Posts tagged Wall Street
Another Batch of Wall Street Villains Freed on Technicality
I liked GE so much better when all I thought they made was light bulbs.
(From Rolling Stone)
The GE Muni-riggers will now join such luminaries as the Gen Re defendants (executives from an insurance company who were convicted in 2008 of helping AIG conduct a fraudulent accounting transaction) and the KPMG defendants (executives of the U.S. arm of the Dutch accounting giant who were convicted in the 2000s of selling illegal tax shelters) in the ranks of Wall Street line-crossers who improbably made it all the way to guilty verdicts in criminal cases, only to be freed on technicalities later on.
As one antitrust lawyer I know put it: “Apparently, the government can’t seem to get criminal trials involving financial executives (as opposed to, well, drug dealers) right. Go figure.”
Image credit: http://www.againstcronycapitalism.org
Fed has created a huge global bubble: David Stockman (Video)
“The Fed is exporting this lunatic policy worldwide.”
This doesn’t end well.
The Fed is the prime mover of crony capitalism. The 0% rates of the past 5 years have made Wall Street fat with fiat currency, while the real economy has languished.
There is so much funny money about that the very rickety underpinnings of the world economy (the current bubble) have been hidden. A paper money mache. Paper mache is not a sound construction material.
Image credit: http://www.againstcronycapitalism.org
Jim Rogers Says “Abolish the Fed and Resign”
It was an historic day on Wall Street with the Dow topping 16,000 on Monday. We’ll tell you why-and-what caused the run.
And the revolving door of Washington-to-Wall-Street takes another spin! This time it’s Timothy Geithner in the turnstile. We’ll tell you where he’s going.
Also, “What Would Jim Rogers Do”? We follow up with the legendary investor, and bow-tie aficionado, to get his take on what he would do if put charge of the Fed.
Finally, foreclosures are up from September. In some cities one in every 300 homes received a foreclosure filing last month. Is yours on the list? Rachel Kurzius and Erin discuss in today’s Big Deal.
Published by Boom Bust
By Ron Paul
Federal Reserve Steals From the Poor and Gives to the Rich
Last Thursday the Senate Banking Committee held hearings on Janet Yellen’s nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE “the greatest backdoor Wall Street bailout of all time.”
As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!
It would be a mistake to think that QE is the first time the Fed’s policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.
By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!
As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.
Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big government spending without causing an economic crisis.
Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.
Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty.
Federal Reserve Whistleblower Tells America The REAL Reason For Quantitative Easing
A banker named Andrew Huszar that helped manage the Federal Reserve’s quantitative easing program during 2009 and 2010 is publicly apologizing for what he has done. He says that quantitative easing has accomplished next to nothing for the average person on the street. Instead, he says that it has been “the greatest backdoor Wall Street bailout of all time.” And of course the cold, hard economic numbers support what Huszar is saying. The percentage of working age Americans with a job has not improved at all during the quantitative easing era, and median household income has actually steadily declined during that time frame. Meanwhile, U.S. stock prices have doubled overall, and the stock prices of the big Wall Street banks have tripled. So who benefits from quantitative easing? It doesn’t take a genius to figure it out, and now Andrew Huszar is blowing the whistle on the whole thing.
From 2009 to 2010, Huszar was responsible for managing the Fed’s purchase of approximately $1.25 trillion worth of mortgage-backed securities. At the time, he thought that it was a dream job, but now he is apologizing to the rest of the country for what happened…
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.
When the first round of quantitative easing ended, Huszar says that it was incredibly obvious that QE had done very little to benefit average Americans but that it had been “an absolute coup for Wall Street”…
Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank’s bond purchases had been an absolute coup for Wall Street. The banks hadn’t just benefited from the lower cost of making loans. They’d also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed’s QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.
You’d think the Fed would have finally stopped to question the wisdom of QE. Think again. Only a few months later—after a 14% drop in the U.S. stock market and renewed weakening in the banking sector—the Fed announced a new round of bond buying: QE2. Germany’s finance minister, Wolfgang Schäuble, immediately called the decision “clueless.”
That was when I realized the Fed had lost any remaining ability to think independently from Wall Street.
Of course the fact that the Fed cannot think independently from Wall Street should not be a surprise to any of my regular readers. As I have written about repeatedly, the Federal Reserve was created by the Wall Street bankers for the benefit of the Wall Street bankers. When the Federal Reserve serves the interests of Wall Street, it is simply doing what it was designed to do. And according to Huszar, quantitative easing has been one giant “subsidy” for Wall Street banks…
Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.
But Huszar is certainly not the only one on Wall Street that acknowledges these things. For example, just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing…
“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”
And Donald Trump said essentially the same thing when he made the following statement on CNBC about quantitative easing…
“People like me will benefit from this.”
The American people are still being told that quantitative easing is “economic stimulus” which will make the lives of average Americans better.
That is a flat out lie and the folks over at the Federal Reserve know this.
In fact, a very interesting study conducted for the Bank of England shows that quantitative easing actually increases the gap between the wealthy and the poor…
It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.
Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”
And this is exactly what has happened in the United States as well.
U.S. stocks have risen 108% while Barack Obama has been in the White House.
And who owns stocks?
The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.
Meanwhile, things have continued to get even tougher for ordinary Americans.
While Obama has been in the White House, the percentage of working age Americans with a job has declined from 60.6% to 58.3%, median household income has declined for five years in a row, and poverty has been absolutely exploding.
But the fact that it has been very good for Wall Street while doing essentially nothing for ordinary Americans is not the biggest problem with quantitative easing.
The biggest problem with quantitative easing is that it is destroying worldwide faith in the U.S. dollar and in the U.S. financial system.
In recent years, the Federal Reserve has started to behave like the Weimar Republic. Just check out the chart below…
The rest of the world is watching the Fed go crazy, and they are beginning to openly wonder why they should continue to use the U.S. dollar as the de facto reserve currency of the planet.
Right now, most global trade involves the use of U.S. dollars. In fact, far more U.S. dollars are actually used outside of the United States than are used inside the country. This creates a tremendous demand for U.S. dollars around the planet, and it keeps the value of the U.S. dollar at a level that is far higher than it otherwise would be.
If the rest of the world decides to start moving away from the U.S. dollar (and this is already starting to happen), then the demand for the U.S. dollar will fall and we will not be able to import oil from the Middle East and cheap plastic trinkets from China so inexpensively anymore.
In addition, major exporting nations such as China and Saudi Arabia end up with giant piles of U.S. dollars due to their trading activities. Instead of just sitting on all of that cash, they tend to reinvest much of it back into U.S. Treasury securities. This increases demand for U.S. debt and drives down interest rates.
If the Federal Reserve continues to wildly create money out of thin air with no end in sight, the rest of the world may decide to stop lending us trillions of dollars at ultra-low interest rates.
When we get to that point, it is going to be absolutely disastrous for the U.S. economy and the U.S. financial system. If you doubt this, just read this article.
The only way that the game can continue is for the rest of the world to continue to be irrational and to continue to ignore the reckless behavior of the Federal Reserve.
We desperately need the rest of the planet “to ignore the man behind the curtain”. We desperately need them to keep using our dollars that are rapidly being devalued and to keep loaning us money at rates that are far below the real rate of inflation.
If the rest of the globe starts behaving rationally at some point, and they eventually will, then the game will be over.
Let us hope and pray that we still have a bit more time until that happens.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
How algorithms written by coders on Wall Street rule your financial world (yes yours)
High frequency trading has changed the investing world, fundamentally. If you do not write algorithms, if you do not benefit from the super dark high frequency trading system, you are on the outs.
Having learned about high frequency trading a few years ago my faith in the stock market was rattled. Then the the Crash hit. Then the Fed started pouring money into the world markets. My faith in the stock market, even as it rose was completely shaken. When I realized what all the new fiat money, coupled with the power of quants meant for the economy I became (and remain) very concerned about the razor edge the world lives on and how far our stock markets have detached from actual real live investing.
It’s not even close to fair for most people in the market. There is a quiet war going on in the ribbons of fiber optics which stretch between Wall Street, Greenwich Connecticut, and beyond.
The new masters of the universe write code. They are programmers.
Below is an amazing documentary. If you have any money in the market you owe it to yourself to watch it.
Video capture added to original post
About Nick Sorrentino
Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.
I enjoy Mike’s blog, titled A Lightning War for Liberty, with his perspective and opinion on the various events that evolve around us on a daily basis. For me it is a daily read and I found the video below interesting as Mike explains his transition from Wall Street suit to blogger and activist. More information can also be found by following Mike on Twitter here.
My 20 Minute Talk at the Liberty Mastermind Conference
Back in late June, I traveled to Dallas to speak at a wonderful event called the Liberty Mastermind Conference and my 20 minute talk has now been uploaded to youtube.This was my first experience speaking in such a setting and I decided to use the opportunity to discuss my journey from a “‘respectable’ guy in a suit on Wall Street, to a guy with a blog in Colorado.” Many of the stories and experiences I go into here are things I have never written about or discussed before, so I am sure this will be a fun watch for longtime readers and new ones alike. Enjoy!
Video capture added to Mike’s original post.
Ignored Reality Is Going To Wipe Out The Human Race
To inform people is hard slugging. Everything is lined up against the public being informed, or the policymakers for that matter. News is contaminated by its service to special interests and hidden agendas. Many scientists or their employers are dependent on federal money. Even psychologists and anthropologists were roped into the government’s torture and occupation programs. Economists tell lies for corporations and Wall Street. Plant and soil scientists tell lies for agribusiness and Monsanto. Truth tellers are slandered and persecuted. However, persistence can eventually win out. In the long-run, truth sometimes emerges. But not always. And not always in time.
I have been trying to inform the American people, economists, and policymakers for more than a decade about the adverse impacts of jobs offshoring on the US economy. The word has eventually gotten out. Last week I was contacted by 8th grade students competing for their school in CSPAN’s StudentCam Documentary Contest. They want to interview me on the subject of jobs offshoring for their documentary film.
America is a strange place. Here are eighth graders far ahead of the economics profession, the President, the Congress, the Federal Reserve, Wall Street, and the financial press in their understanding of one of the fundamental problems of the US economy. Yet, people say the public schools are failing. Obviously, not the one whose students contacted me.
Is it too late? I know much, but not all. So this is not the final word. I think it might be too late. When skilled jobs are sent abroad, the skills disappear at home. So do the supply chains and the businesses associated with the skills. Things close down, and abilities are lost. Why take a major in college for a job that is offshored. A culture disappears.
But we can start them back up, right? Perhaps not. When a First World country exports its technology and know-how abroad to a Third World country in order to benefit from lower cost labor, how does the First World country get the work back? Living standards and the cost of living in Third World countries are much lower than in First World countries. The populations of First World countries cannot pay their mortgages, car payments, student loans, medical care, and grocery bills with the wages of Third World countries.
When First World wages drop, mortgage, car, credit card, and student loan payments do not drop. Americans cannot live on Chinese, Indian, and Indonesian wages. Once the technology and know-how is transferred, the low wage country has the advantage in the absence of tariff protection.
For America to revive, our economy would have to be walled off with high tariffs, and subsidies would have to be provided in order to recreate US industry and manufacturing. But many corporations now produce offshore, and America is broke. The government has been $1 trillion dollars in the hole each year for the last 5 years.
Jobs offshoring diminished the US tax base. When a job is sent abroad, so is that job’s contribution to US GDP and tax base. When millions of jobs are sent abroad, US GDP and tax base cannot support government spending levels. To the extent that there are any replacement jobs, they are in lowly paid domestic services, such as waitresses, bartenders, retail clerks, and hospital orderlies. These jobs do not provide a tax base or consumer spending power comparable to manufacturing jobs and tradable professional services such as software engineering and information technology.
Republicans and increasingly Democrats, as both parties are dependent on the same sources of campaign contributions, blame “entitlements.” By entitlements they mean welfare.
In fact, entitlements consist of Social Security and Medicare. Entitlements are funded by the payroll tax, approximately 15% of payroll. The fact that a person pays the payroll tax all his working life is why the person is entitled to Social Security and Medicare if they live to retirement age. Welfare, such as food stamps and housing subsidies, are a small part of the federal budget and are not entitlements.
Ever since President Reagan was betrayed three decades ago by Alan Greenspan and David Stockman, both of whom sold out to Wall Street and raised the Social Security payroll tax above what was needed to pay Social Security benefits in order to protect Wall Street’s stock and bond portfolios from exaggerated deficit fears, Social Security payroll tax revenues have exceeded Social Security payments. As of today, Social Security revenues exceed payments to beneficiaries by an accumulated $2 trillion. The money was used by the federal government to pay for its wars and other spending programs. The Social Security Trust Fund holds non-marketable IOUs from the Treasury. These IOUs can only be made good from an excess of tax revenues over expenditures or by the Treasury selling $2 trillion in bonds, notes, and bills and paying off its IOUs to the Social Security Trust Fund. This is not going to happen.
The Federal Reserve could not care less about the US population. The Fed was established for the purpose of protecting and aiding banks. Currently, the Fed, as if America were a Banana Republic which America appears to be becoming, is printing one thousand billion dollars per year in order to support the banks and to finance the federal deficit.
This is bad news for Americans, as it means that their fiat money is being created at a far greater rate than the demand for the dollar. The implication for our future is a drop in the dollar’s value. As there are no jobs, a drop in the dollar’s value means high inflation on top of unemployment and double the misery of the Great Depression.
As bad as this is, it is minor compared to the destruction of the planet’s environment. Online information shows that the Gulf of Mexico ecosystem is in crisis after the BP spill and use of Corexit, a dispersant used to hide, not clean up, the spilled oil. http://www.opednews.com/articles/Gulf-ecosystem-in-crisis-a-by-Dahr-Jamail-Corporation-BP_Ecosystems_Gulf-Oil-Spill-Disaster_Gulf-Shrimping-Industry-131020-15.html
The Fukushima catastrophe has hardly begun. Yet already the radioactive water pouring into the Pacific Ocean has made fish dangerous to eat unless a person is willing to accept a higher risk of cancer.
Fukushima has the potential of making Japan uninhabitable and of polluting the air, water, and soil of the US with radioactivity. Yet the crisis is seldom mentioned in the US media. In Japan the government just passed a law that could be used to imprison Japanese journalists who report truthfully on the dire situation.
Take the time to familiarize yourself with the online information about Fukushima.. According to the presstitute media, Americans face threats from Iran and Syria and from whistleblowers such as Edward Snowden. The real threats are simply not in the news.
If you search Fukushima, you will find information that the presstitute media hides from you. See for example, http://www.globalresearch.ca/28-signs-that-the-west-coast-is-being-absolutely-fried-with-nuclear-radiation-from-fukushima/5355280
There are a number of other threats to the environment on which our lives depend. One is the effort to extract more productivity from the soil by use of GMOs. Monsanto has altered the genes of several crops so that the crops can be sprayed with RoundUp to eliminate weeds. The results have been to deplete the soil of nutrients, to destroy the micro-biology of the soil so that new plant diseases and funguses are activated, and to produce superweeds that require heavier doses of the glyphosate in RoundUp. The heavier dose of RoundUp worsens the aforementioned problems. US agricultural soil is losing its potency.
Now we come to chemtrails, branded another “conspiracy theory.” http://en.wikipedia.org/wiki/Chemtrail_conspiracy_theory However, the US government’s efforts to geo-engineer weather as a military weapon and as a preventative of global warming appear to be real. The DARPA and HAARP programs are well known and are discussed publicly by scientists. See, for example, http://news.sciencemag.org/2009/03/darpa-explore-geoengineering Search Chemtrails, and you will find much information that is kept from you. See, for example, http://www.globalresearch.ca/chemtrails-a-planetary-catastrophe-created-by-geo-engineering/5355299 and http://www.geoengineeringwatch.org
Some describe chemtrails as a plot by the New World Order, the Rothchilds, the Bilderbergers, or the Masons, to wipe out the “useless eaters.” Given the amount of evil that exists in the world, these conspiracy theories might not be as farfetched as they sound.
However, I do not know that. What does seem to be possibly true is that the scientific experiments to modify and control weather are having adverse real world consequences. The claim that aluminum is being sprayed into the atmosphere and when it comes to earth is destroying the ability of soil to be productive might not be imaginary. Those concerned about chemtrails say that weather control experiments have deprived the western United States of rainfall, while sending the rain to the east where there have been hurricane level deluges and floods.
In the West, sparse rainfall and lightning storms without rain are resulting in forests drying out and burning down. Deforestation adversely affects the environment in many ways, including the process of photosynthesis by which trees convert carbon dioxide into oxygen. The massive loss of forests means more carbon dioxide and less oxygen. Watershed and species habitat are lost, and spreading aridity further depletes ground and surface water. If these results are the consequences of weather modification experiments, the experiments should be stopped.
In North Georgia where I spend some summers, during 2013 it rained for 60 consecutive days, not all day, but every day, and some days the rainfall was 12 inches–hurricane level–and roads were washed out. I received last summer 4 automated telephone warnings from local counties not to drive and not to attempt to drive through accumulations of water on the highways.
One consequence of the excess of water in the East is that this year there are no acorns in North Georgia. Zilch, zero, nada. Nothing. There is no food for the deer, the turkeys, the bear, the rodents. Starving deer will strip bark from the trees. Bears will be unable to hibernate or will be able only to partially hibernate, forced to seek food from garbage. Black bears are already invading homes in search of food.
Unusual drought in the West and unusual flood in the East could be coincidental or they could be consequences of weather modification experiments.
The US, along with most of the world, already had a water problem prior to possible disruptions of rainfall by geo-engineering. In his book, Elixir, Brian Fagan tells the story of humankind’s mostly unsuccessful struggle with water. Both groundwater and surface water are vanishing. The water needs of large cities, such as Los Angeles and Phoenix, and the irrigation farming that depends on the Ogallala aquifer are unsustainable. Fagan reminds us that “the world’s supply of freshwater is finite,” just like the rest of nature’s resources. Avoiding cataclysm requires long-range thinking, but humanity is focused on immediate needs. Long-range thinking is limited to finding another water source to deplete. Cities and agriculture have turned eyes to the Great Lakes.
Los Angeles exists because the city was able to steal water from hundreds of miles away. The city drained Owens Lake, leaving a huge salt flat in its place, drained the Owens Valley aquifer, and diverted the Owens River to LA via aqueduct. Farming and ranching in the Owens Valley collapsed. Today LA takes water from the Colorado River, which originates in Wyoming and Colorado, and from Lake Perris 440 miles away.
Water depletion is not just an American problem. Fagan reports that “underground aquifers in many places are shrinking so rapidly that NASA satellites are detecting changes in the earth’s gravity.”
If the government is experimenting with weather engineering, scientists are playing God when they have no idea of the consequences. It is a tendency of scientists to become absorbed by the ability to experiment and to ignore unintended consequences.
Readers have asked me to write about Fukushima and chemtrails because they trust me to tell them the truth. The problem is that I am not qualified to write about these matters with anything approaching the same confidence that I bring to economic, war and police state matters.
The only advice I can give is that when you hear the presstitute media smear a concern or explanation as “conspiracy theory,” have a closer look. The divergence between what is happening and what you are told is so vast that it pays to be suspicious, cynical even, of what “your” government and “your” presstitute media tell you. The chances are high that it is a lie.
Reprinted with permission from www.paulcraigroberts.org
About Dr. Paul Craig Roberts
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
By Ron Paul
New Fed Boss Same as the Old Boss
The news that Janet Yellen was nominated to become the next Chairman of the Board of Governors of the Federal Reserve System was greeted with joy by financial markets and the financial press. Wall Street saw Yellen’s nomination as a harbinger of continued easy money. Contrast this with the hand-wringing that took place when Larry Summers’ name was still in the running. Pundits worried that Summers would be too cautious, too hawkish on inflation, or too close to big banks.
The reality is that there wouldn’t have been a dime’s worth of difference between Yellen’s and Summers’ monetary policy. No matter who is at the top, the conduct of monetary policy will be largely unchanged: large-scale money printing to bail out big banks. There may be some fiddling around the edges, but any monetary policy changes will be in style only, not in substance.
Yellen, like Bernanke, Summers, and everyone else within the Fed’s orbit, believes in Keynesian economics. To economists of Yellen’s persuasion, the solution to recession is to stimulate spending by creating more money. Wall Street need not worry about tapering of the Fed’s massive program of quantitative easing under Yellen’s reign. If anything, the Fed’s trillion dollars of yearly money creation may even increase.
What is obvious to most people not captured by the system is that the Fed’s loose monetary policy was the root cause of the current financial crisis. Just like the Great Depression, the stagflation of the 1970s, and every other recession of the past century, the current crisis resulted from the creation of money and credit by the Federal Reserve, which led to unsustainable economic booms.
Rather than allowing the malinvestments and bad debts caused by its money creation to liquidate, the Fed continually tries to prop them up. It pumps more and more money into the system, piling debt on top of debt on top of debt. Yellen will continue along those lines, and she might even end up being Ben Bernanke on steroids.
To Yellen, the booms and bust of the business cycle are random, unforeseen events that take place just because. The possibility that the Fed itself could be responsible for the booms and busts of the business cycle would never enter her head. Nor would such thoughts cross the minds of the hundreds of economists employed by the Fed. They will continue to think the same way they have for decades, interpreting economic data and market performance through the same distorted Keynesian lens, and advocating for the same flawed policies over and over.
As a result, the American people will continue to suffer decreases in the purchasing power of the dollar and a diminished standard of living. The phony recovery we find ourselves in is only due to the Fed’s easy money policies. But the Fed cannot continue to purchase trillions of dollars of assets forever. Quantitative easing must end sometime, and at that point the economy will face the prospect of rising interest rates, mountains of bad debt and malinvested resources, and a Federal Reserve which holds several trillion dollars of worthless bonds.
The future of the US economy with Chairman Yellen at the helm is grim indeed, which provides all the more reason to end our system of central economic planning by getting rid of the Federal Reserve entirely. Ripping off the bandage may hurt some in the short run, but in the long term everyone will be better off. Anyway, most of this pain will be borne by the politicians, big banks, and other special interests who profit from the current system. Ending this current system of crony capitalism and moving to sound money and free markets is the only way to return to economic prosperity and a vibrant middle class.
Also adding a note by RPI Staff
Dr. Paul also publishes a monthly “Freedom Report” through his FREE Foundation. This printed report consists mostly of Dr. Paul’s collected weekly columns with quotes and other items of interest as well. You can have a look at the online version of the October Freedom Report here. Also, if you would like to have Dr. Paul’s weekly column e-mailed to you directly each week, you can sign up here.
It’s official: Janet Yellen to be named Fed chair on Wednesday
It was Yellen. Then Summers. Then Yellen. The race has been run and guess what? The Keynesians win!
Of course the Keynesians always “win” when it comes to the Fed chair. After all one can’t be Pope if one isn’t Catholic.
Congratulations to Ms. Yellen.
Ben it’s time to land the helicopter and hand the yoke over. It’s Ms. Yellen’s turn to drop $100 bills. (On Wall Street.)
“Markets are giving Yellen the thumbs up, counting on quantitative easing being maintained at full pace until further notice,” Sean Callow, senior currency strategist at Westpac in Sydney, told Reuters after the announcement. “It’s a notable reaction given Yellen’s nomination was so widely expected and that it comes at a time markets are already assuming the Federal Open Market Committee will not seriously consider a policy change at the October meeting given the fiscal standoff.”
Image credit: http://www.againstcronycapitalism.org