Money growing on trees

[peepinmofo]

http://usawatchdog.com/bernanke-admits-pri...ut-of-thin-air/

 

Curious to see what the smart folks around here think of this...

 

Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air to buy mortgage backed securities. This shocking admission came from the Joint Economic Committee hearing on Capital Hill last week. I was dumbfounded when I saw Bernanke shake his head in the affirmative as Representative Ron Paul said, “Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.” I was amazed he admitted this. I looked up the original hearing on C-Span to make sure the clip was not edited. It was not.

What is even more shocking is I could not find a single mainstream news agency that covered this revelation. Congress just finished voting on the bitterly contested Obama health care bill that is supposed to cost nearly a trillion dollars over ten years. (Some contend it will be more than twice that amount.) The mainstream media doesn’t even bat an eye over the Fed creating $1.3 trillion in a little more than a year to buy worthless debt no one else will touch. I do not get it. I guess we could have asked the Fed to print up a trillion dollars to pay for health care and avoided that drawn out battle in Congress.

Then, Rep. Paul brings up printing another $105 billion to bailout Greece. Bernanke answers by saying, “. . . I think one of the agreements that the G20 leaders came up with was sort of a mutual commitment to put more money into the IMF as a way of addressing the financial crisis around the world. . .” Notice how Bernanke used the term “mutual commitment.” I think what that really means is an agreement between all the G-20 nations of a “mutual debasement of their currencies.” I think this is why gold has been rising in price around the globe. I have been saying for months that we are going to have some very big inflation. (Real inflation is already at 9.5% according to shadowstats.com.) I wrote about this last November in a post called “The Fix Is In.”

I think Bernanke just opened the Fed playbook and revealed money will be printed to fix all financial problems. I don’t think he’s even trying to hide it anymore. Rep. Paul also brought up the big debt trouble coming soon with many, many bankrupt cities and states such as Los Angeles and California. I think they will all be bailed out one way or another by the printing press.

New York Fed President William Dudley seems to be on the same page as his boss. Dudley recently said, “The fact that our foreign indebtedness is for the most part denominated in our own currency is a huge advantage in the event the dollar were to come under significant downward pressure.” (Zero Hedge has a complete text of Dudley’s speech, click here) Is Dudley making a not so subtle hint about devaluing the U.S. dollar? Once again, I say yes.

Anyone with a savings account or money market denominated in dollars should be terrified. You have scrimped and saved only to have the Fed print money and devalue what you have worked so hard for! Inflation has been chosen for you by the Federal Reserve, and we the taxpayers can’t even audit its actions. Below is the video from the Joint Economic Committee Hearing last week. Watch for yourself Bernanke nod yes to printing $1.3 trillion:

[peepinmofo]

[Savage Beatings]

I was going to comment on this, but then I was assassinated by the Illuminati. Stupid overlords!

 

Trillion is the new Million. No big deal.

 

-Check it out, my man! This is the Dominator X-10. Thirty inches of thigh-slapping, blood-pumping, nuclear brain damage!

-Bitchin'! Hey, what's it Penny Laneing cost?

-That's the bitchin' part about it! It don't matter! If you can't afford it, Penny LaneING FINANCE IT! So what if it's as big as a Subaru and costs as much? You'll never have to trade this in! This is gonna be with you for the rest of your life! And when you die, they can BURY you in it!

Edited May 3, 2010 by Savage Beatings

[TimC]

Nothing to see here. Just more old people pushing payback off to their kids until after they're dead. Typical baby boomers. We'll end up paying for that loser generation for the next 200 years. Oh well, at least they enjoyed their time here...and that's all that mattered.

[dmarc117]

we are frucked

[Brentastic]

This isn't really news. If any of you read my description of the Federal Reserve's function (there are only 2), one of them was monetizing debt. Read my description here: Brentastic's post about the Federal Reserve.

[Azazello1313]

I think the fed, by and large, has been doing what it needed to do to keep the economy afloat. it's why they are there in the first place, and monetary policy has been a lot more effective dealing with this crisis than fiscal "stimulus" has been. so I'm no ron paul on this particular issue. but stuff like this seems a relevant and kind of distressing commentary on all this loose money going around.

 

So why all the euphoria, especially when there’s less to the banking recovery than meets the eye? Spooked by the panic following the failure of Lehman Brothers, our financial leaders avoided making essentially insolvent banks like Citi and Bank of America write off their toxic loans. Instead, banks have been allowed to hold such assets on their books at inflated prices while they slowly rebuild their capital — a head-in-the-sand policy sarcastically dubbed “extend and pretend.” While it grinds on, loans will be scarcer and more expensive for businesses and consumers — the opposite of what’s needed to rebuild the economy. “Extend and pretend means that banks will continue to shrink, lending will continue to decline and real economic activity will continue to suffer,” says Christopher Whalen of Institutional Risk Analysis, a bank rating firm. “The cost of extend and pretend runs into the trillions of dollars of lost economic activity.”

 

But what about all those record bank profits? Isn’t that a sign that bank lending is back? Not at all, says Whalen: It’s just an indicator that even our most brain-dead banks can make money when the Federal Reserve holds their cost of goods — short-term interest rates — at essentially zero. “The zero interest rate policy is a massive transfer of wealth from savers to banks,” says Whalen. In a financial rondeau that would make even Lloyd Blankfein blush, banks borrow taxpayers’ deposits at close to zero percent rates and essentially lend it back to them at higher rates, through Treasury purchases. The banks keep the profits. Nice work if you can get it, but not exactly the “God’s work” of allocating capital to ensure economic growth.

 

which of course leads to this:

When President Obama took office, the personal savings rate for Americans was an anemic-but-getting-healthier 5 percent. That number peaked a year ago, and is now down to 2.8 percent. This drop is even more striking when you consider that asset prices have, until the beginning of this year, been dropping or flat almost across the board.

 

you'll hear a lot of people talking about how policies encouraging people to consume voraciously rather than save helped get us into this mess in the first place. I don't really know if that's a little bit true, a lot true, or not true at all. but if it's even true a little bit, then current government/fed policy would seem to be pouring gas on the fire.

[wiegie]

two things:

 

1) While the monetary base has skyrocketed, the money supply (M2) has not (do to a dramatic reduction in the money multiplier). (In fact, it might actually be the case that M3 actually decreased due to the collapse of the repo market (although since the Fed stopped collecting data on M3 a few years ago, I am not able to verify this).

 

2) Concerning the banks being propped up so that they can earn their way back into the black, that is indeed what is happening (and we should be at least thankful that it is working). A better solution would have been for the government to temporarily nationalize the insolvent banks, but you guys would NEVER have let Obama get away with that "socialist" ploy--so be thankful that the second-best solution seems to be working. (Letting the banks just fail on their own was not an option (unless you really liked the Great Depression and wanted to see another one happen).)