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Fed Audit's Initial Report Reveals Trillions in Secret Loans
An anonymous reader writes "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression."
Dennis Kucinich is the left-wing equivalent. Both Kucinich and Paul are vocal about the Fed and its parasitic relationship to national economies. It is for that reason that I know they can be trusted.
True, reverting to the gold standard would greatly excelerate our fall into third world nation status. But I just dont see why that's a desirable thing.
"Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
Well, let's see, gold was trading for around $350 an ounce not too long ago, and it's now well over $1,000 per ounce. Basically, that would have us living with what, 200% inflation? Why would you peg your entire economy to some random mineral? Remember when two clowns in Texas came very close to virtually cornering the global silver market? If some one creates a way to artifically produce gold on a vast scale, then what? It's already happened with diamonds, but there's no cartel to protect gold prices.
OK, so they loaned out a truly epic amount of money. A reasonable thing to do during a crisis: you borrow money to get through the bad times, then you pay it back when times are better.
The questions are:
* Did they pay it back?
* Did they pay interest?
* How much?
I don't really care about the absolute dollar figure: this was an international crisis and the dollar figures are going to be proportional to the size of economies, which will measure in the trillions. As long as the net result was that the economy survived (which it did), that it didn't blow up inflation rates (which it didn't; inflation was negative for a while), and that in the end the books balance (thus my questions).
It may well be that the interest rates were so low as to be questionable, especially given that the banks have been giving nonexistent interest to depositors and have been very chary about turning that money around to investment. But I'm not going to wring my hands over the size of it. I'm more concerned about the terms.
Stolen?
They made overnight loans on which the Fed profited. Meaning they reduced the amount the American people owe.
It's not illegal if no one enforces the law against it.
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Well, let's see, gold was trading for around $350 an ounce not too long ago, and it's now well over $1,000 per ounce. Basically, that would have us living with what, 200% inflation?
No, it's the other way round. If a commodity that used to cost $350 now costs $1.000, that means that dollars had 200% inflation in that time period.
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Your grandfather should have invested that money not hoarded it.
Inflation is good in that it encourages spending.
Except other currencies have been relatively stable with the dollar.
And before you start saying "well, they had 200% inflation too!", they didn't, because the prices of non-gold commodities didn't go up by the same amount. Gold is in a bubble.
Both are pretty bad actually.
Gold is valuable as a currency because it looks pretty, doesn't have many industrial uses, is difficult to counterfeit, and cannot be created infinitely by the controlling authority. There's no artificial scarcity involved with gold like their is with paper money. Classically, staying on the gold standard was a good idea because almost every attempt to create a paper currency throughout history ended in the controlling authority (the monarchy usually, the Fed and congress in our case) printing more money to cover their debts until inflation rendered the currency worthless.
Unfortunately, when the population and economy expand, the money supply has to expand with it. When administered responsibly (I.E. not just printing more money to cover debts), a paper money supply can be controlled much more finely. The gold supply expands in a fairly unpredictable way, controlled by how fast mining can be done, which can be completely unrelated to current economic conditions.
Basically, if you have a responsible and knowledgeable administrator, fiat currency can be superior to the gold standard. If you have an irresponsible administrator, fiat currency can and will turn into economic doomsday.
Considering that "going off the gold standard" in that time period is just a roundabout way of saying, "stealing the gold people were entitled to as currency holders", I think you need to show a little more than (very temporarily) puffed up economic activity to show that it was a good idea.
In most shitty economies, you can goose the economic numbers for a few years if you loot the rich and spend the proceeds on cool stuff. (See: History of every Banana Republic.) That doesn't somehow prove that looting the rich is a good idea.
Information theory is life. The rest is just the KL divergence.
You're deluded if you don't think inflation isn't a problem. You're also nuts if you think all of these commodity spikes are somehow "speculation" driven.
Whenever someone proposes that something complicated or unmanageable by human standards should be controlled by a computer, I cannot help but read the whole sentence in Dr Strangelove's voice. Which of course makes it instantly hilarious.
I think my brain does this because people still don't get the fact that computers are just as fallible as man. They are after all, programmed by us. Computer control is NOT the answer and any system which would rely on it in a "savior" like way, is not one that I would 'bank' on. (heh)
As a potential lottery winner, I totally support tax cuts for the wealthy
Ron Paul follows the Austrian school of economics. They believe that mathematical models and statistics can't be used to analyze economics, and that you cannot conduct tests are experiments to determine the validity of economic theories. You just have to reason it out from first principles. It is basically a rejection of the idea that economics can be developed as a science or based on real world data.
They are essentially the economic equivalent of creationists, rejecting science. A Ron Paul economy would be a disaster.
Maybe he'd be better on non-economic issues. Oh wait--he's tried three times now to use an underhanded legislative trick (jurisdiction stripping) to make it so the Constitutional prohibition of establishment of religion would not apply to the states. Yeah, state sponsored religion--that's just what we need.
How about education? He supports spending public money on vouchers for Christian schools, but voted against vouchers for DC schools. I guess he thinks public schools are good enough for Black kids.
Votes no on pretty much anything designed to encourage development of clean energy or to reduce our dependency on oil.
Do Ron Paul supporters ever actually look into his record? Nearly all of them I've seen on the net seem to support him because he agrees with one or two of their pet issues, and they have no idea of how terrible he is on so many things.
Your grandfather should have invested that money not hoarded it.
Inflation is good in that it encourages spending.
That is perhaps the greatest fallacy of the modern era: economic strength is in spending.
An increase in economic activity is not an indication of strength. Spending (consumption) is actually a destructive force. If spending and an increase in economic activity were indicative of economic strength, then nations with hyper-inflated currencies are among the strongest in the world, because those people spend all of their income the very same day they get paid.
Power is increased through accumulation (saving), which is reserved not for itself, but for the sake of future spending and investing, whether or not there is a goal in mind for those savings. Whether or not you see it, spending must always come from savings. What about spending on credit? Well that is just a promise that you will save in the future. You are promising future savings for spending today. If you can't learn to save before spending then you will never catch up with your debt, and you will live out the rest of your life as a slave to your debt.
A monetary system that discourages savings by way of inflation will make slaves of all of it's subjects.
Fiat currency is a technology. We the ppl can use it to benefit us! Just think, if the Fed created $16 trillion out of thin air and there was no inflation to speak of, why can't we print the budget and empower individuals with a basic income, and fund challenges to stimulate the innovation that is the real driver of standard of living increases?
There's no such thing as a free lunch. Those at the top get to use the money while it retains most of it's value. Those further down the money "food chain" won't get to use any of that extra money until most of the value is depressed. That's how the wealthy use fiat money and inflation to rob the rest of the people. Because they just need capital to get more capital, but the rest of us have to do real work and produce real goods and services.
"Somebody has to do something. It's just incredibly pathetic it has to be us."
--- Jerry Garcia
Steady deflation provides an incentive to keep most of your wealth in savings, rather than invest it. The result is a tendency for slower economic growth compared to an inflationary economy.
People tend to become slaves to debt in America because they don't know how to live within their goddamn means.
In the real world, the U.S. went off the gold standard in 1933, and the while there is some debate among experts about how big a role the gold standard played in the Depression overall, it was undisputably a major factor in the bank run and bank collapses that were one of the early events of the depression, because these were directly triggered by waves of attempts to convert dollars to gold.
Its true that much of the world, including the U.S., adopted a system that was something like a gold standard under the 1946 Bretton Woods agreement, but this wasn't what most people (including most current advocates of a "gold standard") define as a gold standard (particularly, it was a "U.S. dollar standard" with a notional peg to gold, but only certain specially privileged actors had the right to convert dollars to gold; most gold standard advocates advocate free convertibility.)
Even the limited sort-of-gold-standard of Bretton Woods was showing major strains by the late 1950s, and was completely failed by the late 1960s (with major runs on gold, the US threatening to deny conversion of dollars to gold to certain countries, and the open market price of gold far above the notional peg price), and effectively killed any meaningful resemblance to a gold standard in 1971 when direct convertibility was suspended and then the dollar began a series of rapid adjustments in nominal gold value in an attempt to maintain the core of the Bretton Woods system, which was the peg of other currencies to the U.S. dollar.
What actually happened in 1973 is that the world left the U.S. dollar standard, more than the U.S. leaving any meaningful gold standard.
How about if you quit being a shill for the gold investors would-be parasites that are looking for their chance to join the banking cartels in that draining. If you look at the history of economies under the gold standard, its not like banking cartels were any less parasitic. The push for a return to a gold standard largely comes from people who have staked out positions in gold hoping to benefit from the inevitable runs on gold that gold standards produce, and their dupes.