has been deeply inured to the system. As Jim wrote, Congress likes the ability to spend beyond their means. As the other poster wrote, Congress is now like a drug addict. Both true.

I think we can all agree that an entity creating fiat currency, micro-managing interest rates, monetizing debt, adjusting reserve requirements, etc. is not necessarily the best system to promote stability, growth and fairness in an economic environment. We made a mistake and need to change it.

Whether there is a power elite, world banker conspiracy, etc. that is using the financial sector, banking, The Fed, etc. as their means to control is again irrelevant because it doesn't help us solve the problem.

We the people need to be educated on what The Fed is and does and how Congress has gone astray due to its creation and use of it. Then we need to push our Congress to take the steps necessary to change the system and remove The Fed. This will be a monumental task.

If we do it, we'll have a vibrant country and economy stirring with entrepreneurship, creativity, incentive, innovation, prosperity, etc. If we don't, the USA will become a diseased socialist state like that of European countries. The USA will lose the lead as being the super power of the planet and someone else will take over.

Anon on a California Mountain said...

Just realize that no one of import or authority is talking about trying to fix or change the system. Current monetary and fiscal policies are designed to reflate the bubble (which would be the equivalent of giving crack cocaine to a heroin addict trying to deal with withdrawal).

Bernanke's mindset it that inflation is the only way out and he will more than likely pursue that path with a vigor never before witnessed in US economic history. He knows that deflation is the largest conceivable nightmare for a highly debt leveraged economy like ours (an economy so different from when we were on the gold standard, producing and exporting).

Bernanke is thinking, "inflation erodes the real value of debt; it is the most painless way out of our current mess".

Whether he can create just the right amount of inflation to bring things into "balance"—and in the future also be able to control it— remains to be seen. No one has yet to do so in history as far as I know. The other question is, with the existing and coming wealth destruction, does he actually have the ability to create inflation in any way.

Meanwhile, we're stuck in the dilemma... "deflationary trend... inflationary trend... which should I prepare for?"

My opinion is that we are in a soft depression with a deflationary trend. Yet, we need to keep both eyes on Bernanke, because monetary policy is key and he runs the "printing presses" and has no qualms about turning them on and depreciating the dollar, and keep a 24/7 vigil for inflation. It can come quietly and gradually, or with a big bang and a rush.

Talk about changing the system or abolishing the FR at this time is counter-productive or a waste of time.

This system wants to continue as status quo and will use inflationary measures in an attempt to guarantee and prolong its survival.

Our duty at this point in time is to figure out how to not become collateral damage. Put on your thinking cap and work out your strategy. Take advantage of deflation and take advantage of and protect yourself from inflation when she comes a knockin'. She probably will too.

Anonymous said...

MHO is that the only way we will get rid of the FED is to educate the people about it - it may never happen. However, because of this crisis the FED and the government are playing the savior even though they are largely the cause of the problem. There are a great many people who, because of fear, will only hear the government's side. It's difficult for most people to understand that sometimes the best course of action is to stand back and do nothing and let what's left of the free market find an equilibrium point - so they want the government to act even if the action is wrong. However, I have never seen more people who are showing signs of waking up than now. I don't see how people can remain silent and let only one side's story be told - even if it means you are merely planting seeds of thought for germinating at some point down the road.

AACC

AIM said...

Yes, I agree and it is what I have been saying all along. The big push should be to educate the populace on the system... how it works... what the outpoints are, etc. We need to get the average voter to the point of being sophisticated enough to understand the correct actions that need to be taken and be willing to take them, no matter the immediate hardship, and have a long term viewpoint instead of "quick fix for now" approach. There is an evolution occurring, led by the internet, and awareness is climbing. Change is coming.

Anonymous said...

Dear Jim,
One thing to realize is that Japan's "lost decade" has actually turned into "lost two decades". They are in deflation again. They've never been able to recover. It is VERY important to note that all of their quantitative easing did not get them up and out, nor did it create rampant inflation. The deleveraging and wealth destruction overpowered their attempt to reflate. Same thing may quash Bernanke's attempts to reflate/inflate as well.

I'm hoping that the same thing happens here in the US (deflationary depression, instead of inflationary depression). Why? Because the savers and people with money (me) will do well; the dollar will increase (or at least maintain) in purchasing power; people will get back to basics and become frugal; materialism, credit and debt driven consumerism will die; all the junk and malinvestments will be purged from our economy; homes will be at true affordability levels; better regulation will be implemented; the unethical bankster and CEO will be a thing of the past; etc. etc.

I forsee a much better economic climate in the future if the market can overpower the dunderheads at the Fed and Congress and White House and force the cathartic cleansing we need.

Jim in San Marcos said...

Hi Anon 1:42

I think that Japan was a special case, it was our country that bailed them out for the last 17 years with the Yen carry trade. In essence, they helped fuel our boom by investing in our economy..

Their banks paid zero interest. They sent their funds stateside and bought Treasuries and other goodies returning 6%. Using CNBC figures, Japan has 634.8 billion in US Treasuries. If me and the wife are not renewing the 3 month T-Bills, why should Japan?

The carry trade is dead and Japan will pull those funds. We have no sugar daddy that will give us 5% interest on our deposits, or do we? Joe 6 Pack is the new carry trade. The Banks borrow from the Fed at zero percent and loan at 20% for credit card loans. This sort of financing works very well in an up market, but fails miserably when you have massive unemployment.

The only problem I see with Japan, is I don't think that they can withdraw the funds. It would set the bond market on it's ear. And then there is China, I can smell the bacon burning!

Jim in San Marcos said...

Hi Anon 10:08

Your assessment of the situation is the same as mine.

I just don't think that rehab is an option that Congress wants to entertain. They don't see themselves as the problem. They are going to fix this mess even if it kills us by golly gee whillikers.

Thank you for your comments.

AIM said...

Jim,
Congress and the Fed are both clueless... about the economy and what they both are doing about it.

Reminds me of a joke:

Boy goes out on a date with a hot chick and they end up in the back seat of his car and do the "wild thing". After the date, they both return to their respective apartments and talk to their roommates.

Boy to his roommate: "Man, I didn't know that she was a virgin. If I'd known I would have been more gentle and not rushed things."

Girl to her roommate: "Geesh, if I had known that he was so horny I wouldn't have worn panty hose."

It seems to get worse and worse every day so I thought a little levity would help.

TranHarry said...

Very well said, the Fed is out of control. They are like a drug dealer people love to get their fix but no one wants them in their neighborhood.

I was wondering if you would like to do a link exchange your blog has very valueable insights related to my own blog. Let me know if you're interested harry@tranharry.com

Anonymous said...

Shut down the fed? It's a little too late for that isn't it? They've been imbedded with income tax into the system since 1913. We became a socialist country in the 30's thanks to Hoover and FDR, and are no longer a capitalist society.

Bernanke is going to put trillions and trillions of monopoly money into the money supply now.

As Kiyosaki pointed out, all of the socialist "solutions" of the 30's just pushed the original problems all the way up here to the future; and created new ones for us to deal with.

Think about it...

Soc Secur now is a nightmare. Medicare and Medicaid even a bigger nightmare. FDIC insured banks and allowed them to go into riskier and riskier activities. FHA created Freddie and Fannie who are responsible for so much of the mortgage/housing crisis. Unemploymt compensation has now had to be expanded and costs us billions. Add all of the Fed's, Obama's and Congress's further socialist programs and bailouts to the mix and it spells... BYE BYE in the not too distant future.

No foresight, no prediction of consequences, vigilance, etc. That is our error. The people should have done away with socialism and the Fed decades ago. Too late now. Now they are going to do away with us.

AndrewJackson the 2nd said...

First of all, great blog! Some very interesting things here.

One item that you try to dispel are various myths of the Fed Reserve system. I was reading your article about the facts. I would love to believe this, I really would as I would sleep a little better at night knowing what is true and what is not.
But even though you list the "facts" you provide no evidence or links to what you claim. I have researched this and am quite annoyed that of all the govt sites I have visited, there is no real specific breakdown of information to support or dispel the myths or the facts.

For instance, since the ownership of the Fed is such a huge question, why is it that the Fed does not have a breakdown of the shares of ownership, rather than just say they are owned by various banks, ect, ect. ?

Have you ever seen an actual share of the Federal Reserve bank? No? If all these banks are actual owners, then shouldn't someone be able to produce a share or some other piece of paper?

And shouldn't the Fed be able to list who the owners are? They could save alot of trouble for everyone by putting that list out in the public domain. The real problem that I see, is that they don't. Why not???

Why do they go to the lengths to keep this undocumented for so long, why? It looks suspect.

So after reviewing what you wrote, I have to say to you, either come up with some real "evidence" to back up your facts, or quit touting them as "facts".

I really want to believe you, I really do. However, I can't with the little bit that you provided.

Jim in San Marcos said...

Hi Andrew Jackson

Welcome and thank you for the atta boy.

Your writing style is very familiar, am I talking to Joseph?

Here is a Link to buy stock in the Federal Reserve. FR2030 is the form number. It might be easier to list which banks are not FDIC members, they have no stock.

Here is a List of directors.

Here is just a
Link that explains the functions of the Federal Reserve.

There is no secret as to who the owners of the bank are. If your bank has an FDIC logo they are members and hold shares of stock.

Shares held by a bank are probably around 2 percent of deposits at the bank. Shares issued are similar in nature to your mutual fund statement. There are no stock certificates.

Jim in San Marcos said...

Hi Anon 12:30

I know what you mean. Frustration is knowing where you are headed. It dosn't look very good from here.

Thank you for your comments and take care.

Anonymous said...

Jim,
Obviously you want to get out of cash at the right time before deflation turns to inflation. The only way to protect your wealth is to stay in cash now and preserve it in CDs or money market accounts (even though interest rates are low to nothing). And then be prepared to turn that cash into tangibles that will be ok in the inflationary wave. I guess the tangibles that will protect your purchasing power to some degree are food, energy, water, gold & silver, land, rental properties.

I've liquidated most all my investments and am now sitting with a lot of cash in money market accounts in strong banks.

This is going to be tricky to turn this cash into hard assets or tangibles. Need to study. Not sure how to do it or what to buy.

You can't call up conventional brokers at Merril Lynch or Charles Schwab to find out how to preserve and invest your money in an inflationary depression?

Who do you turn to for the real world savvy and advice?

Gulp!

Jim in San Marcos said...

Hi Anon 9:24

I recommend diversification, home, car, stocks, silver or gold and some cash.

The government is constantly changing the rules and it is starting to piss off the banks, so it is hard to second guess what they will do next.

Considering the present interest rate, I would get out of any sort of cash deposit, and go to safety deposit box cash. If I remember my history right, the government put cash withdrawal limits on bank accounts in the 1930's.

The neat thing about cash is that the banks can't loan your money to someone else if it is sitting in a safety deposit box.

Make sure you get crisp new bills, the old ones absorb too much glue, ---thats if you decide to wallpaper your bathroom after we get out of this mess;>)

Anonymous said...

Most of those in the 50-60 age range: who've been working a job... earning a nominal salary (ie. grossing 50k or less per annum)... contributing to an IRA, 401k or annuity which is invested in stocks and bonds (which are a losing proposition)... has debts: a home mortgage (on a home with no or negative equity), car payments, credit card payments, etc... who hasn't been agressively saving... is SCREWED and will not be retiring with a decent standard of living. Probably won't be retiring at all. If they've been living beyond their means it will even be a worse situation as their current lifestyle will now crumble.

The plight of the 50-60 aged guys is the result of the meddling of government and the unethical practices of Wall St. and banks... and the 50-60 aged victims not seeing it coming (attempting to live over the last few decades a normal lifestyle in a veneer that covered up the abnormal conditions).

You guys are screwed and I don't think there is anything you can do about it. And over the next decade or two the government is going to squeeze every last drop of life out of you. The conditions government is causing will make your life even more miserable in the future (high taxes, diminished social services, collapsing infrastructure, high cost of food and energy, etc.)

While the American middle class was busy living their myopic lives, the big money and government boys were busy working their magic and making a big mess of things.

Look what you've allowed to happen. You've been caught out.

A hard rain is a gonna fall and their ain't nothing you can do about it now. Have you learned a lesson? Will you pass it on to your children or will they wind up drugged-TV watching-wage slaves as well?

Anonymous said...

I'VE GOT MY SOLUTION. I'M LIQUIDATING ALL MY ASSETS, SELLING OFF EVERYTHING EXCEPT MY BASIC POSSESSIONS. GONNA PUT ALL MY CASH INTO CDs AND MOVE TO MEXICO AND RENT A NICE LITTLE VILLA OUTSIDE OF GUADALAJARA.
EVEN THOUGH MY YIELD WON'T BE HIGH FROM THE CDs. BECAUSE I'LL HAVE CLOSE TO 750K USD AND BECAUSE THE PESO IS 14.3 TO THE USD I'LL BE ABLE TO LIVE VERY COMFORTABLY DOWN THERE.
WHEN THE DOLLAR STARTS TO TANK I CAN SWITCH IT TO THE BETTER CURRENCY WHICHEVER IT MAY BE (SWISS FRANC, EURO, ETC.). AND IF I WANT TO INCREASE MY STANDARD OF LIVING THERE IS ALWAYS COLUMBIA OR BRAZIL WHERE THE USD WILL GO EVEN FURTHER. I'VE BEEN DOWN IN MEX AND COLUMBIA BEFORE AND YOU CAN LIVE LIKE A KING ON IF YOU HAVE USD INCOME AND CONVERT TO THIER CURRENCY.
WHY PUT UP WITH THIS CRAP ANY LONGER AND WHY BE HERE FOR A COLLAPSE? I'M MAKING MY PLANS.

FUTURE HAPPY EXPATRIATE

Jim in San Marcos said...

Hi Anon 5:12

I'd think twice about moving South of the border. America will be blamed for this mess, which will cause poverty conditions for the lower class in many countries. You might find yourself nailed to a cross for non religious reasons.

Kidnapping rich people's relatives in Mexico is a profession that pays well. There is a reason illegal Mexicans run from the police in this country.

A nightstick to the kneecap can really cripple up a retiree. You pay for police protection in advance down there. You might want to reconsider.

Jim in San Marcos said...

Hi Anon 8:17

I don't see a cloud of doom and I am 62. It will affect us more than those younger.

There are many options available to exercise. Gold is pretty ridiculous in price, but buying a home on leverage with the bank is the equivalent of 175 ounces of gold. Houses are starting to look a little more reasonable. I just might buy one next year using my 401K as a down payment.

Earning money is not hard, learning how to keep what you have earned is hard.

I do agree though that a lot of retirees are in a world of hurt now, their world has been turned upside down. It's going to get worse for some.

Thank you for your comments

Anonymous said...

I do think that Americans are intelligent enough to understand this, but I don't think most are aware, but that is why we are doing this. Blogging and commenting and discussing it.
Watch "America, From Freedom to Fascism" and then pass it on. It helps put the information in your mind and into a shareable format. They would love us to despair and have the whole world seek relief from anyone who would offer to bail them out. Just keep talking and the word will get out.
Also, it would be a hard fall, but abolishing the fed reserve would put us back where we need to be, and we would need to get out of it naturally, not artificially with bail-outs.