Federal Reserve: Everything is fine. Just like in 2008

Simon Black

It’s nothing but rosy news coming from the Federal Reserve.

Recently the Fed released this reassuring statement:

“The banking system remains well-capitalized under even the harshest of these downside scenarios. . .”

In other words, everything is just fine.

Yet at the same time, the Fed also announced that it would impose restrictions on bank dividends and stock buybacks, essentially preventing banks from passing along their profits to shareholders.

If those two statements strike you as completely contradictory, you’re right.

If the Fed isn’t worried in the slightest because the banking system remains strong ‘even under the harshest downside scenarios’, then why restrict what banks can/cannot do with their private profits?

This forked tongue communication style is becoming somewhat of a trend.

Back in March, the head of the FDIC released a video asking Americans to NOT withdraw their money from the banks.

“Your money is safe at the banks,” she said, with soft piano music in the background. “The last thing you should be doing is pulling your money out of the banks thinking it’s going to be safer somewhere else.”

This reminds me of back when Ben Bernanke repeatedly told the public, and Congress, that housing prices would continue rise, and that a subprime mortgage meltdown would not affect the broader economy.

Or in July 2007 when Bernanke said: “Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008.”

And even in early 2008 when Bernanke said, “The Federal Reserve is not currently forecasting a recession,” and that the federal housing agencies Fannie Mae and Freddie Mac “would make it through the storm.”

Within months, Fannie Mae and Freddie Mac had collapsed, the economy went into the harshest recession since the Great Depression, and the entire financial system was on the brink of failure.

Bear in mind, this was the Chairman of the Federal Reserve telling people that everything was fine.

Now the Fed (and FDIC) are once again telling us that everything is fine.

Yes, everything is fine despite the fact that large sections of the economy have shut down, tens of millions of people are unemployed, countless businesses have failed and will never re-open, major cities across the United States have experienced extreme social unrest and continued economic disruption, and now a second wave of the pandemic is upon us.

But other than that, everything is just fine.

And, definitely, DEFINITELY, don’t worry about the banks. Don’t even think about the banks. Nevermind that some of the largest banks in the world failed in 2008. This time is different.

In fairness, they might be right. But who really knows?

This is one of the [many] big problems in banking: there’s practically zero transparency.

As an example, I was looking at Bank of America’s financial statements yesterday; their balance sheet shows $983 billion in loans.

And that’s about all the detail you get; even doing a deep dive into the footnotes and annual report shows little additional information.

What are the loan terms? What’s the duration risk? How valuable and marketable is the collateral? What legal security was taken over the collateral? Is there even any collateral at all?

Plus there’s extremely limited information on the bank’s exposure to riskier derivatives and collateralized loan obligations (CLOs– which are the toxic securities du jour).

In fact there’s far more information about Bank of America’s diversity and inclusion programs than disclosures about potential financial threats.

Again, it’s possible that there’s nothing to see here and everything is just fine. But given the lack of transparency, it’s impossible to independently verify.

The Fed and FDIC insist everything is OK. But the Fed and FDIC (along with the entire financial system) insisted that everything was OK back in 2008 right before everything collapsed.

Why should we be so trusting again this time in light of such obvious risks?

To be clear, I’m not suggesting that anyone should pull their money out of the banks.

But there are a few important things to consider:

You work hard for your money. So the decision of which bank to trust with your hard-earned savings should be deliberate.

Most people choose where to bank based on irrelevant factors, like location– ‘There’s a branch near my kid’s karate school, so I’ll deposit my funds there.’

There are far more important factors. Do they treat you well, or like a criminal suspect? Do they treat your money well, or do they gamble it away on some ridiculous investment fad?

Are they transparent? Are they conservative, responsible custodians of my money?

Those are the things that matter in a bank.

Here’s an easy litmus test: if your bank routinely sends you junk mail offering to loan money at super attractive terms, that’s a good indication you DON’T want to be a depositor there.

No money down? Teaser interest rates? No personal guarantee?

To me, those are reasons to take my money and run. Because when a bank makes it easy for people to borrow money, they’re taking on unnecessary risks. And they’re doing it with MY money. And YOUR money. Not theirs.

I prefer to deposit my savings at a bank that scrutinizes every prospective borrower and has incredibly stingy loan terms. Because at least I know they’re being very conservative with my money.

Second, you might want to also consider gold.

Gold was money for thousands of years. And the whole time, it held its value.

Even US dollars were redeemable for most of US history.

But in 1971, Nixon formally ended the gold standard and divorced the dollar from gold.

And go figure, the 1970s was a dismal decade of stagflation, where the value of the dollar plummeted, wages stagnated, and unemployment soared. What a surprise!

But gold did quite well, and silver did even better.

Maybe 5,000 years of history is wrong, and humanity suddenly got smarter in 1971.

Or perhaps gold is still the safest haven we have available, despite what the central banks would have us believe.

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1 Comment on Federal Reserve: Everything is fine. Just like in 2008

  1. THE FEDERAL RESERVE FOR DUMMIES
     
    “What difference does an increase in the National Debt make? We owe it to ourselves.” virtually every congress-critter has declared. Such a paraphrased program gives the federal government/ congress purchasing power not previously available—to buy votes from home. Unfortunately, the inflation created dilutes the purchasing power and value of assets owned by individuals. The system also conceals the immense transfer of value to bankers, which has justified the intense subterfuge and arm-twisting necessary for the Fed’s creation—that this paper exposes. The inherent destructive forces, evidenced by historic Rothschild banking1 and mathematical analysis, are also identified.

    The medieval Rothschild banks established a line of credit for the King provided he pledged collateral with a written promise to pay gold with interest to the bearer at a time in the future. The book-entry Rothschild credit was used to satisfy obligations incurred by the king. The credit continued to be circulated in the kingdom between merchants. The bankers sold the king’s promise to investors for hoarded gold. The promise (security) was renewed by the bank on its maturing date and became perpetually rolled-over. 2
     
    VOILA !!! The king made the suppliers of services happy with Rothschild credit; the bankers had the gold from investors; the investors gained interest on their assets and a promise the king would eventually return their gold—which would never happen.3 Everything went smoothly as long as the bankers could sell the promise and the investors, or merchants, did not demand the gold.4 The king would pay the interest with more credit from the bank so the credit cost nothing. The schemes stole the wealth from the people with its book-entry fiat money5 until the people brought a catastrophic climax.6

    The Federal Reserve system does the same thing with the U.S. government’s deficit spending. The banking wizard is hiding behind Frank Baum’s curtain of the government image Federal Reserve marquee7 as obscurant to any public inquiry.8 The Federal Reserve Bank of New York will grant credit (not “create money”) in an account of the U.S. government in an amount that the government will pledge. 9 The government will expend the book-entry-credit account (deficit spending) to pay for goods and services consumed by the government. The suppliers are content. Evidence that the supplier has received a credit voucher is obvious. The heading of the currency given to the supplier by a local commercial bank is Federal Reserve Note; i.e., a debt obligation of the Federal Reserve. Historically, it was identified to be redeemable for gold, silver, or lawful money. It is now identified as a “tender” (substitute) required by law to be accepted for an imprinted number of dollars. What you have is what you get. [It is touted to the public as a loan.] 10

    To sell the promise from the government at the highest price, the Federal Reserve (as fiscal agent for the government) will hold an auction but will imply it is an auction by the government.11 Acceptance of bids, determining the interest rate, and the amount of deficit spending permitted is controlled by the BOG.12 Government regulations establish the funds from the auctions are controlled exclusively by the FRBNY; i.e., a franchisee of the BOG13. These accounts of government money have never been audited, despite misleading GAO statements.14

    The roll-over of approximately $12 trillion debt from prior years (publicly held maturing) is annually auctioned and disbursed by the FRBNY. The approximate $1 trillion auctioned for deficit spending is evidenced by TreasuryDirect as “new cash.” 15 [Currently new cash can be 100% to a negative (input) of the issue.] Since all values are determined by the Fed, they must be given to TD.

    The difference in handling of the two accounts is the supreme camouflage. Funds for roll-over securities are credited by the FRBNY to a government account. The FRBNY then pays the Primary Dealers among others (from the government account) for their task in collecting the maturing securities from the public. There is no increase in the National Debt nor is there any inflation as a result from these transactions.

    If the funds from deficit spending securities (new cash) were to be used in redeeming Treasury securities in the market (i.e., paid by the FRBNY for government expenses), it would eliminate any increase in the National Debt. It would, in effect, buy back the securities that created the debt. It would also eliminate any increase in money in circulation (inflation). That clearly does not occur. Request for documentation from TreasuryDirect as to the destination of the funds are ignored.

    WHERE DO FUNDS FROM THE AUCTIONS OF
    DEFICIT SPENDING SECURITIES GO ??

    The Primary Dealers receive the bulk of auction funds for their task in redeeming maturing securities. If the Primary Dealers include shareholders of a privately held incorporated Board of Governors of the Federal Reserve, they would not have to reveal corporate records.16 The commingling of new cash funds could be completely hidden from view. 17 The deficit spending amount 18 would be clear profit for the owners of the BOG.19 No other destination of the funds appears viable.

    The statutory charter of the Federal Reserve stipulates profit of the operation belongs to the government. 20 No consideration appears to be received by the government for the funds. Consideration for commercial bank loans involve a risk; such a condition does not appear applicable to the instant action.

    Each annual trillion dollars of deficit spending transfers $3 billion DAILY for an entire year to the unidentified owners of the Board of Governors. The recent trillion dollars of deficit spending in one month transfers $34 billion daily for four weeks. The source of wealth inequality becomes obvious. If the securities can not be auctioned at an acceptable price, they accumulate on the Fed’s balance sheet. They would then appear to become a claim by the Fed against the taxpayers.

    An abundance of such covert funds would go a long way to advance David Rockefeller’s utopian world government identified in his autobiography MEMOIRS. The project was mentioned decades earlier by Carroll Quigley in TRAGEDY AND HOPE. Funds from Wall Street could be used to dominate foreign nations as documented by John Perkins in CONFESSIONS OF ECONOMIC HIT MAN and William Blum in KILLING HOPE; CIA AND U.S. MILITARY INTERVENTIONS. Unused funds could be laundered in the stock or bond market. 21

    The proposed Goldman Sach’s government budget (whoops, Trump’s budget) includes huge deficit spending increases (increased military spending with cuts in social programs) with unrealistic increases in national productive/tax base.22 This is the same scheme Wall Street and the CIA have used to bankrupt other nations for four decades. 23 The psychopathic Wall Street warmongers demand a humongous deficit busting military expenditure, but this statement may reverse cause and effect. 24 Douglas Valentine identifies chaos by U.S. elements in foreign nations is being duplicated in the 50 states.25 Whether this involves the development of the United Nations, NATO, drugs, or a virus26 depends on the observer.

    Bankruptcy of the Nation is inherent. The FR Ponzi scheme creates an expanding National Debt with no possible way to pay it off. The principle of a ‘loan’ is created by deficit spending. [Notice that the ‘loan’ (sic, credit that is never negated) is from the Federal Reserve system but the taxpayers have become responsible for it.] The required interest to pay it off is never created. Only more debt, with the new principal being used to pay the prior interest, delays the Ponzi’s collapse. The growth required to perpetuate such a scheme, of interest upon interest upon interest, is exponential as evidenced in any graph of the National Debt. A contract that cannot be culminated is an act of fraud and is void from its inception.

    Academic centers, MSM, and publishers fear retribution for exposure.

    Unrelated use of the Fed’s new Special Purpose Vehicles (SPV) program to sell Wall Street’s trash to the Treasury Department (read Stephen Mnuchin of Goldman Sachs) at inflated prices to procrastinate bankruptcy of Wall Street banks will additionally balloon the national debt but will be used to avoid bankruptcy of Wall Street banks and their cronies. 27 Blackrock, allegedly owned by insiders, is central to the scam. 28 Unrelenting access to government funds, while the tax base is destroyed by compelled national unemployment and corporate bankruptcies by a created virus29, is a textbook recipe for insolvency.

    If the scheme is not altered, Wall Street internal memos identify the “ultimate goal” is to collect on the $24 trillion National Debt. 30 During national bankruptcy, the FRBNY will handle redemption of the PD’s tendered securities they have purchased in the market for pennies. They will demand face value from the U.S. Treasury; i.e., a financial rape of the nation. They are all one clan. Hello Greece and a U.S. troika controlled by financial entities.31

    It appears as if Larry Kudlow, Director of the United States National Economic Council, has conceded control of the Treasury has passed to Wall Street to complete the coup.32

    National bankruptcy would duplicate the Greek chaos within the United States.33 The financiers’ objective in Greece 34 is not to exploit, but is to destroy the nation. 35 Indeed, national sovereignty has been acquiesced by Greece to the Troika (financiers) as the terminal end of Goldman Sach’s “shitty” three billion Euro debt. 36

    Get ready to kiss your 401(k), your government benefits, your pension, and your bank accounts goodbye, with strikes prohibited, health care costs escalated, perpetual war, mass layoffs (including government personnel), and economic chaos—among other dire occurrences. The economic chaos initiated by the virus, which has served to destroy the tax base and make the budget unsustainable, may be only the prelude.

    The U.S. has four options:
    The entire situation can be ignored with the public meekly submitting to Wall Street’s collection of the fraudulent $24 trillion National Debt and accept the fate of Greece [Greece has surrendered national sovereignty control to Goldman Sachs/Troika. Approval by Troika (financiers) is required for all government actions.] The New World Order will become established.
    or
    They can assert public pressure on congress-critters to audit relevant accounts and investigate Wall Street. The GAO has authority to audit the handling of government funds by any entity. 37 It has made at least two reviews of the FRBNY’s handling of funds [but not audits] from auctions of Treasury securities. The FRBNY has exclusive handing of such funds. Ref. 31 CFR 375.3. All that is required for the GAO to review the handling of government funds is a request by a Congressional committee. Unfortunately, it is rumored that votes can be purchased as cheaply as $50,000.
    or
    Citizens can use the FOIA38 to demand relevant official Fed documents for analysis as affirmed by the Second Circuit Federal appellate court.39
    or
    Pitch—no, no—salad forks. No violent action advocated.

    It all depends on how submissive the American people have become.

    This essay is not copyrighted. Feel free to distribute.

    Footnotes: [available at http://stateofthenation.co/?p=20475 or by email if deleted by form]

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