TIM GEITHNER DOESN’T GET IT

At least Ben Bernanke isn’t the only person in government who doesn’t really understand our monetary system.  Over the weekend Tim Geithner paraded himself all over the weekend talk shows while he proved that he barely deserved to pass econ 101.  That’s right, the Secretary of the US Treasury doesn’t get it.

The interviews mostly began with Mr. Geithner distancing himself from the entire cause of this crisis.  Although he was effectively the fox in the hen house (he was President of the NY Fed while we experienced the grossest bank expansion/leveraging experiment in the history of the world) Mr. Geithner continues to make it sound as if he was saddled with this problem and played no role in its cause:

“I, I think I disagree slightly in the sense that, you know, remember, this was a recession caused by a set of policies that left us with a $1.3 trillion deficit when the president came into office, an economy that was falling off the cliff. Millions of Americans had already lost their jobs. The recession was a year old at that point.”

Mr. Geithner goes on to explain that there is no chance of a double dip (famous last words?).  He displays absolutely zero sense of risk management and prescience.  This shouldn’t be surprising to anyone.  It is the tendency of government officials to adhere to the scientific method – “let’s wait for the dust to settle before we make our next moves”.   Unfortunately, that’s not how markets work and it’s certainly not how economies work.  Mr. Geithner is blindingly optimistic:

“MR. GREGORY: So just to be precise, you do not believe in a double-dip recession, that it will get worse before it gets better?

SEC’Y GEITHNER: No, I don’t. I think the most likely thing is, you see an economy that gradually strengthens over the next year or two, you see job growth start to come back again.”

Mr. Geithner then goes on to explain how he totally misunderstands how a fiat currency system in a floating exchange system works.  It’s 100% crystal clear that Geithner is living in his textbook gold standard world where the USA borrows money to finance spending - nothing could be farther from the truth.  The Treasurer of the USA says we “borrow” to “finance” our spending:

“I think this is a responsible way to do it. You know, my job, David, is to help make sure we can borrow to finance the obligations that Congress gives us.”

Mr. Geithner then continues his rambling diatribe by offering up an explanation for why we can afford to continue borrowing and why interest rates are so low:

“David, we can afford to do it this way. I’m completely confident we can. And if you look, again, at what we’re paying to borrow now, we’ve got very low interest rates as a country, in part because people around the world and Americans have a lot of confidence in our capacity as a country to make sure we manage through these challenges.”

Of course we can afford it.  We are the largest and most productive economy in the world.  There is enormous demand for our currency.  We have an output gap have you could drive a Mack Truck though.  We have Harvard graduates applying for jobs at Starbucks.  The amount of idle capacity is an outrage.  As a nation, we can always always afford to spend in the currency we create so long as there is a productive economy that backs that currency and the USA does not lose its ability to tax that productivity.

Mr. Geithner believes interest rates are low because the risk of insolvency is low.  Of course the risk of insolvency is low in the USA – because there is no insolvency risk in the USA.  Despite the ranting and raving of many market pundits in recent years a bet on US insolvency has been an absolute disaster.   Interest rates are low today because the market is worried that the USA is at risk of years of very low growth and below trend inflation rates.  Insolvency is not an issue, yet Mr. Geithner believes we need to cut the deficit so we can reassure the rest of the world:

“But we have to make some choices, too, and we have to make sure we can continue to earn confidence around the world that we’re going to have the will as a country to bring these large inherited deficits down over time to a much more manageable level.  We think that’s the responsible thing to do because we need to make sure we can show the world that (we’re) willing as a country now to start to make some progress bringing down our long-term deficits.”

And we wonder why the economy in this country is such a mess after all this time?  Mr. Geithner has no clue how the system actually works.  If he did, he would have taken responsibility for his part in the crisis and never taken a job that is clearly well beyond his capabilities.  He would have never helped Ben Bernanke devise his great bank rescue plan which has been an utter waste of government resources and failed on all levels (except making bankers more wealthy).

Mr. Geithner might have sounded at least partially credible if he’d spent more time talking about cutting wasteful spending as opposed to letting tax cuts expire (which is an effective tax hike – the last thing the debt saddled private sector needs right now).  But it’s clear Mr. Geithner doesn’t understand how a sovereign issuer of currency in a floating exchange system actually functions.  He’s more worried about non-existent bond vigilantes and China as our banker (which they aren’t).  Let’s just hope Geithner’s model isn’t as horribly flawed as Mr. Greenspan’s was.  Unfortunately, the evidence leads me to believe it might even be worse….

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. There’s another possibility. Tax-evader Timmy is simply a crook, a frat-boy sycophant who “gets it” alright; using Greenspanesque obfuscation to hide the looting. He’s setting himself up for a fat undisclosed sinecure as Alan did at John Paulson & Company, the hedgehog who sucker-shorted the Greenspan housing bubble.

  2. I see it all the time (I work daily with executives in private industry). Competence is in no way necessary for a high-level position of power. In many cases it is a hindrance.

    Very frustrating for most of the “little people” who of course would like the higher salaries and other perks to see these idiots in charge. The lower levels keep trying to hone their skills and become more technically proficient, doing the same things that would get them an A in school. Well that doesn’t work in real life. It’s a completely different set of “soft competencies” that win the day and that we ultimately reward, both in the public and private sector. It’s a bitter pill to give someone credit for being able to look good in the suit an “suck up move up” but using the measuring stick we have developed, that indicates Geithner is the smart one. He’s “done it right” …

  3. “Mr. Geithner has no clue how the system actually works” ???
    He ho benefits from the system knows what is going on.
    The ones from ho he benefits don’t.
    If and when and if it was to collapses he ho benefits will have exited.

  4. how else is the party in power going to vilify the opposition to get that 10% of swing vote independants who elect politicians

  5. Tiny Time doesn’t get it??! Wait a minute…

    Jokes aside, of course he doesn’t get it – that’s why he was offered the job! I mean, one has GOT to laugh about a guy missing tax payments over $40k being elected to head the Treasury….that’s kind of irony is perfectly fitting.

    And when the proverbial $hit hits the fan, he’ll be the one to take the fall.

  6. You are straining your credibility a little. I’m pretty sure the Secretary of the Treasury knows how our monetary system works.

    What do you expect Timmy to say? “Well actually, David, the Fed just makes money on their computers out of thin air, so it doesn’t really matter if we can borrow money or not, because otherwise we’ll just make new money.” How do you think the American people would react to that? When a 4-year-old asks about Santa Claus, you don’t start giving him history listens about the origins of the St. Nicholas myth in Germanic paganism.

    And do you really think this statement is “blindingly optimistic”: “I think the most likely thing is, you see an economy that gradually strengthens over the next year or two, you see job growth start to come back again.” If you ask me, that is a pretty reasonable, hedged statement. Even if you think a double-dip is a real possibility, you could agree that it is still “most likely” that the economy will “gradually strengthen”. It’s not as if he said that he expects 5% GDP growth and a return to 4% unemployment in two years. Again, what do you expect him to say: “Actually, David, we probably will double-dip and job growth won’t strengthen for at least 5 years”?

    I think you can make the argument that it is time for people like Timmy to start talking to Americans like adults (even those most cannot think like adults) and stop hiding uncomfortable truths. But to say that Timmy doesn’t even understand these facts himself, based on his public statements, is ridiculous. Let me let you in on a little secret: People in government (and in the public eye in general) do not say what they really think, they say what will play well with the public and help them to achieve their short-term policy goals. You cannot infer what an official understands from 30-second answers in a Sunday morning interview. Period.

    • I think TPC is referring to this statement as patently incorrect:

      “I think this is a responsible way to do it. You know, my job, David, is to help make sure we can borrow to finance the obligations that Congress gives us.” – Geitner

      The fact is, Congress raises the deficit ceiling, money credits flow from the Fed into the Treasury from thin air and that money is spent to keep things running. Later down the road, the Treasury will sell bonds (large amounts of which go directly to the Fed to “pay for” the credits) mainly to insure that interest rates don’t fly through the roof.

      We don’t borrow to finance, we generate output to finance. That’s like saying I take out money from my Visa card to “finance” the spending on my Mastercard. We do have to pay off those IOUs but how and when is a different story all together. Moreover, the fact that bond yields have plummeted in the midst of all this turmoil and money printing (fiscal irresponsibility) seems to be in direct contradiction to Timmy’s statements about “continuing to earn confidence” from the market. And despite the absurdity of such a line of reasoning, the truth is that if we did cut back on expenditures – we likely would fall far deeper than before.

    • If I had written this same article in 1992 in reference to Alan Greenspan I would have been insulted by everyone. Little did we know that 15 years later he would admit that he was entirely wrong about everything….

      I don’t know why a title and a Congressional vote means this man has instant credibility….

      The earth is flat again…..At least in the world of economics….

      • I agree that an official title does (should) not confer instant credibility. My point is that public statements made by public officials virtually never reflect the true thinking of that official. Open books don’t achieve such positions (see Robert Bork). I am sure you understand this. It’s not fair to say Geithner doesn’t understand something based on Meet the Press comments; the primary goal of a public figure on Meet the Press is to gracefully evade questions, not outline the full depth of their thinking!

        • Let’s judge him by his results then. Do you believe he has done a good job? In my opinion, his PPIP plan has been an utter failure. He is complicit in Ben’s plan to save the banks – the greatest monetarist gaffe in the history of economics. The bank plan failed. The banks were not the cause of this crisis and we’re only just now beginning to see some people admit this. I am not sure that anyone can look at his response to the crisis and say that he understood the problem or applied the correct response….His words might not matter, but his actions prove he knows far less than we think. And if he actually understands it and simply saved his banking buddies then we have a much bigger problem here – perhaps a legal one….

          • Yes, exactly right. I think we should judge him by his results. Or at least by comments made in a forum where we can expect him to be relatively honest and reveal the depth of his thinking. (By no means am I defending Geithner… I’m criticizing the absurdity of judging his understanding based on comments made on a Sunday morning news show.)

            On the whole, I can’t comment on his job performance on the small decisions and mundane tasks, but I agree with you completely that when he’s been involved in big decisions he’s been on the wrong side. IMO the worst banks should have been nationalized (or unwound, restructured, whatever you want to call it). The banks were certainly involved in the crisis and were in large part the _proximate_ cause of the _liquidity_ component of the crisis, but it isn’t “either/or” as the liquidity component was merely a manifestation of a more significant solvency issue that goes far beyond the banks. Agree with you on PPIP. So I think we are in agreement on Geithner’s performance.

            That said, you still have to be careful when trying to divine his views or what he understands from his policy decisions. He is, after all, a political appointee beholden to his political masters. While it seems he is one of the major players influencing policy, he is certainly not the only one within the administration and there are plenty of outside forces that shape policy as well. Even if he argued strongly against a policy that was later adopted and proposed an alternative more in line with your thinking, there’s a good chance we wouldn’t know it until after Obama leaves office (or at least until after Geithner leaves office). In short, regardless of what an administration official actually thinks, once a policy is adopted by the administration, that official must either get behind the policy or get out. And political considerations can force even the most enlightened official to abandon ideal solutions in favor of bad ones (because the ideal solutions are politically impossible). I am not saying Geithner is enlightened, but I do think you have to be VERY careful about judging public officials as if they’re open books. They’re not.

          • One more thing: By all accounts Geithner is a very smart guy. That doesn’t mean he can’t be wrong. (Larry Summers is brilliant and god knows he’s been wrong.) That doesn’t mean he can’t misread a situation, ignore important variables, or emphasize short-term priorities over more important long-term issues. But it does mean that he probably understands that the Fed can create money at will and buy Treasury debt to finance public spending. That’s what makes your comments a little ridiculous:
            “Mr. Geithner then goes on to explain how he totally misunderstands how a fiat currency system in a floating exchange system works. It’s 100% crystal clear that Geithner is living in his textbook gold standard world where the USA borrows money to finance spending – nothing could be farther from the truth. The Treasurer of the USA says we “borrow” to “finance” our spending:”
            1) Geithner is speaking to the broader American public, so he is framing the issue using the common understanding of debt and deficits. This understanding is wrong, but that’s not the point. Meet the Press is not the place to give an impromptu tutorial on the American monetary system, not least because any comments he made to that effect (however accurate) would be taken out-of-context and used against him.
            2) There are many good reasons not to expand the monetary base and monetize debt, the most notable of which is future inflation. So yes, hard insolvency is impossible, but “soft default” through inflation is not (as you yourself have noted). Considering this, and considering that the “ideal” (used loosely, not situation specific) is not to monetize debt, it’s even easier to understand why Geithner would use the framework he did even if he knows that it’s not accurate.

  7. “As a nation, we can always always afford to spend in the currency we create so long as there is a productive economy that backs that currency and the USA does not lose its ability to tax that productivity.”

    Please clarify. What is your stance on the US current account deficit in relation to your monetary theory? I’m sure many would argue that capital inflows from China and Chinese productivity support our currency, at least in context of your ideas. Does an ongoing and widening trade deficit shrink our ability to tax production enough to pay for new printing? Or does it simply have no effect?

    • Please see the many links in the article. My stance on monetary theory is well documented. Email with specific questions. Thanks.

  8. TPC I believe you are letting your personal moral code get in the way of seeing a crook as a crook and not just your run of the mill empty suit with a dirty nose. He is well aware of what he is doing and I can guarantee that he does indeed understand the real system. He is mearly setting the stage for the coming depression, reset of wages, devaluation and coming war all the while wrapped in the American Flag of patriotism. Remember it is good for the “country” (collective) that we show the rest of the world that we can do it, go team USA. /sarcasam

    “there is no shelter here”

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    • I disagree. I really honestly believe that many of our most influential politicians and leaders have little to no idea how the economy actually works. Call me crazy, but the results don’t lie….

    • Hey Scott,
      I don’t know who this TPC guy is but trust me, he puts out a great site. Believe me, I don’t always agree with him either but no question about it he gives good food for thought and since none of us really know all the answers anyway (we may think we do) all we really want is some good information, some good food for thought along with some healthy give and take from other readers along with TPC which, believe it or not, you can actually get on this site, and maybe if we’re lucky, we actually come away learning something in the process. Thats really what we’re hoping for when we go to these sites anyway isn’t it?
      I usually don’t write comments on this site but from what I’ve seen over the months I’ve been on here, the experience is priceless. If you dislike or disagree with TPC’s thoughts and opinions, and I do myself at times, but can’t come up with a better way of expressing that, do me a favor and just go somewhere else. I doubt many of us who read this site regularly will miss you anyway.

  9. “Please see the many links in the article. My stance on monetary theory is well documented. Email with specific questions. Thanks.”

    I’ve read much of your writing, but sorry, circular arguments like “I already proved this, so see that” don’t work. You source yourself continuously when answering inquiries. Why do you require email unless you cannot make a coherent argument publicly?

    If I had written this same article in 1992 in reference to Alan Greenspan I would have been insulted by everyone. Little did we know that 15 years later he would admit that he was entirely wrong about everything….

    I don’t know why a title and a Congressional vote means this man has instant credibility….

    The earth is flat again…..At least in the world of economics….”

    Well argued. Very well argued.

    Your responses are starting to remind me a bit of the “Mathematically Perfected Economy” folks. I think you’d get more credibility if you started answering inquiries in a respectful manner.

    • Perhaps you should narrow your question a bit. Saying “please frame your MMT knowledge in terms of the current account” is asking for a lot to be spoon fed. If not willing to do that, then perhaps you can arrange your own assumption based on TPC’s previous posts and state that. Remember, he’s running the site and posting articles as well as responding to numerous comments and questions – asking for a full rundown in the comments section on topics which he’s covered many times is a bit much.

      Re: China – having a pegged currency gives China a huge advantage. Bowing somewhat to the pressures against them, China allowed their currency to appreciate slightly and that changed a lot. Inflows from China support our currency just as much as outflows from the US support their artificially debased currency. The day when the yuan is allowed to trade freely, the entire situation could reverse quite drastically as the Chinese are working on very small margins as it is. Furthermore, Chinese culture is transforming as workers are waking up to realize that they’ve potentially missed the massive growth that’s occurred over the past 3-4 decades. Many factories are having trouble finding workers and even more trouble keeping workers. Couple this with the resulting population imbalance due to the One Child Per Family laws of the past decades and you can see a big powder keg building in China.

      Regardless, had you read some of TPC’s past articles and comments, you’d come to realize that what we give China (ie. US IOU’s) and what we receive from China (ie. manufactured products at low cost) means that the true controller of the trade relationship lies with us.

      TPC’s position is that China doesn’t finance our spending. We don’t shut down schools, send police home, shut off water, etc and wait for China to come “bail us out” when we don’t have money. What we do is Congress is asked to raise the deficit ceiling (which they just about always do) and that allows money to flow freely to our Government entities to do their jobs. Now if this were the only way we functioned, it would collapse in short order as inflation would run rampant. So, we then issue Bonds which brings in cash. Yes, this can be a circular feedback loop and it cannot be sustained forever – but being the sole issuer of our currency, we basically have a say as to how long it can go on (within practical reason). We still do produce things and provide services to the rest of the world. We still have the largest and most robust economy in the world. And despite all the naysayers, when things get ugly, everyone floods back to the proven safety of Uncle Sam. Things could change, but up until this point, that fact has been undeniable. If you don’t believe so, then by all means you should attempt to profit from such. Sell bonds, buy US CDS, buy gold, convert your money to EUR, GBP, JPY, etc, buy foreign real estate and sit pretty waiting for the windfall. But I would make sure to get comfortable because you may be waiting a long time…

    • My comments are not circular. They are continuous. I sincerely apologize to any new reader who is jumping in on what is essentially a running dialogue of commentary….I will attempt to create a better system of tracking past writings…

  10. TPC (aka uneducated blow),

    I love your stuff and the site. Well-balanced and very informative. You’ve really motivated me to learn more about our (I’m Canadian, but we have roughly the same sysetm) monetary system and fiat currency. Very eye-opening.

    Anyways, I disagree with your assessment of Geithner, Greenspan, and Bernanke. I think that they do understand the system from an academic standpoint but when they’re talking to the public, they have to talk in terms people understand. The public understand our monetary system as being analagous to a household: you have to balance your books or you go bankrupt. If you started telling the American or Canadian publics that there’s no worry about defaulting on our debts or being in hock to communist creditors, they wouldn’t believe you or they would dismiss you as irresponsible.

    At the end of the day, I just feel that they say things like Geithner did on Meet the Press because that’s what his target audience understands. My two cents.

    • See I disagree. I am a results person. your either produce or you are wrong. If you bailout every bank in the USA with the premise that it will fix the US economy and it fails then you have failed. Game over. That’s it. you get fired at that point. The connection of dots is so clear in my mind that it dirves me mad……The very fact that these peopole are in power is sheer madnesss….

  11. Seconded. This is a wonderful, thought-provoking blog. TPC should just ignore carpers and trolls.

  12. Here’s the money shot from @Bleako post 8:22AM

    “Competence is in no way necessary for a high-level position of power. In many cases it is a hindrance.”

    Geithner is an elite level yes-man. Already angling for a consultant gig at Pimco most likely. At this point of his career I view him as sort of a John Kerry type. He kind of looks around, tows the company line, says a few things. Won’t stick his neck out, scared. Hell he looks at the floor when he talks. The man is a fraud.

    He’s not like Ben B. When I see Ben talk, he seems frustrated by the constraints of political office and wants to yell “I’m trying to repair a friggin semi-truck together with duct tape!!!!!! You want my job?@!!!!!” but instead he calmly says “The risks to our economy are still prevalent, but we have seen encouraging signs”

    Ben B seems to care about our country while Geithner looks like a frat boy who snuck into a sorority house. My 2 cents…

  13. There may well be many examples that prove that Geitner is a fool, but the example cited in the article is not one of them. The example cited in the article just proves anyone who believes it is a fool.

    If you believe that evidence showing that Geithner believes
    1. The USA IS NOT a “sovereign issuer of currency”
    and
    2. The USA “borrows” to “finance” our spending
    … proves Geithner is a fool,
    then that just proves you are a fool yourself – it just proves the writer of the aricle has made a fool of you.

    A common tactic of the International Bankers’ disinformation artists is to get protesters to accept false premises in order to personally attack one of the Banker’s agents.

    This article is an example.

    It is absolutely true that
    1. The USA IS NOT a “sovereign issuer of currency”
    and
    2. The USA “borrows” to “finance” our spending

    CLICK THIS FOR MORE INFO:
    How International Bankers Gained Control of America

  14. I agree. Gethner is a total idiot. A guy who never had a private sector job and doesn’t know how the private sector should work. God help us with this joker at the Treasury and that clown in the whitehouse.

  15. The “appeal to authority” logical fallacy argues that an idea must be true because somone you like believes it. The “Guilt by association” logical fallacy argues that an idea must be false because someone you don’t like believes it. Obviously the one is the opposite of the other and they are equally silly.
    This article invokes the the “Guilt by association” logical fallacy to argue that an idea must be false because they don’t like Tim Geithner and he agrees with it.
    That idea is:
    1. The USA IS NOT a “sovereign issuer of currency”, and
    2. The USA “borrows” to “finance” our spending
    But when we test the idea using sound logic rather than logical fallacies, the idea turns out to be true not false:
    1. America abdicated its right to issue currency to the private Federal reserve Bank group in 1913, so The USA IS NOT a “sovereign issuer of currency”.
    2. And since then, the only way the government has been able to finance spending is to pledge interest bearing bonds as collateral and borrow money. And when the bonds come due, to repeat the process to get the money to redeem them. An obvious Ponzi scheme. So The USA “borrows” to “finance” our spending.
    QED.

    • The Fed Bank Group, if I’m not mistaken, resides in the US does it not? It isn’t a sovereign nation within our nation. Technically its established as a distinct entity, but practically it is still bound to the nation. Arguing semantics in this case is a bit silly.

      Moreover the Fed and the Treasury actively meet and engage in trading with each other and the open markets – admittedly so in fact. How exactly can the Fed be a distinct entity if one of its main products is US Treasuries?

      Finally, even if you want to make this semantic argument, you must be much more specific. The Fed is an independent entity WITHIN the government. The “independent” part says that the fed doesn’t require presidential, legislative or any other executive approval to make its decisions nor is it funded by Congress or bound to the election cycles of the other branches. But being WITHIN the government means that the Fed is under Congressional oversight – hence the ability of Congress to pass financial reform which required a one time audit of the Fed (despite the Fed’s objection). Congress can alter the Federal Reserve Act whenever necessary and also requires an annual report to the speaker of the House and semi annual reports to the Banking committee. Moreover, the GAO and the OIG regularly review and audit the Fed.

      Calling people fools when you clearly haven’t done your research is, well….foolish.

  16. If Geithner really does understand the monetary system then it would seem that he is guilty of malfeasance and should not be Treasury Secretary – and TPC would be correct .

    If Geithner really does not understand the monetary system then he is incompetent and should not be Treasury Secretary – and TPC would be correct .

  17. “It’s important to understand that historically, the Fed has never actually “created money” out of thin air. What it has always done is purchase Treasury debt, paying for that debt by creating “Federal Reserve Notes” (see the top of your dollar bill). When it has purchased other types of securities, it has historically done so using “repurchase agreements.” These enable the Fed to sell those securities back at a known price, even if the security itself was to default. By restricting the vast majority of its purchases to U.S. Treasury securities, the Fed has always operated under a budget constraint: Congress has always had the sole, Constitutionally enumerated power to authorize the spending that creates government liabilities, and the Fed has merely affected whether those liabilities were held by the public in the form of Treasury debt or in the form of Federal Reserve Notes (money).

    For example, if Congress votes on a billion dollars of spending, and the Treasury issues debt to finance this spending, the Fed might buy that billion dollars of Treasury debt and create a billion dollars of currency to pay for it. But notice that from the standpoint of the public, the end result is still a billion dollars of government liabilities, that was explicitly authorized by Congress. The Fed was never involved in spending decisions, which is fiscal policy.”

    http://www.hussmanfunds.com/wmc/wmc100726.htm

    • But notice that from the standpoint of the public, the end result is still a billion dollars of government liabilities, that was explicitly authorized by Congress. The Fed was never involved in spending decisions, which is fiscal policy.”

      The US Treasury could simply issue debt free (and thus interest free) legal tender without any borrowing. The fact that private citizens lend to the US government for interest is a scandal and was a political maneuver of Alexander Hamilton’s to secure the loyalty (actually self interest) of the wealthy in the early days of the nation. That political need no longer exists. Instead the US should just issue its own currency as needed backed by its taxing authority. The US should assert its sovereignty in money creation. It is absurd and immoral to burden future Americans with interest charges for what could be created for free.

  18. Between_the_lines:
    The “appeal to authority” logical fallacy argues that an idea must be true because somone you like believes it. The “Guilt by association” logical fallacy argues that an idea must be false because someone you don’t like believes it. Obviously the one is the opposite of the other and they are equally silly.
    This article invokes the the “Guilt by association” logical fallacy to argue that an idea must be false because they don’t like Tim Geithner and he agrees with it.
    That idea is:
    1. The USA IS NOT a “sovereign issuer of currency”, and
    2. The USA “borrows” to “finance” our spending
    But when we test the idea using sound logic rather than logical fallacies, the idea turns out to be true not false:
    1. America abdicated its right to issue currency to the private Federal reserve Bank group in 1913, so The USA IS NOT a “sovereign issuer of currency”.
    2. And since then, the only way the government has been able to finance spending is to pledge interest bearing bonds as collateral and borrow money. And when the bonds come due, to repeat the process to get the money to redeem them. An obvious Ponzi scheme. So The USA “borrows” to “finance” our spending.
    QED.

    In_Banking replies: The Fed Bank Group, if I’m not mistaken, resides in the US does it not?

    Between_the_lines: Canadian Tire company resides within Canada and when it issues Canadian Tire money it doesn’t make the Canadian government the sovereign issuer of the money.
    Toyota US resides within the US, but that doesn’t make it part of the Federal government.

    In_Banking: Technically its established as a distinct entity, but practically it is still bound to the nation.

    Between_the_lines: The Federal Reserve Bank group is bound to the nation in the sense Cymothoa exigua is bound to the Snapper
    IN THIS LINK Six Horrifying Parasites
    .. they remain distinct entities even though they appear as one.
    The Federal Reserve is all foreign-owned too, ownership comes down to the Rothschilds in London.

    In_Banking:
    Moreover the Fed and the Treasury actively meet and engage in trading with each other and the open markets .

    Between the lines:
    So do the US and China “actively meet and engage in trading with each other and the open markets ” but that doesn’t mean one owns the other.
    In fact the U.S. government owns not one share in the Federal Reserve Bank group and derives not one penny from its dividends.

    In_Banking:
    How exactly can the Fed be a distinct entity if one of its main products is US Treasuries?

    Between_the_lines: U.S. Treasuries and Bonds are not a product of the Federal Reserve Bank group. U.S. Treasuries and Bonds are IOUs produced by the Federal Government. The government pledges its IOUs as collateral on a loan at the Rothschild Pawnshop, and gets back a Rothschild pawnticket and nothing else of value, because Rothschild pawntickets ARE our currency. Read the top of any dollar bill: “Federal reserve note”. And of course, all pawnshops trade in unredeemed pledges.

    In_Banking: The Fed is an independent entity WITHIN the government. The “independent” part says that the fed doesn’t require presidential, legislative or any other executive approval to make its decisions nor is it funded by Congress or bound to the election cycles of the other branches. But being WITHIN the government means that the Fed is under Congressional oversight

    Between_the_lines: You are confusing a parasite with its host again.

    In_Banking: Calling people fools when you clearly haven’t done your research is, well….foolish.

    Between_the_lines: What I said was: if A believes an idea is false because B tells him that C is a fool and C believes the idea; then A is the fool not C, and B is the one who has made a fool of A. To which I now add: “In_Banking” is an A.

    CLICK THIS How International Bankers Gained Control of America

  19. between_the_lines “In fact the U.S. government owns not one share in the Federal Reserve Bank group and derives not one penny from its dividends.”
    That is wrong.
    The shares get a standard 6% dividend. These shares cannot be sold on the open market. All ‘profit’ from the Federal Reserve branches are turned over to the Treasury at the end of the year.

  20. firts: “All ‘profit’ from the Federal Reserve branches are turned over to the Treasury at the end of the year.”

    Between _the-lines: No its not. The “Federal reserve” is a group of 12 banks and they have constructed a body called “itself “Board of GOVERNORS of the Federal Reserve System” to look after their common interests and fix prices. Click this website and see how it describes itself:
    Board of GOVERNORS of the Federal Reserve System
    … and the “.gov” in their web address stands for “governors” not “government”.
    This is similar to how a large group of realtors constructed the “National Association of Realtors” to look aftertheir common interests.
    However if the National Association of Realtors donated all its surplus to the Girl Scouts, it wouldn’t mean Century 21 and RE/MAX weren’t making a lot of money. And when “itself “Board of GOVERNORS of the Federal Reserve System” donates its surplus to the Federal Government it doesn’t mean the Rederal Reserve bank of New York and the Federal reserve bank of Boston aren’t making a pile of money. In fact the “Board of GOVERNORS of the Federal Reserve System” does it to fool you, just like they put “Federal” in ther name and “.gov” in their website address.
    The national debt is NOT EQUAL TO the sum of prior years budget deficits,
    it is mostly due to compound interest on government borrowing private currency from the country’s private banks.
    And most of the national debt is owed to the private (but foreign-owned) Federal Reserve bank group operating right within this country, not to any foreign nation like China or Japan.
    Click this for more info Ownership of US Treasury securities
    [Yes we know they have phrased it: "Federal Reserve and intra-governmental holdings", but that is just to fool you into thinking the Federal Reserve is a government department. A debt you owe yourself is no debt at all.]

    HERE”S THE POINT:
    If the Federal Reserve banks were part of the Federal Government, then the Federal Government would owe most of the national debt to itself. And a debt you owe to yourself is no debt at all!

  21. SOME TYPOS CORRECTED…

    firts: “All ‘profit’ from the Federal Reserve branches are turned over to the Treasury at the end of the year.”

    Between _the-lines: No its not. The “Federal reserve” is a group of 12 banks and they have constructed a body called the “Board of GOVERNORS of the Federal Reserve System” to look after their common interests and fix prices. Click this website and see how it describes itself:
    Board of GOVERNORS of the Federal Reserve System
    … and the “.gov” in their web address stands for “governors” not “government”.
    This is similar to how a large group of realtors constructed the “National Association of Realtors” to look after their common interests.
    However if the National Association of Realtors donated all its surplus to the Girl Scouts, it wouldn’t mean Century 21 and RE/MAX weren’t making a lot of money. And when the “Board of GOVERNORS of the Federal Reserve System” donates its surplus to the Federal Government it doesn’t mean the Federal Reserve bank of New York and the Federal reserve bank of Boston aren’t making a pile of money. In fact the “Board of GOVERNORS of the Federal Reserve System” does it to fool you, just like they put “Federal” in ther name and “.gov” in their website address.
    The national debt is NOT EQUAL TO the sum of prior years budget deficits,
    it is mostly due to compound interest on government borrowing private currency from the country’s private banks.
    And most of the national debt is owed to the private (but foreign-owned) Federal Reserve bank group operating right within this country, not to any foreign nation like China or Japan.
    Click this for more info Ownership of US Treasury securities
    [Yes we know they have phrased it: "Federal Reserve and intra-governmental holdings", but that is just to fool you into thinking the Federal Reserve is a government department. A debt you owe yourself is no debt at all.]

    HERE”S THE POINT:
    If the Federal Reserve banks were part of the Federal Government, then the Federal Government would owe most of the national debt to itself. And a debt you owe to yourself is no debt at all!

  22. I do understand that the Fed is private but my understanding has alway been that it redistribute some 98% of its gain to the government. I will have to revisit all this as its not so clear, When its not clear there is generaly a good reason. Thanks

  23. between_the_lines.
    With all due respect unless there is a Misterious Secret Trust Deed or that we are in the Twilight Zone I think that the evidence is clear:

    “top eight stockholders of the New York Fed Citibank, Chase Manhatten, Morgan Guaranty Trust, Chemical Bank, Manufacturers Hanover Trust, Bankers Trust Company, National Bank of North America, and the Bank of New York”
    “The SEC requires the name of any individual or organization that owns more than 5 percent of the outstanding shares of a publicly traded firm be made public.” So forget the London Branch of the House of Rothschild. “Perhaps foreigners own shares of the New York Federal Reserve Bank directly. The law stipulates a small portion of Federal Reserve stock may be available for sale to the public. No person or organization, however, may own more than $25,000 of such public stock and none of it carries voting rights”” each commercial bank receives one vote regardless of its size,””By an agreement between the Board of Governors and the Treasury, nearly all of the Fed’s annual profits are paid to the federal government.”in 1995 “$23.4 billion, which represents 97.9 percent of the Federal Reserve’s net income, was transferred to the Treasury. The Federal Reserve Banks kept $283 million, and the remaining $231 million was paid to its stockholders as dividends.”

  24. Firts: “The SEC requires the name of any individual or organization that owns more than 5 percent of the outstanding shares of a publicly traded firm be made public.”

    Between_the_lines: You are just blowing smoke. The Federal Reserve Bank of New York is NOT a publicly traded company and therefore does not fall under that Securities & Exchange Commission rule (and has no Ticker Symbol).
    It is public knowlege. You can Google it for yourself. This just happens to be the first hit I found ..
    Federal Reserve Bank of NY
    ..and the same applies to the other 11 branches..

    Who owns the Federal reserve banks is not in the public domain, however people have done detective work and pieced together detailed charts like this
    who owns the Federal Reserve?
    And while we are at it we might as well include..
    Who operates the Federal Reserve?

    Give sources for the rest of your quotes if you want answers.