SOME THOUGHTS ON THE CURRENT STATE OF AFFAIRS
As I ponder the implications of the Fed’s printing press and the potentially disastrous bank run rally I question the actions taken by our Central Bank. Reader Finn posted some excellent quotes the other day. Fortunately for the reader these quotes/thoughts are from men far more intelligent than I. To say that these comments have withstood the test of time is a great understatement:
“We have come to be one of the worst ruled, one of the most completely controlled governments in the civilized world – no longer a government of free opinion, no longer a government by a vole of the majority, but a government by the opinion and duress of a small group of dominant men.
“Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it”
- Woodrow Wilson“These international bankers and Rockefeller-Standard Oil interests control the majority of newspaper and the columns of these papers to club into submission or drive out of public office officials who refuse to do the bidding of the powerful corrupt cliques which compose the invisible government.”
-Theodore Roosevelt“I have two great enemies, the Southern Army front of me and the financial institution in the rear. Of the two, the one in my rear is my greatest foe.”
-Abraham Lincoln
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”
– Andrew Jackson
“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
Let that sink in for a few moments as we watch our Central Bank once again reflate the boom/bust cycle and manipulate the capitalist system in a fashion that only serves the bankers and not the citizenry….
I’d like to add this quote from another great American hero:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” – Andrew Jackson
What our country needs for than anything else right now is a true leader someone like a Thomas Jefferson, a Teddy Roosevelt or an Andrew Jackson.
The movie version:
Newer version – “Zeitgeist – The Movie: Federal Reserve”
http://www.youtube.com/watch?v=_dmPchuXIXQ
Or the original – “The Money Masters”
http://www.cosmolearning.com/documentaries/the-money-masters/2/
Here is Rep. Alan Grayson questioning the Fed about buying equities and futures on the markets and the banks they buy them through front running the Fed’s massive orders:
http://www.youtube.com/watch?v=mXmNpdYpfnk&feature=player_embedded
People know what is going on. This is a huge government scheme through various stimuli and maniulations of statistics as well as direct buying of securities (we at least know they are buying debt securities and probably equities) to create the steepest rally in history…
“In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunk to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; and the savings of many years in thousands of families are gone. More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
And yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered, because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.
Primarily, this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True, they have tried. But their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They only know the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.”
-FDR
http://www.bloomberg.com/news/marketsmag/sr_0608_chip.html
Two worlds which one is real?
This is the emotional take on the gov action. An alternative interpretation is that the Fed/Gov is thinking like a distressed situation investor. Pump in a little confidence (signalling; talk your book), capital and debt for equity swap. Of course not all distressed situations are turnable.
JT26 – I agree. Part of me is happy that the government has stepped in and helped. Personally, the first portion of the rally (what I refer to as the government run rally) was perfectly fine. The shorts who got squeezed on a daily basis deserved to get squeezed for shorting such a grossly oversold market. But if the Fed is actually allowing these banks to use taxpayer dollars to manipulate the stock market then that is not only immoral but borders on illegal. There is simply no defending it. If the economy is not truly recovering then they need to let market price dictate the action. You can’t prop everything up because supply & demand is going to take hold at some point. Just look at Japanese real estate. They could have lost 75% in value in 5 years, but intervention prolonged their issues for 20 years. How did that work out for them?
TPC. You’re right, I don’t think the Fed/gov, legally or illegally, can keep it up in the long term (just like FX interventions … you can do it for maybe 5-10 years). If this first play doesn’t work, they will have to look for major concessions from “key stakeholders”, layoffs, salary cuts, salary for equity swap, benefit cuts, vulture financing, concessions from creditors and suppliers, wage and price controls, etc … to keep out of liquidation. But then again, the US has lots of assets still (military, energy, food) so liquidation is a long way; plenty of time for the US to make a comeback, but for sure the standard of living will decline (as it has been 20 years, it has just been postponed by debt).
Either way I think the fed is on the verge of being audited and then we’ll know a lot more about what they did with the money. What we won’t be able to prove is whether these banks actually purchased equities with the bailout money though I think anyone with one iota of common sense knows they were….
Anyone who believes the Fed is working for the benefit of the common man or our nation as a whole is naive.
TARP was the greatest transfer of wealth or more accurately theft this country has ever seen. While the stockholders did get a haircut, they were not wiped out, the bondholders were made a 100% whole and the incompetent, greedy, crooks running these financial institutions have not only avoided jail time, but kept their jobs.
I have no doubt that the money given to the primary dealers went straight into the stock and futures markets. Zero Hedge has done a lot reporting on this I highly recommend their site to everyone, IMHO its the best financial site, sorry TPC though you’re in my top 5:
http://www.zerohedge.com/
Banks got a lot of money and they’re not lending it so its going somewhere. Why is the Fed fighting so hard to avoid an audit after Zimbabwe Ben, Hanky Panky and Turbo Timmy all told CONgress how transparent they would be?
The Fed is saying how an audit would hurt their independence, this pure BULLSH!T. When you’re the Fed Chief and are up for re-appointment you’re going to play ball. William Martin under Lyndon Johnson, Arthur Burns did so with Nixon, Greenspan with Clinton, Bernanke with Bush and yes, everyone’s favorite Fed Chief Paul Volcker did it too:
http://www.nationalreview.com/nrof_bartlett/bartlett200406140846.asp
“It was only after the election, when Volcker knew that Carter had lost, that he really clamped down on the money supply.”
As Ron Paul pointed out the other day during the hearing the GAO audits many agencies of the Gov’t and it doesn’t dictate policy to any of those agencies.
The Fed must be audited, the people who broke laws must go to prison and then abolish the Fed once and for all!
No doubt ZH is one of the best sites on the net. I think our focuses are a bit different though. More of my time is spent trying to relay these events in to money making ideas whereas he spends more time actually exposing nefarious acts….Different focuses.
TPC I hope, if they are audited, it is a true audit. And it doesn’t get screwed up ‘accidentally’ or the people who are responsible for the audit such as Ron Paul, Kucinich, Alan Grayson (to a lesser extent) are told that their children can get into a plane crash or car accident if they continue.
TPC,
ZH has a wide array posts, some of which are money making ideas (I’ve seen your posts at ZH) though for the most part you’re correct that the ZH team is seeking the truth. I drive my own boat, so as the captain I’ll go down with my ship, i.e. I’m not looking for investment advice. To me, a lot of investors seek the opinion of others and use that as an excuse for their own poor performance rather than doing their own homework. For me at least, I find ZH’s focus most useful.
Oh don’t get me wrong. I love their work. I don’t read a lot of blogs, but theirs is one I check out almost daily.