Fed Audit's Initial Report Reveals Trillions in Secret Loans

← Back to Stories (view on slashdot.org)

Fed Audit's Initial Report Reveals Trillions in Secret Loans

Posted by timothy on Thursday July 21, 2011 @08:27AM from the go-ahead-have-a-cabal dept.

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."

101 of 499 comments (clear)

Min score:

Reason:

Sort:

Ron Paul 2012 by rcb1974 · 2011-07-21 08:29 · Score: 4, Funny

nuff said.
1. Re:Ron Paul 2012 by Anonymous Coward · 2011-07-21 08:33 · Score: 3, Insightful
  
  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.
2. Re:Ron Paul 2012 by Kenja · 2011-07-21 08:34 · Score: 4, Insightful
  
  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?"
3. Re:Ron Paul 2012 by rubycodez · 2011-07-21 08:37 · Score: 2, Funny
  
  We became a superpower while on the gold standard; your statement is absurd.
4. Re:Ron Paul 2012 by Anonymous Coward · 2011-07-21 08:38 · Score: 4, Informative
  
  You do realize that it was Bernie Sanders, not Paul, who ordered this audit, right? You know, Sanders (S-VT), where "S" is the Socialist Party of Vermont?
5. Re:Ron Paul 2012 by Anonymous Coward · 2011-07-21 08:41 · Score: 3, Insightful
  
  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.
6. Re:Ron Paul 2012 by 2muchcoffeeman · 2011-07-21 08:46 · Score: 4, Informative
  
  The gold standard is overrated. The longer a country stayed on the gold standard during the Great Depression, the longer it took that country to get out of the Great Depression.
  
  As this article notes,
  
  ... 13 other countries besides the U.K. had decided to abandon their currencies' gold parity in 1931. Bernanke and James' data for the average growth rate of industrial production for these countries (plotted in the top panel above) was positive in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth.
  A gold standard only works when everybody believes in the overall fiscal and monetary responsibility of the major world governments and the relative price of gold is fairly stable.
  Enough with the gold standard nonsense already.
  
  --
  Prevent Windows piracy. Use Linux instead.
7. Re:Ron Paul 2012 by Noughmad · 2011-07-21 08:48 · Score: 4, Insightful
  
  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.
  
  --
  PlusFive Slashdot reader for Android. Can post comments.
8. Re:Ron Paul 2012 by h4rr4r · 2011-07-21 08:54 · Score: 4, Insightful
  
  Your grandfather should have invested that money not hoarded it.
  Inflation is good in that it encourages spending.
9. Re:Ron Paul 2012 by Lunix+Nutcase · 2011-07-21 08:55 · Score: 2
  
  And by "most of us" you mean a small minority of right-wing whackjobs, right? Because most of us don't want a government that does nothing.
10. Re:Ron Paul 2012 by newcastlejon · 2011-07-21 08:57 · Score: 3, Informative
  
  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.
  For accuracy's sake I should say that artificial gold is a practical impossibility until we have cheap transmutation; diamonds are just a form of common carbon, while gold is made of precious gold. To answer your specific question of what might happen when we have the technology to cheaply create synthetic gold, I can only imagine: our economies might well have moved past physical scarcity by that point in time.
  Perhaps you should have been thinking about cheaply extracting the gold that already exists on Earth. Getting it from seawater is an idea that I've heard mentioned a few times and if that were possible then the price of what is basically just an expensive commodity would plummet, so naturally basing a currency on it would be a Bad Thing. Until that happens I've no idea why the gold standard is bad but then again I don't know how to cast the bones like an economist.
  
  --
  If God forks the Universe every time you roll a die, he'd better have a damned good memory.
11. Re:Ron Paul 2012 by Anonymous Coward · 2011-07-21 09:00 · Score: 2, Informative
  
  hahahahaha...no we didn't actually...our super status was not really sealed until after WWII. We all know that we began to move off of the gold standard under Roosevelt, but still had some of our money supply backed up by gold reserves. Moving off of the gold standard was what allowed our economy to grow exponentially after WW2. This is a simplistic explanation as it is much more involved than that. We were a player on the world stage, but not really what you would deem a super power.
  It had nothing to do with us and everything to do with the rest of the industrialized world being leveled during WWII while our factories were still operational. In it's superior productivity position, the US basically strong-armed implementation of the Bretton Woods system that essentially set international trade pegged to the dollar, part of which was swallowed because it was pegged to gold, which the US was holding onto since, during the war, wealthy nations during the war had shipped it there for safe keeping.
  Essentially, the US stole the world's gold reserves by exchanging it for dollars and under the Bretton Woods formed World Bank, pegged all trade to the US dollar by pegging all foreign currencies to the US dollar. Then we changed the ounces of gold per dollar. Then we eliminated all pretext and made the dollar pure fiat... now that vital commodities like oil were traded in, yep, US dollars.
  The superpower status of the US was as much a scam as the USSR's superpower status, except we actually managed to steal much of the world's wealth while the USSR was too deluded by the communism illusion to admit they had nothing.
12. Re:Ron Paul 2012 by dkleinsc · 2011-07-21 09:02 · Score: 5, Informative
  
  Here's the deal on this: Ron Paul is one of the minority in Congress who actually believes what he's saying and isn't for sale. It's actually not unusual for him to ally himself with the likes of Bernie Sanders (S-VT) and Dennis Kucinich (D-OH), because he will come to the same conclusions they do for completely different reasons. For instance, Kucinich and Paul have worked together trying to stop the war in Libya. Dennis is against it for typical liberal peacenik reasons like thinking it immoral to bomb people who present no threat to the United States. Ron is against it because he thinks of big military spending as tax-and-spend big government.
  Now, Paul has been pushing "audit the Fed" from a conservative angle for years. Sanders, on the other hand, actually managed to get it into law. Kudos to both of them for making the right decision.
  
  --
  I am officially gone from /. Long live http://www.soylentnews.com/
13. Re:Ron Paul 2012 by vajrabum · 2011-07-21 09:03 · Score: 2
  
  Fascinating that you didn't seem to notice that this came from Bernie Sanders who's the only self described democratic socialist in the national legislature. Unlike Ron Paul there's no indication at all that Bernie Sanders is a racist (http://www.realchange.org/ronpaul.htm).
14. Re:Ron Paul 2012 by rubycodez · 2011-07-21 09:05 · Score: 3, Informative
  
  no nonsense, U.S. went off the gold standard in 1973. The Depression had everything to do with self-referential paper pyramid scams, same as recession of now. Quit being a shill for the banking cartel parasites who have been draining our wealth.
15. Re:Ron Paul 2012 by KhabaLox · 2011-07-21 09:14 · Score: 2
  
  our economies might well have moved past physical scarcity by that point in time.
  Umm... they already have with fiat currency.
  Or do you mean our economy as a whole, i.e. the trading of goods and services, would move beyond scarcity? I don't see how that is possible. Value is intrinsically linked to scarcity.
  
  --
  Ceci n'est pas un sig.
16. Re:Ron Paul 2012 by Xaositecte · 2011-07-21 09:18 · Score: 5, Insightful
  
  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.
17. Re:Ron Paul 2012 by tombeard · 2011-07-21 09:23 · Score: 2
  
  No it wouldn't. The price of bread doubled when the value of dollars dropped by half. Ribeye steaks cost $12/lb at my grocery, 3 years ago they cost $6. You are supposing a gold based currency which is the opposite of what we have. 1 Oz of gold used to buy $800, now it buy $1600 thus the cost or value of the doller is now half what ti was 3 years ago. Good if you are paying back loans, bad if you had money in the bank. Irrelevant if you had gold.
  
  --
  The reason we subjugate ourselves to law is to better procure justice. If law does not accomplish this purpose then it m
18. Re:Ron Paul 2012 by MiniMike · 2011-07-21 09:38 · Score: 2
  
  We also became a superpower without the internet; bye now!
19. Re:Ron Paul 2012 by Znork · 2011-07-21 09:43 · Score: 3, Informative
  
  Inflation is only easy to control if you get to define 'inflation' to mean whatever you feel like. As in "something went up in price so we'll make up an excuse to exclude it - see we have no inflation". Or "oh, beef got more expensive, but eh, people will eat processed dog instead so their meals got no more expensive - see, we have no inflation".
  Perhaps, if we got accurate measurements of inflation it would be a workable model, but unless things like asset inflation get included we'll just get an endless process of bubble-crash-bubble-crash as malinvestments get stuffed into segments that are not accounted for.
  A deflationary economy would ultimately be less painful, but as it would put significant problems for stealth taxation and it would create less benefit for the economic actors closest to money creation, it is unlikely to happen.
20. Re:Ron Paul 2012 by DriedClexler · 2011-07-21 10:05 · Score: 2, Insightful
  
  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.
21. Re:Ron Paul 2012 by Magius_AR · 2011-07-21 10:32 · Score: 5, Insightful
  
  You should look up the term "leading indicator". That's what gold is. It's an inflation HEDGE, where people put their money because they're expecting inflation will be coming. And based on the rising prices of a whole score of commodities (Corn, Coffee, Sugar, Copper, Oil, etc, etc...pick your poison), I'd say they got it right. I've little doubt these costs will eventually filter down to the consumer. Hell, I know for a fact we've already seen that in coffee prices: http://www.usatoday.com/money/industries/food/2011-03-18-starbucks-coffee-prices.htm
  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.
22. Re:Ron Paul 2012 by Xaositecte · 2011-07-21 10:34 · Score: 2
  
  Eh, even if gold wasn't currency, people would still want it. It's shiny, can be made into jewelry, which can then be used to help you find a mate (getting down to the basics). If everyone one day decided to stop using gold as currency, you'd still have it as an intrinsically valuable commodity, just less valuable then when it was a currency.
  But, you're right to say that every currency (Fiat, mineral, or otherwise) is just an arbitrary token that has been agreed to be worth a certain amount of goods or services. People argue that gold is a better choice of arbitrary token then fiat currency mostly because of the aforementioned enforced scarcity. Other scarce materials that lack industrial applications would also be a good choice of currency for the same reasons.
23. Re:Ron Paul 2012 by citylivin · 2011-07-21 10:34 · Score: 3, Insightful
  
  "where the amount of currency in the system (and hence its value) is controlled by a computer. The computer simply raises the tax rate in order to "destroy" currency and prevent inflation"
  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
24. Re:Ron Paul 2012 by harlows_monkeys · 2011-07-21 10:38 · Score: 5, Insightful
  
  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.
25. Re:Ron Paul 2012 by roman_mir · 2011-07-21 10:41 · Score: 5, Informative
  
  . 13 other countries besides the U.K. had decided to abandon their currencies' gold parity in 1931. Bernanke and James' data for the average growth rate of industrial production for these countries (plotted in the top panel above) was positive in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth. - this entire paragraph is ridiculous.
  The US didn't begin a recovery in 1933 at all. US only recovered once the WWII ended, so the government stopped with the spending and the credit could be reallocated back into the private sector. 1929-1945 were the years of bail outs and stimulus. And when talking about 'output decline', yeah, that's their most important metric. For the government of-course, as when prices fall in a deflation, they collect less taxes and they owe money, so to a government this is a double hit - they collect less in taxes and they must repay debts in appreciating currency.
  Of-course they hate deflation, but deflation is great for the consumer. FDIC was created to fight an imaginary problem - only 2% of deposits were wiped out during the Depression, but the prices fell by a much bigger amount due to the deflationary pressure, which was a healthy unwinding of the bubble, that the US government has created in the twenties, when it was buying UK debt, to prop up UK pound, so they inflated a huge bubble in agriculture, prices needed to go down and they fought it tooth and nail by printing so much money, it was obscene by those times.
  The consumers who didn't have their deposits disappear, gained hugely from the increase in purchasing power, much more than 2%, as the prices for agricultural products were plummeting, and government was trying to keep the prices up then, just like it's trying to keep prices for houses and various companies (banks, GE, GM, etc.) up today.
  Real gold standard wouldn't have let US to get into the Great Depression in the first place, because the Fed wouldn't be able to print money. The current depression wouldn't have happened either.
  
  --
  You can't handle the truth.
26. Re:Ron Paul 2012 by Curunir_wolf · 2011-07-21 11:02 · Score: 2, Informative
  
  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.
  Bullshit. How about oil? And how about industrial commodities? Have you compared the price of gold over time to the price of wheat?
  I also suggest you take a careful look at the stock market, which the "experts" in Washington and at the Fed claim is indicating a recovery. In fact, the stock market prices simply reflect the first place where the devalued dollar starts to show large price increases. Check out the indexes vs. the price of gold, and you'll notice that the market is still depressed, and the only thing that is failing is the fiat "money" that the elites are fooling everyone with and using to rob the lower classes.
  
  --
  "Somebody has to do something. It's just incredibly pathetic it has to be us."
  --- Jerry Garcia
27. Re:Ron Paul 2012 by clampolo · 2011-07-21 11:03 · Score: 2
  
  You are injecting too much politics into this. Do you really think that Glenn Beck and Rush Limbaugh's audience have the economic power to cause a major commodity to rise to an all time high? For a major commodity like gold to go up in price some major players have to be getting in on the action. And in fact, China and India have been buying large amounts of gold.
  And it makes sense why people are buying. There is a lot of uncertainty in the world economy right now. There are fears from austerity measures in Europe as well as debt/unemployment woes in the US. Gold makes a very nice hedge. If the fears are justified then there is no bubble. But if you are so sure that you know more than the market, feel free to short gold.
  
  Inflation has not been the problem over the last few years
  Considering that the FED's definition of inflation excludes food and energy prices, I tend to dismiss anyone that says inflation isn't that bad.
  
  The gold standard would be a great thing for very few people. and I'd bet dollars to donuts that you aren't actually one of them
  Despite its occasional ups and downs, gold is pretty good at keeping its purchasing power. The dollar is not. Inflation is a real killer for people on fixed incomes, so I fail to see why you think price stability is only good for the rich.
28. Re:Ron Paul 2012 by enjerth · 2011-07-21 11:03 · Score: 4, Insightful
  
  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.
29. Re:Ron Paul 2012 by SomeKDEUser · 2011-07-21 11:04 · Score: 2
  
  No, he is right. For all intents and purposes, spending and investing are the same. In aggregate, the money put into the system in exchange for is used to produce more goods and services.
  It is a bizarre illusion that some transfer of money between two parties is "spending" and some of it is "investing". In the end, it doesn't matter: money gets transformed into goods and services. When you spend your money in a restaurant, you are allowing this restaurant to stay in business. And you are ensuring that you can continue to go eat there.
  Money is just a convenient way to exchange goods and services. But in the end, it is only that. There is no particular value of having lots of it stored somewhere, unused.
30. Re:Ron Paul 2012 by Curunir_wolf · 2011-07-21 11:05 · Score: 4, Insightful
  
  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
31. Re:Ron Paul 2012 by Curunir_wolf · 2011-07-21 11:21 · Score: 3, Informative
  
  You do realize that it was Bernie Sanders, not Paul, who ordered this audit, right? You know, Sanders (S-VT), where "S" is the Socialist Party of Vermont?
  Actually, it was originally Ron Paul's bill. Sanders sold out, gutted it, and instead of a comprehensive full audit of the Fed became and extremely limited, one-time audit instead.
  
  --
  "Somebody has to do something. It's just incredibly pathetic it has to be us."
  --- Jerry Garcia
32. Re:Ron Paul 2012 by KhabaLox · 2011-07-21 11:26 · Score: 2
  
  I think you are confusing knowledge of all things with knowledge of a specific thing. As we learn more, the sum total of knowledge increases, the aggregate value of that knowledge increases. But as specific knowledge becomes widespread, the value of that knowledge decreases.
  If only one person knew how to brew beer, that knowledge would be very valuable. If everyone knows how to brew beer, that knowledge is less valuable.
  
  --
  Ceci n'est pas un sig.
33. Re:Ron Paul 2012 by Jayson · 2011-07-21 11:39 · Score: 2
  
  So, bright eyes, what would happen if a gold-backed currency could not find more gold to back it?
  You are not understanding how a gold standard is operated. It doesn't mean that the amount of money is tied to an amount of gold. It means that the dollar is tied to the price of gold.
  For example, right now you would set the dollar to target $1500 per ounce of gold. As gold rose, dollars would be drained from the economy. As gold fell below $1500, dollars would be injected into the economy. We don't need to monkey with the tax rates either (actually, that would be an absolutely terrible idea). You would use open market operations like they do now. Too many dollars (inflation) - sell bonds and extinguish the dollars. Too few dollars (deflation) - buy bonds with newly printed dollars.
  People often get this really wrong and assume that a gold standard implies money has to grow at the rate of gold when that isn't true at all. The central bank doesn't even need to own any gold at all to make it work since you are just doing a price target. People also often confuse inflation and deflation with rising and falling prices. They are not the same thing. For example, inflation will put upward price pressure that will result in rising prices - ALL ELSE BEING EQUAL. But scarcity or high demand can also cause rising prices, but that isn't inflation - it is a pricing signal unrelated to inflation.
34. Re:Ron Paul 2012 by MyFirstNameIsPaul · 2011-07-21 11:53 · Score: 3, Informative
  
  The Sanders amendment was passed over Paul's amendment. Paul's amendment was an actual top-to-bottom audit of the Fed, while the Sanders was incredibly watered-down by comparison. For example, the gold will not be audited. For all other multi-billion dollar assets, owners require periodic audits of the asset, yet for some reason the gold in the Federal Reserve has not been audited in over 60 years.
  
  --
  I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
35. Re:Ron Paul 2012 by PCM2 · 2011-07-21 12:12 · Score: 3, Interesting
  
  Because it is so expensive it is only adapted when there is really no alternative.
  The paradox here is that something like 50 percent of all gold that isn't used for money or investments is used for jewelery and other decorative purposes, all of which are completely unnecessary. There are also plenty of alternative shiny things that could be used to make jewelery, but people choose gold anyway. So whatever demand there may be for it in industrial applications is offset by the completely irrational demand for it in other applications. In my book that makes it a lousy commodity market to be in, unless you're there to exploit bubbles.
  To illustrate, titanium is also used in medical applications because it has some properties similar to gold, and it's probably useful in far more medical applications than gold is, yet gold is currently 1,224 times more expensive than titanium.
  
  --
  Breakfast served all day!
36. Re:Ron Paul 2012 by Xaositecte · 2011-07-21 12:27 · Score: 3, Insightful
  
  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.
37. Re:Ron Paul 2012 by PCM2 · 2011-07-21 12:29 · Score: 2
  
  I dare you to go to you favourite shop, and buy a suit for an ounce of gold.
  A friend of mine runs a store that sells fancy bicycles, and a guy tried to do just that. He actually had the gold coins on his person. Really, though, it seemed like he was less interested in buying a bike than in haranguing shop owners about the evils of fiat currency, etc., etc. This may be why a lot of folks assume that people who are obsessed with the gold standard are loonies.
  
  --
  Breakfast served all day!
38. Re:Ron Paul 2012 by PCM2 · 2011-07-21 12:33 · Score: 2
  
  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.
  And if not spending were indicative of economic strength, then nations where everyone lives in caves and there is no industry would be among the strongest in the world, because everyone's money would just sit in the bank.
  
  Power is increased through accumulation (saving), which is reserved not for itself, but for the sake of future spending and investing
  So spending now is bad, and what you really want to do is spend later? I'm not sure I see the distinction.
  
  --
  Breakfast served all day!
39. Re:Ron Paul 2012 by DragonWriter · 2011-07-21 14:17 · Score: 3, Insightful
  
  no nonsense, U.S. went off the gold standard in 1973. The Depression had everything to do with self-referential paper pyramid scams, same as recession of now.
  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.
  
  Quit being a shill for the banking cartel parasites who have been draining our wealth.
  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.
40. Re:Ron Paul 2012 by Bob+the+Super+Hamste · 2011-07-21 14:34 · Score: 2
  
  I thought we became a super power after the Europeans bombed the crap out of each other so that they were basically all 3rd world countries and then we rolled in and bombed them some more. Add to that what happened in the Pacific Theater and basically we came out way ahead since we could actually build stuff and produce food. We really weren't on the gold standard during or after WWII since an individual US citizen couldn't actually redeem their dollars for gold from the government, but only foreign governments could, but after WWII they were all dirt poor and indebted to the US anyway so what did that matter.
  
  --
  Time to offend someone
41. Re:Ron Paul 2012 by Bob+the+Super+Hamste · 2011-07-21 14:53 · Score: 2
  
  Also during that time there was a run on "hard" currency since people were hording all the coinage they could since gold and silver coins would still be worth something regardless of what side won. It got so bad the both the Union and Confederate governments had to create fractional currency, also known as postage currency which was basically denominations of paper currency less than a dollar.
  
  --
  Time to offend someone
42. Re:Ron Paul 2012 by jcr · 2011-07-21 16:34 · Score: 2
  
  Gold has increased in value because the Glenn Beckers and his (whatever they actually call themselves) ditto-heads have driven the price up with excess demand.
  That's absolutely idiotic. Beck got on the gold-buying bandwagon very late, and he certainly had nothing to do with the massive buying that the Chinese and Indian banks have been doing.
  -jcr
  
  --
  The only title of honor that a tyrant can grant is "Enemy of the State."
43. Re:Ron Paul 2012 by Killall+-9+Bash · 2011-07-21 19:10 · Score: 2
  
  Holy fucking Jesus, I thought I was the only one that saw the pattern..... When you see it on TV, that's the charlatans working together to get someone else to hold the flaming bag of poo.
  
  --
  "Prediction: within 10 years, Windows will be a Linux distribution." Me, 7-6-2016
44. Re:Ron Paul 2012 by DragonWriter · 2011-07-22 01:33 · Score: 2
  
  But it rejects economical models and statistics. These models, never-mind how much are you inclined to believe them are full of flaws. And one of them particularly hardcore. The assumption that humans will make rational decisions based on presented facts.
  That's actually not a feature of rational choice theory, which models behavior as making the choice with the best utility with full knowledge, not making a "rational decision" based on "presented facts". Its actually well-known that what it posits (which requires perfect information) isn't an accurate model of the underlying reality. How science works, though, is to arrive at successively better models of reality by positing a model which makes falsifiable predictions, testing them, and refining them as necessary. Within certain domains within economics and other social sciences, rational choice theory has reasonable predictive power and better models aren't available. Within other domains, it doesn't, and other models (often based on modifications to rational choice theory based on observations of how actual human decisionmaking has shown to diverge from utility optimizing with perfect information) are used.
  
  Despite four decades of applied psychology research showing that rational decision making in certain situations is not attainable, your statistic lovers in the "we love Keynes" Department won't listen, and won't change their models accordingly.
  You don't discard a model because research in a different domain shows that its basic principle isn't universally applicable. You discard a model because you have a model which works better. And there are lots of models used in lots of domains within economics are empirical models that aren't derived from simple rational choice theory to start with, including most of those labelled "Keynesian".
  Discarding aggregate economic models based on rational choice theory that work empirically because rational choice doesn't model individual level decisions perfectly and thus can't be a perfect explanation of why those models work empirically is merely dumb. Discarding empirical economic models for which rational choice theory isn't central in the first place for that reason is insane.
45. Re:Ron Paul 2012 by ImprovOmega · 2011-07-22 02:04 · Score: 2
  
  The US absolutely did NOT become a super power until after the close of WWII. And in large part, that was thanks to the Germans (including Nazis) absorbed by the US.
  It had much more to do with Europe (the former economic super power) having completely wrecked its infrastructure following two major wars, while the U.S. had a completely intact infrastructure from a complete lack of being bombed into the stone age.
Re:Isn't this illegal? by Ruie · 2011-07-21 08:38 · Score: 2

I do not see $16T in the actual document - is this an integrate number (i.e. the sum of all loans provided over the time period) ? Everybody should keep in mind that Fed provides overnight loans which have to be returned the next day. If the bank needs more money they do it again so the figure multiplies quickly.
The quick look at plots shows that the maximum amount (in 2008) was below $1T.
16 trillion? A typo? by Guspaz · 2011-07-21 08:39 · Score: 2

I don't see how the federal reserve could have given out 16 trillion in secret loans when that represents more than five times the total assets of the federal reserve... Am I missing something? The GAO's report never mentions this figure.
1. Re:16 trillion? A typo? by i+kan+reed · 2011-07-21 08:52 · Score: 5, Informative
  
  As a poster suggested above, these were overnight loans that were almost immediately repaid.
2. Re:16 trillion? A typo? by MrQuacker · 2011-07-21 08:52 · Score: 4, Informative
  
  Thats total, not at once. Lend out $100 Billion to someone on Monday night, they pay it back Tuesday morning, and borrow it again Tuesday night to pay back Wednesday morning. Do that for a week and you just lent out a Trillion.
3. Re:16 trillion? A typo? by MyFirstNameIsPaul · 2011-07-21 12:39 · Score: 2
  
  I see, the standard is higher for me.
  
  --
  I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
4. Re:16 trillion? A typo? by DriedClexler · 2011-07-22 03:29 · Score: 2
  
  Collateral or not, short-term or not, a loan at 1% APR (or whatever obscenely below-market rate they charged) is pretty fucking sweet, and the fact that the Fed doesn't extend this offer to everyone, but only the "important people" should tell you something. If nothing else, the difference between the market cost of such a loan, and the price the Fed charged, is the magnitude of the subsidy.
  Which means that all of these firms did, in fact, get a free handout just for being "special".
  
  --
  Information theory is life. The rest is just the KL divergence.
A one liner solution would be great by Marrow · 2011-07-21 08:39 · Score: 2

But I am unsure how the the powers of the Executive Branch can force a change.
1. He only gets to sign or veto bills written by other people.
2. He has no control over the airwaves that would be saturated by very desperate people who want to keep things the same.
3. He will want to get re-elected.
This is well known by sgent · 2011-07-21 08:40 · Score: 5, Informative

Its not some sort of secret, it has been disclosed by the Fed in their annual reports as required by law.

FORTUNE -- The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn't really need it, it didn't work, it was a failure. It has become politically toxic, which inhibits reasoned public discussion about it.
But you know what? The bailout, by the numbers, clearly did work. Not only did it forestall a worldwide financial meltdown, but a Fortune analysis shows that U.S. taxpayers are coming out ahead on it -- by at least $40 billion, and possibly by as much as $100 billion eventually. This is our count for the entire bailout, not just the 3% represented by the massively unpopular Troubled Asset Relief Program. Yes, that's right -- TARP is only about 3% of the bailout, even though it gets about 97% of the attention.
http://finance.fortune.cnn.com/2011/07/08/surprise-the-big-bad-bailout-is-paying-off/ Fortune Magazine Article
1. Re:This is well known by rcb1974 · 2011-07-21 09:04 · Score: 2
  
  When you claim that the bailout worked, do you factor into your conclusion that 2011 dollars are worth about 20% less than 2008 dollars, due to inflation? Oh, and don't believe the CPI values that the government comes up with -- those are manipulated lower so that the government doesn't have to increase Social Security payouts.
2. Re:This is well known by roman_mir · 2011-07-21 09:49 · Score: 2
  
  Bail outs did not work because the same institutions that were bailed out are just as insolvent today, as they are now loaning from the Fed's discount window and making a spread by buying/holding T-Bills. Once the interest rate goes up, they fail, and real interest is going up, Fed won't be able to hold interest down as long as it's printing, and it will continue to print.
  Fed now cannot even technically be bankrupt, as a couple of months ago, the Fed changed the rules, that any liabilities it holds actually count towards its balance with the Treasury, so any liabilities of the Fed are now your liabilities.
  About 1/3 of the mortgage market was underwater, now is owned by the Treasury - you, the 'taxpayer'.
  The real bail outs are still coming, the States, the municipalities, then businesses again, probably student loans, etc. This won't stop, because bail outs are exactly the instruments that don't let it stop by letting the market get rid of the companies that must fail and the debt that must be written off.
  Those same banks that were bailed out will fail again shortly.
  
  --
  You can't handle the truth.
3. Re:This is well known by geekoid · 2011-07-21 10:31 · Score: 2
  
  Yes. The problem is many people don't understand.
  The bailouts work in that the US economy didn't completely collapse.
  People seem to thing the bailouts working means things won't get bad.
  They are bad, but not nearly as bad as they would of been otherwise. Look at what happened in Japan when this happened. Look at pretty much in country this type of collapse happened.
  I do wonder if letting it crash would have been better for us in the long run. Meaning better regulations and controls. But that's a different thing altogether.
  
  --
  The Kruger Dunning explains most post on /. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
4. Re:This is well known by m.dillon · 2011-07-21 14:16 · Score: 2
  
  More horse-tripe, unfortunately. 'Unfunded liabilities' is just another way of projecting a deficit into the future and assuming nothing will ever be done to deal with it. It's a fun way to come up with a big-assed number but worthless in any real discussion.
  The reality is that no deficit survives long enough to come remotely close to the numbers the talking heads spew out. Changes are made (or forced to be made) long before then.
  Just like the 'hundreds of trillions' of dollars of face value people were screaming about for CDSs, these numbers are meaningless. You are taking the scare-mongers statements hook line and sinker without bothering to understand what the numbers actually mean.
  Here's a little hint: Everything congress mandates comes out of somebody's pocket. 'Funded' vs 'Unfunded' is a feel-good gimick used by politicians. It doesn't matter how it is designated. You know, our two wars have been unfunded as well... congress simply tacked their costs onto the debt and didn't count them at all in their budgets. For ten fracking years.
  Similarly if you were to talk about, say, Medicare, throwing around big numbers won't help you actually solve the problem.
  p.s. this is also why people generally have no clue as to how healthy or non-healthy the banking system is. From an investor's standpoint the banking system is still in trouble, but from a fundamental solvency standpoint the banking system is not. Anyone looking for a large U.S. bank to go under due to mortgages or European debt or whatever is going to be mightily confused when it doesn't materialize.
  We got the same tripe with the FDIC too. People were screaming about the FDIC's balance sheet going negative and having to dig into their line of credit with the Fed. It didn't happen, and anyone with a clue knew it wouldn't happen. But the screaming masses listening to the talking heads thought it might and some people (obviously) STILL think it might. Sigh.
  In anycase, if you want to talk meaningful numbers then stick to the actual debt, which is $14T. Stick to current costs (medicare is good fodder here, but Social security isn't). There's plenty to talk about there without having to throw out meaningless synthesized numbers.
  -Matt
5. Re:This is well known by roman_mir · 2011-07-21 22:05 · Score: 2
  
  More horse-tripe, unfortunately. 'Unfunded liabilities' is just another way of projecting a deficit into the future and assuming nothing will ever be done to deal with it.
  - no, unfunded liabilities means that there are debts, liabilities that have no funding behind them.
  As in they are only funded on paper with IOUs, that are US Treasury T-bills that need to be sold. Somebody has to buy them. On the other hand if US could scrap the entire liability situation, as in default on its payments for these unfunded liabilities, then it would deal with its debt. By defaulting, just like it did in 1971, when it defaulted on its promise to pay gold for US dollars.
  When you say
  
  assuming nothing will ever be done to deal with it.
  what exactly do you mean by 'deal with it'? US cannot deal with it in any way, that requires paying these out in actual money that is actually worth anything.
  Imagine yourself, owing 100 million dollars to a bunch of people, with whatever current salary that you have. How would you 'deal with it'? The only way you can deal with it is by refusing to pay, declaring yourself a bankrupt and then having an sale, paying down something, but basically a penny on a thousand dollars or something to that tune.
  US can deal with it the same way. It doesn't have the revenue to deal with it by funding it, but it can deal with it by stopping the payments. The worst thing that US could do is to print more money to 'deal with it' by inflating the dollar further, because that will cause hyperinflation and insane interest rates. Unfortunately it looks like that's going to the the modus operandi here.
  
  The reality is that no deficit survives long enough to come remotely close to the numbers the talking heads spew out. Changes are made (or forced to be made) long before then.
  - you think debt is magic, and solutions are magical. No no, this debt is real and there is no revenue to cover it and there will be no revenue to cover it, especially given what the government is doing to 'deal with it'. Inflation will drive more capital out of US, the production capacity will diminish further, the US consumer will lose all ability to buy foreign goods, as the foreigners will stop supplying them, because what foreigners are doing now is gifting the US with their goods, they are not selling them, they are giving them away, it's a charity, because they are absorbing worthless dollars and bonds by printing their own currency and they are lending US the money to buy their own products and they build the products.
  US will default on their debts of-course by destroying the dollar and the foreigners will get nothing in return for all that manufacturing they did to provide US consumers with all those goods. So it's going to be a few lost generations of manufacturing for the foreigners, while they are on a quest to devalue their own money to subsidize the US consumer.
  
  Just like the 'hundreds of trillions' of dollars of face value people were screaming about for CDSs, these numbers are meaningless. You are taking the scare-mongers statements hook line and sinker without bothering to understand what the numbers actually mean.
  - no, you don't understand that those are now products/assets and liabilities that US tax payer owns through the Fed and now the Treasury, as the Fed changed the way it deals with the Treasury. Those are real losses that must be accounted for. They are on US Treasury books, at their former 'valuations', which are insanely high and need to come down by a disturbing factor (I don't know, by a million? I don't know.) The point is that that those are in your possession, on the books and they cannot be sold at their book value. It's impossible.
  
  Here's a little hint: Everything congress mandates comes out of somebody's pocket. 'Funded' vs 'Unfunded' is a feel-good gimick used by politicians. It doesn't matter how it
  
  --
  You can't handle the truth.
Did they pay it back? by jfengel · 2011-07-21 08:43 · Score: 5, Insightful

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.
1. Re:Did they pay it back? by Fishbulb · 2011-07-21 08:58 · Score: 4, Interesting
  
  * Did they pay their taxes to support such an institution?
2. Re:Did they pay it back? by jhsiao · 2011-07-21 09:27 · Score: 2
  
  Did they pay it back? Page 2 of the GAO report: "To date, most of the Reserve Banksâ(TM) emergency loans have been repaid, and FRBNY projects repayment on all outstanding loans."
  
  Did they pay interest? Page 17: "To ease stresses in these markets, on August 17, 2007, the Federal Reserve Board made two temporary changes to the terms at which Reserve Banks extended loans through the discount window. First, it approved the reduction of the discount rateâ"the interest rate at which the Reserve Banks extended collateralized loans at the discount windowâ"by 50 basis points."
  
  A reduction in the interest rate by 0.50%. The discount rate was already pretty low IIRC.
  
  What basically happened was all the banks were terrified of lending money to each other because of counterparty risk (banks weren't sure of their counterparties' exposure to credit default swaps). So there was a credit crisis since noone wanted to risk lending any money to each other for daily business operations. So the fed stepped in and offered tons of cheap credit so that the banks could continue to operate.
  
  See http://marketplace.publicradio.org/display/web/2010/05/07/whiteboard-counterparty-risk/
3. Re:Did they pay it back? by jfengel · 2011-07-21 09:39 · Score: 2
  
  Thanks for actually reading a very lengthy FA.
  In return: the discount rate is very low now (.75%) but in August 2007, it was 5.75% for primary credit. (That is the lowered discounted rate; it had been 6.25% before that.)
  http://www.frbdiscountwindow.org/historicalrates.cfm?hdrID=20&dtlID=52
  The rates proceeded to drop like a rock, so they either paid it back fast or got caught with a hell of a spread.
4. Re:Did they pay it back? by Billly+Gates · 2011-07-21 12:50 · Score: 2
  
  So we all heard we would be suffering hyperinflation back in Early 2009 when it finally came into law. LOOK OUT!!!
  Well, it is now 2011. Where is this hyperinflation you speak? I do not see runs on the bank. I do not see the cost of goods going up by the hour like in Weinmar Germany. I do not see riots.
  I am becoming a more liberal keyesian economic supporter if anything. Basically in a *normal* economy if the fed did something stupid like this then yes we would have massive hyperinflation, rising costs by the day, riots, and currency being worth nothing next to nothing as you can't buy squat with it. The fact that is it not happening at all shows us that your classical economists ...cough ... austrian...Paul Ryan ... viewpoints are discredited. What is scary for me is they are becoming more mainstream again with the cult of Fox News and Goldline.
  Basically Keyesian economics states that demand side, rather than Reagan supply side creates jobs and more goods and services. This whole recession was started because the private sector distorted the free market by deregulation of financial services and loans mixed with the gamblers on Wall Street. The prospensity to consume is hugely influential in consumers behaviors more than cheap prices. If people are scared to spend they will save. Too many universities only teach the conservative classical view of economics where prices and supply always correct each other that complete ignore demand and other factors.
  The US and world had a depression in 1873 as well when gold was the standard. It was not as bad as the Great Depression but it was servre and lasted for 7 years. 1812 may have been another one, but we lack economic data at the time to make it a conclusion. Gold would work if we all used it for currency and nothing else but we still trade it without another for purchases.
  
  --
  http://saveie6.com/
Re:Bravo! by h4rr4r · 2011-07-21 08:44 · Score: 4, Insightful

Stolen?
They made overnight loans on which the Fed profited. Meaning they reduced the amount the American people owe.
How Much is a Trillion? by Grizzley9 · 2011-07-21 08:45 · Score: 4, Interesting

I thought this site explains what a trillion dollars is fairly well.

www.wtfnoway.com
1. Re:How Much is a Trillion? by Jeng · 2011-07-21 08:52 · Score: 3, Interesting
  
  Here is what a Trillion looks like.
  http://www.pagetutor.com/trillion/index.html
  
  --
  Don't know something? Look it up. Still don't know? Then ask.
Re:Isn't this illegal? by Hatta · 2011-07-21 08:46 · Score: 4, Insightful

It's not illegal if no one enforces the law against it.

--
Give me Classic Slashdot or give me death!
Not that you would stop spreading disinformation.. by PaulBu · 2011-07-21 08:46 · Score: 2

But Ron Paul does not advocate return to pure gold standard, he advocates allowing competing currencies, some backed by gold, other by silver, third by "trust in US Government", and letting people/markets decide which one do they prefer.
And, as others have said, US was technically on the gold standard until 70s, this is how dollar became reserve currency of the world...
Paul B.
This is more money than the Federal Public Debt by cervesaebraciator · 2011-07-21 08:47 · Score: 2

The Fed and the Treasury keep swearing that they're not going to monetize the debt. But my goodness, this amount of money is greater than what we owe. For that matter, it's greater than our GDP. This is why we should all laugh when they say they won't be monetizing the debt, try to prepare for heavy inflation, and vote for someone who has a record of not being a mere R or D. The Fed supplied status quo, built on endless wars and unsustainable entitlement programs, will end because it will destroy our currency.
ok by geekoid · 2011-07-21 08:50 · Score: 5, Informative

A) These are loans, almost all of which get paid back.
B) this is not a secret. Just because something goes on you didn't know about, doesn't mean it was a secret. It just means you where ignorant.
C) This benefits the US. The US MADE money from this.
I just had to get that out there, I know it wont stop the frothing lunatics.

--
The Kruger Dunning explains most post on /. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
1. Re:ok by Tr3vin · 2011-07-21 09:17 · Score: 2
  
  But... But... Ron Paul says...
2. Re:ok by roman_mir · 2011-07-21 10:31 · Score: 2, Informative
  
  US lost money on this and it will lose money going forward on these very bail outs again.
  1. Moral hazard was created - now everybody knows they will be bailed out again. Everybody can gamble, government made sure of it. You loan money to these major banks, you can't lose. The government won't let you. All managers at the banks know, they can take any crazy risks, the government will bail them out.
  2. The bail outs are causing massive price hikes, the money printing is inflation and inflation causes prices to go up. You are saying: the loans are paid back. How does any of it help the consumers, who have to pay higher prices?
  3. The bail outs money printing and borrowing increased the total debt of USA. This is money that needs to be paid back with interest.
  4. The same companies that were bailed out before will inevitably fail again. Except that the bail outs made sure that the currency also will be destroyed, as that's how government 'bails' out, by printing and borrowing.
  5. The economy is not growing, it's shrinking, the bail outs just worsen the inflation and capital flight, and thus worsen the economy.
  6. In reality the money wasn't even repaid. This is the MOST IMPORTANT POINT. The Fed did NOT UNWIND THE TRADES.
  The so called repayment is no such thing. Let the Fed show the actual money, because the moment they try to sell the assets that they own from those banks they will find out their actual worth, and it's nowhere near what they tell you, there is no repayment.
  Also, don't forget that they are creating about 10% inflation annually, so anything you can even count as 'repayment' is already 10% below what it was last year, you have to repay with extra 10% just to be at 0.
  GM will be bankrupt again of-course as well.
  
  --
  You can't handle the truth.
3. Re:ok by inKubus · 2011-07-21 12:19 · Score: 2
  
  The so called repayment is no such thing. Let the Fed show the actual money, because the moment they try to sell the assets that they own from those banks they will find out their actual worth, and it's nowhere near what they tell you, there is no repayment.
  Uh, the Fed prints money. They can show whatever they want. The Fed responded to a massive deleveraging (leveraging is when money is spent multiple times). In the U.S. economy, we rely on money being spent around 8 times at once. It's hard to envision but there's a sort of chain reaction effect when money is spent and economists call this the money multiplier. What happened was the housing market was over-represented in the leveraging and when it tanked it took a major multiple of itself out of play. What the Fed did was re-leverage all of that itself by basically printing up a portion of the lost multiplied leverage and just giving it to some big companies. They in turn, spent it and the regular money multiplier took effect enough to lift the credit markets from a standstill. It wasn't fair, no, but we are all better off today that we would be.
  Where we stand right now is that the private capital leverage is starting to pick back up again as banks loan money. As that happens, people are going to be willing to take on risk and at that point the Fed will unload the stuff it bought for cash it printed, thus getting that cash back. The Fed can then just burn the money or basically buy back debt from china or something. The beauty is that we make the rules and the rules call for, above all, certainty of value, even if that value is dropping at a certain rate (e.g. inflation). What they did was brilliant, actually made the taxpayers money and, although we will have to suffer some inflation (and it's coming), the vast majority of prices were already inflated due to the over-leveraging (which functions as monetary inflation does on prices), so food isn't going to shoot up and if you're well placed in the market now you will see some very nice gains over the coming decade. Plus, baby boomers are going to go from saving to spending mode starting in 2016 which will just add some more bull market momentum. Assuming we don't overheat again, we are primed for a good 10-15 years of steady growth, and they can keep us from overheating by doing some taxes, or raising rates or a combination of both. I have a feeling it'll be taxes first, so we can buy back those treasuries.
  
  --
  Cool! Amazing Toys.
Re:Bravo! by Anonymous Coward · 2011-07-21 08:51 · Score: 2, Funny

Now let's put these criminals who've stolen trillions from the American people behind bars.
Oh wait.
They're already behind bars... of gold.
Senator Sander, you know better. by panda · 2011-07-21 08:51 · Score: 3, Informative

"No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.
Since when is the Federal Reserve an agency of the United States government? Last time that I checked it was and still is a privately owned corporation.

--
Just be sure to wear the gold uniform when you beam down -- you know what happens when you wear the red one.
1. Re:Senator Sander, you know better. by mybecq · 2011-07-21 09:54 · Score: 4, Informative
  
  Since when is the Federal Reserve an agency of the United States government?
  Since December 23, 1913:
  
  The Federal Reserve, like many other central banks, is an independent government agency
2. Re:Senator Sander, you know better. by Lando · 2011-07-21 10:08 · Score: 2
  
  Federal reserve is a part of the government. I believe it's a common misconception that it isn't a part of the government because it's an independent agency and word of mouth isn't that hot about specifics. I had the understanding that it wasn't a part of the government until I took an economics class where the instructor mentioned that it was and I did a little digging.
  http://en.wikipedia.org/wiki/Federal_Reserve_System
  
  --
  /* TODO: Spawn child process, interest child in technology, have child write a new sig */
3. Re:Senator Sander, you know better. by MyFirstNameIsPaul · 2011-07-21 14:48 · Score: 2
  
  Congress controls the Federal Reserve only if it passes acts to amend the Federal Reserve Act (and the acts that amend that act). They cannot subpoena nor otherwise influence the Fed.
  
  --
  I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Re:Not that you would stop spreading disinformatio by Lunix+Nutcase · 2011-07-21 08:51 · Score: 5, Informative

But Ron Paul does not advocate return to pure gold standard, he advocates allowing competing currencies, some backed by gold, other by silver, third by "trust in US Government", and letting people/markets decide which one do they prefer.
Because multiple competing currencies worked so great during the Articles of Confederation days, right? Oh wait, it was an abysmal failure.
This is Why by gubers33 · 2011-07-21 08:51 · Score: 2

No one from any banks or investment firms should be allowed to serve on any government boards. The corruption is absolutely absurd, they have the interests of the companies they are boards on not of the people. Like what this country was founded on a government of the people, by the people and for the people. But this country has become ruled by the corporations and it just saddening.

--
Just because you are wrong and I called you out on it doesn't mean I am a Troll.
Incorrect by geekoid · 2011-07-21 08:52 · Score: 3, Informative

Lets say I have 5 dollars.
I lend you 5 dollars, the next day you pay me back 5 dollars and 5 cents.
The I lend that 5 dollars to someone else and they paid me backs 5 dollars an 5 cents.
I lent out 10 dollars during those 2 days, but I never lent more then I had. And I ended with 10 cent more then I started.
Get it?
Listening to most slashdotters talk about finance is like listening to accounts talk about a computer. simple painful.

--
The Kruger Dunning explains most post on /. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
1. Re:Incorrect by cervesaebraciator · 2011-07-21 09:56 · Score: 2
  
  I'll certainly agree with your point (the first point, not the bit which seems to impugn the knowledge of a large and diverse group of people), and I thank you for it, but it is beside my point.
  I apologise if I was unclear about this, but pointing to the GDP and the national debt was meant as an illustration of the enormity of the Fed's activities. It was not meant to speak of whether or not, to borrow your phrase, we lent more than we had. Nor could it have been. GDP is not the amount of money we have--i.e. it isn't the five dollars in our collective pocket. I am quite certain that the people have more in assets than the 14.7 trillion in goods and services produced in a year (after all, were there not more in assets than in the value of goods and services produced, then we'd have a hard time accounting for the capital used to produce).
  My point is simply that the Fed acts on a scale that is quite capable of destroying our currency, that they will monetize the debt because neither major party will allow genuine spending cuts on entitlements or warfare (indeed they call these things "non-discretionary") but both will continue to argue over things like NPR, and that a wise man will do his best to ready himself for the coming inflation. As evidence of these claims, I submit to you the farce that is the debt ceiling debate. Boehner and McConnell have made it quite clear that they'll strike a deal, they just have to put on a show first. Ultimately the President will give in to some plan that "reduces the deficit" by calling for a reduction in projected increases (as Paul Ryan's joke of a plan did)--i.e. vaporware cuts. And they will do this because both the politician who doesn't save us from terrorists and tyrants by bombing Somalia, Yemen, Libya, Afghanistan, Pakistan, and Iraq and the politician who dares to suggest a hike in the eligibility age for certain entitlements will quickly become a failed politician. The only politically viable solution will be to allow the debt to be monetized, hide under inflation numbers that do not include basic items of consumption, and hope the storm passes.
Jefferson said it best.. by gtmoose · 2011-07-21 09:04 · Score: 2

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -Thomas Jefferson It doesn't get anymore prophetic than that.
1. Re:Jefferson said it best.. by MikeyC01 · 2011-07-21 09:28 · Score: 2
  
  "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -Thomas Jefferson It doesn't get anymore prophetic than that.
  I often see this quote (or something close to it) bandied about so I fired up the Interweb to research it. Snopes.com offers a different view of that purported Jefferson quote http://www.snopes.com/quotes/jefferson/banks.asp
  
  Among the highlights ...
  
  In addition to the lack of documentation, an entry in Respectfully Quoted: A Dictionary of Quotations labels this quotation as "obviously spurious" for contextual reasons, noting that the Oxford English Dictionary's (OED) earliest citation for the word "deflation" (as related to currency) dates only to 1920. (The OED's earliest citation for the word "inflation" used in a financial sense dates to 1838, which means that usage might have been known during Jefferson's lifetime.)
It's called the discount window by Thelasko · 2011-07-21 09:17 · Score: 4, Informative

seriously guys, this isn't news.

--
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
1. Re:It's called the discount window by nickmalthus · 2011-07-21 10:00 · Score: 2
  
  We knew the federal reserve corporation was lending money; we did not know the extent or exactly to who. Does this matter? From the article:
  
  "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
  
  "The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans."
  This is a real American corruption crisis of private individuals using government authority to pick market winners and losers.
  
  --
  If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be-T J
Re:Isn't this illegal? by Kelbear · 2011-07-21 09:22 · Score: 5, Informative

It's on page 131, table 8, bottom right:
In short, it's a pretty absurdly inflated number. Loaning 10 billion for 1 day, and doing it for 30 days, is counted as 300 billion of loans, rather than a 10 billion 30-day loan.

"Table 8 aggregates total dollar transaction amounts by adding the total dollar amount of all loans but does not adjust these amounts to reflect differences across programs in the term over which loans were outstanding. For example, an overnight PDCF loan of $10 billion that was renewed daily at the same level for 30
business days would result in an aggregate amount borrowed of $300 billion although the institution, in effect, borrowed only $10 billion over 30... In contrast, a TAF loan of $10 billion extended over a 1-month period would appear as $10 billion. As a result, the total transaction amounts shown in table 8 for PDCF are not directly comparable to the total transaction amounts shown for TAF and other programs that made loans for periods longer than overnight"

Further, this is pretty much regular operations of the Fed as part of their work in stabilizing the economy through monetary policy. It's what they were made to do.
The GAO is pointing out failures in controls. Offering some perspective as a public company auditor (not a government auditor) I see failures in control all over because there is the concept of an ideal control environment, but every control represents additional costs and times, and general inefficiency. It adds hoops to jump through to get things done. At some point companies look at the risk and the cost needed to implement additional controls on that risk and decide that it's not worth it to strive for 100% security against a problem that may or may not exist. However, auditors point out these risks because that's their job, and the risks are real, whether or not the cost/benefit makes sense. In this specific case, revolving around conflicts of interest, there's only so much you can do, but considering the nature of the issue, it is damned important to have strong controls in these area. In summary, it's not suprising to see control deficiencies, and control deficiencies are not evidence of fraud or misstatement, but it's always better to have less control risk.
Forty Carriers by Oxford_Comma_Lover · 2011-07-21 09:22 · Score: 4, Informative

Got news for you, before WWII, our solders pointed broomsticks at cars ("tanks") and said, "eh, eh, eh, eh, eh, eh", to simulate firing an imaginary weapon. During WWI, gunners trained by using their finger and pointing at imaginary targets while spinning in a swivel chair. The US absolutely did NOT become a super power until after the close of WWII. And in large part, that was thanks to the Germans (including Nazis) absorbed by the US.
At the Battle of Leyte Gulf, we had forty aircraft carriers: 8 fleet, 8 light, and 18 escort. Plus a dozen battleships and over a hundred fifty other ships.
Forty fucking aircraft carriers.
We were a super power--and the only nuclear power--before the end of World War 2.

--
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
The way to do this. by Chas · 2011-07-21 09:37 · Score: 2

1: Stop with all the NEW pork projects in the government and military.
2: Finish out any projects already on the books that are within their original budgets.
3: Do not continue to pay for projects that are overdue.
4: If projects are overdue, DEMAND DELIVERY.
5: If the contractor cannot deliver, declare the project failed and in default.
6: Liquidate the company's assets to recoup the cost of the failed project.
7: Stop all the government welfare crap. If there's legitimate medical reason, maybe. I'm a big fan of government-created work programs though. Nothing like a lot of back-breaking labor to motivate someone to get a real job. Tie it into health and housing support with a small budget for food, etc.
8: When an official is elected to office, liquidate all his assets and put them into a fund tied to the well-being of the economy. This way, if the economy does well, he has a lot of money when he leaves office. If the economy tanks, he's handed a set of clothes and turned out on the street when things are over. Tax rates would be fixed during their term and only take effect once their successor took office. This way they can't fix tax rates to generate false profit.
I could go on, but you get the idea.
Of course, this would never work. Politicians of all stripes would never actually DO this. The lousy fucking bastards are all more worried about keeping their jobs and lining their pockets than they are about actually doing something to help the country.
Maybe they should wor

--

Chas - The one, the only.
THANK GOD!!!
1. Re:The way to do this. by blue+trane · 2011-07-21 16:50 · Score: 2
  
  Better idea: guarantee a basic income to everyone, and encourage innovation through challenges (biz can hold them too). The focus should be on the advance of knowledge and technology, because that is what raises standard of living and increases the survival fitness of society. Debt is a giant distraction, purely a way for attention-seeking bankers to seize control of the national discourse to gratify their egos.
This Audit Was More Extensive by cmholm · 2011-07-21 09:40 · Score: 2

Per the Wikipedia entry, normal audits of the Fed leave significant gaps, gaps that were to some degree addressed by this more through audit.

--
Luke, help me take this mask off ... Just for once, let me butterfly kiss you with my own eyes.
Top to Bottom Audit? Ha! by tekrat · 2011-07-21 09:48 · Score: 2

Now if only they could find that 12 Billion that went missing in Iraq. Yeah, whatever happened to *that* ?

--
If telephones are outlawed, then only outlaws will have telephones.
Act of congress by sjbe · 2011-07-21 10:02 · Score: 3, Informative

Since when is the Federal Reserve an agency of the United States government?
I would guess ever since the Federal Reserve System was created by an act of Congress, which has been amended some 200 times. All banks are required to be members of the Federal Reserve.

Last time that I checked it was and still is a privately owned corporation.
It is technically private but that doesn't mean it doesn't answer to the government. The Fed needs some independence to do its job properly. But the Fed is a quasi-governmental entity. It is backed up by the full faith and credit of the US government and only exists because Congress delegated some powers to it. It is private in the same sense that Fannie Mae was private. Technically true but well understood that it had the backing of the government.
Re:Bravo! by cosm · 2011-07-21 10:05 · Score: 2

Are you telling me when the Federal Reserve profits that money goes into reducing the deficit? I thought they were a pseodo-private institution?

--
'We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress.' RPF
Re:Isn't this illegal? by Dracos · 2011-07-21 10:11 · Score: 2

Has your stolen bicycle been returned yet? If so, who cares?
I'd expect nerds to be smarter than average by m.dillon · 2011-07-21 10:43 · Score: 2

But I guess it isn't so :-(
This isn't really news. These weren't even real loans, they were just 28-day backstops during the money market meltdown. Just like the inflated values reporters loved to throw around about CDSs, it's more of the same here. They're just adding them all together sequentially (and conveniently forgetting to report the short durations and senior debt status).
And, really, only a complete fool hopes and prays for the banking system to fail.
Go looking somewhere else, this was one thing the Fed actually did right. And like TARP, the government didn't lose any money doing it either.
If you want to complain about something complain about the use of the AIG bailout as an indirect method of bailing out the (mostly bank) counterparties. That was real money that didn't have to be paid back to the government.
-Matt
Democratic Socialists by DragonWriter · 2011-07-21 10:43 · Score: 2

Fascinating that you didn't seem to notice that this came from Bernie Sanders who's the only self described democratic socialist in the national legislature.

Bernard Sanders is not the only self-described democratic socialist in the Congress; there are at least 69 others (since, including Sanders, there are 70 members of the Democratic Socialists of America in Congress, but there may be additional self-described "democratic socialists" who are not members of the DSA.)
Re:Inflation v Deflation by MyFirstNameIsPaul · 2011-07-21 11:07 · Score: 3, Interesting

If you desire to purchase a good, let's say a loaf of bread, do you factor in the rate of change of value in the currency? How about when you purchase a new phone? Of course not, because the change in value is insignificant to the price of the good. The supply chain works to support your needs as a consumer, so the argument that deflation affects production is false, especially when we begin to evaluate how markets behaved when there really was deflation.
We did not leave the gold standard until the Federal Reserve Act of 1913. Before that we were on the gold standard, and from the ratifying of the Constitution to creation of the Federal Reserve we went from a third-world bankrupt nation to the largest manufacturer on the planet (1895). Clearly the small amount of deflation did not hamper investment in capital goods. In fact, it probably made the economy grow more quickly because investments were made more wisely.
Most people are poor at making investment decisions, but inflation puts pressure on people to invest because they know that their savings will be worthless when they want to draw on it during retirement. With this pressure they are more likely to make higher risk investments. However, if they know that a penny earned now will be worth a penny after being saved, they become much more skeptical about investing, meaning that those seeking investors will have to have much more robust business plans to convince the investors to part with their money. With less malinvestment prices are more stable and the economy will grow more quickly.

--
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Perspective by rockwood · 2011-07-21 11:27 · Score: 2

http://www.wtfnoway.com/

--
Never try to beat a professional at his own game!
How is this news by MonkeySpaceCapsule · 2011-07-22 00:55 · Score: 3, Interesting

I'm not sure why this is news (google "short term loans federal bailout" for stuff back in march/april). The Fed Reserve admitted to as much months back, though it had to be coerced out of them. The loans (overseas and domestic) were done in an overnight or sub-week fashion in order to provide liquidity in the open market. Where I draw issue is that most of these banks had capital, but were unwilling to lend it. Instead, they were able to get essentially free (~0% interest) money with which they could purchase short-term positions with guaranteed returns (e.g., US Treasuries) and make considerable money. Almost *none* of this money was lent to small businesses (as that would've required a long-term loan from the Fed, which this was not).
During that interval I really wished I would've qualified as a bank so I could (1) get huge sums of zero-interest short term money from the Fed and (2) just stash it somewhere to get returns in gov't bills.
Also, the metric reported (16 trillion) is a bit skewed. If you imagine that this was done over 14 months and the loans were of a 2.5 day average, that means any given day only 95 billion dollars was actually wrapped up in loans ( e.g., the RMS loan value is $9.5e10= $16e12/(14 months*30days/month)*2.5days). However, taking that back-of-the-envelope number and calculating interest, that let (with 3% compound interest at 14 months), the collective of banks make ~3.6 billion in returns. So, given the loss to the community (e.g., free money of 3.6 billion to rich banks), versus the potential fallout if they hadn't made these loans (e.g., bank collapse??), I say that this was a *very* cost effective means of stabilizing the economy. This is in contrast to other "bailouts" and shovel-ready plans which essentially just funneled cash into poorly managed state slush funds and pet projects.