MUST READ: THE REAL REASON BEHIND THE FED SECRECY
For decades we have let a central bank control the value of our money with their boom/bust money printing policies. What do we have to show for it? A massively profitable banking industry, a record setting wealth gap and a struggling middle class and lower class U.S. consumer. If the last 18 months aren’t a sign that the Fed policy of the last 25 years is massively flawed then I don’t what is.
“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
This comes from the desk of Ron Paul:
Last week I was very pleased that the Financial Services Committee held a hearing on the Federal Reserve Transparency Act, HR 1207. The bill has 295 cosponsors and there is also strong support for the companion bill in the Senate. This hearing was a major step forward in getting the bill passed.
I was pleased that the hearing was well-attended, especially considering that it was held on a Friday at nine o’clock in the morning! I have been talking about the immense, unchecked power of the Federal Reserve for many years, while the attention of Congress was always on other things. It was gratifying to see my colleagues asking probing questions and demonstrating genuine concern about this important issue as well.
The witness testifying in favor of HR 1207 made some very strong points, which was no surprise considering the bill is simply common sense. It was also no surprise that the witness testifying against the bill had no good arguments as to why a full audit should not be conducted promptly. He attempted to make the case that the fed is already sufficiently accountable to Congress and that the current auditing policy is adequate. The fact is that the Fed comes to Congress and talks about only what it wants to talk about, and the GAO audits only what the current laws allow to be audited. The really important things however, are off limits. There are no convincing arguments that it is in the best interests of the American people for anything the Fed does to be off limits.
It has been argued that full disclosure of details of funding facilities like TALF and PDCF that enabled massive bailouts of Wall Street would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.
If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore. (Emphasis added).
Good stuff TPC. F$ck the bankers!
Meanwhile, Ken Lewis walks away with $53 million after nearly driving B of A into the ground. WTF?
Hey TPC,
Great work altogether. Coupla comments:
Check snopes.com on the veracity of the TJ quote. And http://wiki.monticello.org/mediawiki/index.php/Private_Banks_%28Quotation%29
Also, the disclaimer on every post shows up over and over and over and over again in RSS readers. Maybe reduce the font size and make it light gray or something?
Thanks for the superb content.
HT
I’ll bet you a nickel that GE was/still is a massive recipient of Fed money, and would show up everywhere in an audit. Left to it’s own devices GE had blown up. I have no doubt they were a bankrupt, defunct organization but for the Fed.
You’re damn right the Fed, and probably the current administration, wants this to remain a secret, as the pay back is enormous and would be glaringly obvious if light were allowed into the room.
GE is a rotten, horribly managed, corrupt organization…and they are deeply in bed with the Fed.
Just my opinion.
But there is another massive fraud, based upon the same pattern. Namely, short selling in the stock market. Lately I’ve been considering carefully just exactly what it is about short selling that I find objectionable. I’ve realized that there are two primary reasons:
1. My first objection is due to the same reason I find the fractional reserve banking system objectionable. Specifically, no matter how you explain it, you end up with two (or more) people having an unencumbered claim to the same property. When someone sells short, their broker is allowed to legally “borrow” the necessary shares from someone else, with no contractual obligation to the actual owner, to make them whole, and to “loan” those (counterfeit) shares to the short seller so that they can sell them. At the point when they are sold, the original owner and the new owner each have an unencumbered claim to the same shares (and the effective number of shares outstanding increases by that amount). When someone else sells those same shares short again, you end up with 3 people having an unencumbered claim to the same shares, which can be repeated indefinitely without even the 10% reserve limit of the fractional reserve banking system, so far as I can see. Try doing that with some other, more tangible, asset (automobiles in a parking garage, for example) and it is easy to see it is a fraudulent/counterfeiting activity, even if it is a legalized counterfeit.
2. My second objection to short selling is that it allows people who have no ownership interest in a security to exercise profound influence over the market for that security. It allows people who do not want to buy a security to “borrow” the shares of someone who owns it, with no contractual obligation to make them whole, and to then sell that security, thus influencing the market against it. Presumably, those owning the security believe it has the value the market has place on it (otherwise they would be selling it). Those believing the price should be lower have every right to offer that lower price, and let the owners decide, but instead they are allowed to “borrow” the shares from those who own them (and, as explained in objection #1 above, even to “borrow” multiple counterfeit shares, without limit, of the same security and keep selling them until they drive the price down to where they think it should be). In many cases, in my opinion, it is the inflation of shares, caused by the unlimited creation of multiple counterfeit shares of the underlying security, that drives the price down, as the total number of buyers chases an ever increasing number of goods. Eventually, there is a “run” on the underlying security, as everyone tries to get their money out, and the whole thing collapses. And the truly wretched thing about it is that the short sellers, who made their money up front by selling the (counterfeit) shares loaned to them by the owner’s broker, come through it whole but the actual owners, who are left at the end trying to sell shares that are mostly worthless counterfeits, are wiped out.
Short selling in general just seems to me a fraudulent counterfeiting activity that is a violation of a brokers contractual obligations to the owners of the shares they hold. It is, in my opinion, one of the greatest encumbrances ever invented to a genuinely free, honest and rational market, just as the fractional reserve banking system is one of the greatest encumbrances ever invented to a genuinely free, honest and sound currency. People can make a lot of money short selling but it is for the same fraudulent reason that bankers make a lot of money in a fractional reserve banking system: legalized counterfeiting. It is as morally wrong as if a parking garage owner were to “temporarily” loan out the cars entrusted to their care for others to sell in the hopes they could buy it back at a profit.
It’s hi time the Hi Jinks of bankers and politicians were bought under the microscope. The amount of abuse of both power and markets have been incredible.
Thomas Jefferson could see what would happen back in his time. We should be able to do something to change it now that we know that he was right. If we do nothing we deserve what we have coming. It does not look good.
Noted that f*&^ the bankers and the Fed got five stars. No surprise here. However, aside from misuse of Jefferson’s non-utterances (see snopes) does anybody have any constructive comments of how to improve the financial system, besides shouting “abolish the Fed” and “return to a gold standard”, which are just empty slogans.
Auditing the Fed may sound good, but do you really think this Congress that spends your money like water and has an approval rating below 25% can effectively control anything? If Congressmen can’t ask the right questions, don’t blame Bernanke for the lack of answers. Fire Congress!
Erich,
Thanks for the comment. Apparently my history isn’t quite up to snuff because I wasn’t aware of the fact that Jefferson’s comments weren’t exactly correct….Apologies. The point has been uttered, however, by plenty of other great Americans so I think the message still resonates with people.
As for what we should do? I think the Fed’s powers should be severely reduced. They should not be allowed to control the printing press to the extent that they do and swap interest rates as they please whenever they please. Personally, I would love for the entire FOMC to be a publicly elected (not nominated) committee.
I don’t think the Fed needs to be replaced, but they need to be audited and their powers need to be substantially reduced.
Tim Singleton Reply:
October 21st, 2009 at 11:04 AM
Don’t be so quick to accept Snope’s refutal of the quote. Even based on their own comments from their site, I say even if the quote you used orginally was a paraphrase of several comments, it are no less true for it.
If Jefferson did not say it, I am sure he would bless this paraphrase of his words with total approval.
If…
-Tim
Leland, thanks for your comment.
I’ve realized since writing the above that, since brokers can only loan stocks on a 1:1 ratio, there is actually a 50% reserve requirement but it is still a fractional reserve system patterned on the same fraudulent scheme as the fractional reserve banking system.
Oops! Sorry. I meant a 2:1 ratio. The system allows them to have 2 “owners” on the books for each share that they hold, each with an unencumbered claim to the same property. The short seller, of course, immediately sells the (counterfeit) share loaned to them (leaving the broker with just an IOU to cover the claim of the original owner). Again, try doing that with automobiles in a parking garage and it is easy to see the fraud. Personally, I think that Ferrari automobiles are way overpriced (
) but I’m pretty sure that, if I were to try and use this same fraudulent scheme to drive the price down to where I’d be interested in buying one, they would lock me away in jail.
I just finished reading “End the Fed” by Dr. Ron Paul, and I agree wholeheartedly with his concludions. The Fed should not only be audited, it should be abolished.
First of all, it is not
constitutional. Nowhere in the Concstitution does it provide for a private central bank. Secondly, it provides only for gold and silver money not paper currency, which the Fed can inflate by controlling interest rates and printing money out of thin air.There is no transparency in the Fed’s operations, which are
a closely held secret both from Congress and the American people.
another popular fallacy is the Fed prints money out of thin air. For every new dollar created the Fed takes in an asset on its books, i.e. “thin air” is really real estate etc. This process is reversible (exit strategies discussed).
A bigger problem is our elected body aka Congress, who is spending without abandon and potentially forcing the Fed to buy their paper aka monetizing the debt; that then would truly be creating money out of thin air.
So, do you really have more trust in Congress? Honestly?
Erich,
that is entirely wrong. The fed creates money ex nihilo and purchases assets with it. They’re making money out of thin air when the FOMC types away at their magic
money printing computers. Research quant easing and FOMC open market ops.
Leland if you have an account with a brokerage the shares are held in the brokerage name and they can do whatever they want with them. If you do not want your shares to be shorted you can take physical possession of the certificate and hold them in your name. The only companies that ever have a “run” are insolvent companies such as Lehman. To claim shorts took Lehman or any other financial down is ignorant. It was the 30 to 1 leverage with worthless assets that took these companies down. There is a reason why there are not runs on strong companies with true earnings, assets and cash…you will never see a run on pg, jnj, aapl etc…You really need to educate yourself before you type windbag claims in which you do not have the facts correct. Brokers hold inventories of stock and there is never two owners on a stock….it is not possible.
Eric, when a broker loans shares to a short seller, they take the short seller’s IOU and hold it in support of any claims by their customers against the shares loaned. Their customers have an unencumbered claim (they can demand them back at any time) against whatever number of shares they have purchased, and which their broker is (supposedly) holding for them in trust. Whoever buys the shares loaned to the short seller also has an unencumbered claim against that same number of shares. No matter how you try to explain it, that transaction inflates the total number of shares against which owners have an unencumbered claim by the number of shares loaned to the short seller. Since the number of shares “owned” has increased due to that inflation, without the company having issued any more shares, you end up with more shares “owned” than were issued and there must logically be multiple people each having an unencumbered claim against the same shares. If you can’t understand that much, it would be pointless for me to try and explain any of the rest.
What ever happened to “we the people” it`s now “we the government and the federal reserve and wall street and other corporations” our government has not acted in the peoples best interest eith now or in our past history, and i dont it will do so in the future either.
The Federal Reserve Bank is the biggest ponzi game in the history of this country. Bernie Madoff an his ponzi game was nothing compared to the the set-up of the Fed and the wall street banks, which in turn are controlled by the Rothschild controlled banks in London, England, which is the financial center of the world. Google Eustace Mullins and the Federal Reserve Bank. You will get over 140,000 hits. Mullins was the first man to research and write a book about the Federal Reserve Bank in America. He is still alive today, around 85 years old. He wrote a book back in 1948 called “The Secret History of the Federal Reserve Bank”. You can read it on line for free, its around 200 pages. The Fed is behind all the wars America has ever been envolved with in its history. They also behind every depression and recession America has been in. There is also a video around 1 hour and 38 minutes long of Eustace Mullins being interviewed by a man, asking him everything about the Federal Reserve System. This is usually in the first couple of pages of hits of googling Eustace Mullins and the Federal Reserve Bank. If you read his book and watch and listen to him, you will discover that the people behind this fraud are evil and have no conscience. How can you for give people who cause millions of deaths and millions who become wounded and suffer most of their lives, from the many wars they finance and fool the people into thinking the wars a justified. Jack Faulk
This is crazy.
Congress CREATED the Fed. The Fed is ALREADY accountable to Congress. Congress CREATED the Fed. The Fed is ALREADY accountable to Congress. Congress CREATED the Fed. The Fed is ALREADY accountable to Congress. Congress CREATED the Fed. The Fed is ALREADY accountable to Congress.
The financial sector is the Phillip Morris of the new millineum but not for the reasons you all believe.
There’s a blazing fire spreading on the ground and we keep testing the ice to make sure it isn’t melting.
If we’d just let it melt, it would put the fire out.
There’s a proposal being worked on right now that candidates for office and politicians be sworn in before addressing the people they work for – that’s you and me!
Please take a few minutes to learn more http://future-liberty.blogspot.com/2009/09/suicide-notes-as-literature.html
May God bless all of us with a thirst for the truth. The truth is out there and can be found in both technical and laymans terms.
God bless America!
Go Ron Paul !
The FED has only made the problem
worse. Why is such a large institution unaudited.
Power corrupts absolute power = absolute corruption.
Time for a new govt not the GOP or Dems , they only
want to fill their pockets.
Dont start the revolution without Ron Paul and Jesse Ventura.
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