Bunch of drunks run the economy

Another shot of the green stuff, please.

“Mishief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges, which are employed all together for their benefit.” – Andrew Jackson 

“Banking establishments are more dangerous than standing armies,” warned Thomas Jefferson, in defense of Americans against the possible monopolization of money. Jefferson’s foresight is noteworthy, and will soon become even more so. The interests of banks are compounding against the interests of citizens, in this country and around the globe.

Today the Federal Reserve introduced the Term Securities Lending Facility to address “increased pressures in liquidity markets.” The TSLF will give $200 billion of Treasury securities to banks each month, and banks can exchange their residential-mortgage-backed securities for these Treasury securities. In simpler terms, the TSLF is a tool that gives banks an easy way to transfer their mortgage losses to the U.S. Treasury.

The TSLF comes on the heels of (and in addition to) two other unprecedented and controversial Fed actions, the Term Auction Facility (TAF) and Federal Reserve repurchase agreements. The Federal Reserve has hinted that these actions will continue for the next six months, and may even increase. Currently, the new facilities pump $400 billion of fiat currency into the market each month, which, in our $12 trillion economy, represents 40% of GDP.

The Fed is also expected to cut rates yet again, in an attempt to stimulate growth through inflation. Low rates, stagnant consumption, negative savings, and high investment, make an awkward combination that would leave even Keynes scratching his head. The U.S. economy is in dire need of a market correction, but the Fed has decided to avoid a market correction (job losses) in favor of a dollar correction (hyperinflation). The Fed may consider that stock prices are measured in dollars; it will probably not consider that wages are paid in dollars. While jobs may be saved, wages will not be able to pay for the inflated prices of the coming year, and then Barack Obama will come to the rescue, touting free healthcare, food, water, electricity, and whatever else a too fat and too happy American public might hope for. The Federal Reserve is unwittingly forcing the United States into complete democratic socialism, and cannot stop it but through honesty, which isn’t forthcoming.

Moving on to the gloomy part of the Fed’s announcements this morning, the Fed’s efforts will be coordinated with those of the European Central Bank, the Bank of Canada, the Bank of England, and the Swiss National Bank. When national sovereignty is properly respected, these banks operate as monetary competitors, helping their citizens by practicing competitive responsibility. This morning, they publicly declared that the nightmare of many neo-classical economists for decades had become reality-collusion against humankind among the planet’s monetary policymakers. Those investors who thought they outsmarted the Fed by switching to Euros or Swiss Francs have not escaped. There truly is no safe store of value in paper anymore.

Buy gold and beans.

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