The Senate passed a bill calling for a one time audit of the Federal Reserve to scrutinize the $2 trillion in emergency loans that the Fed provided to some of the nation’s biggest banks.
The bill was a very watered down version of bill that passed in the House, which would have enabled the Government Accountability Office (GAO) to audit every item on the Fed’s balance sheet, including all credit facilities and all securities purchase programs. An amendment to expand the Senate bill to match the House's failed to pass. Still, this is a good first step as it would enable the GAO to audit at least some Fed actions for the first time in history.
The government's bailout of Wall Street points to a huge problems in our financial system and even larger problems with the control that Wall Street has over politicians in both parties.
Conceptually, Wall Street exists to support the needs of other businesses. When businesses need capital to start up or expand, they can get the money in one of three ways: A.) from their own savings, B.) through borrowing (debt), or C.) by selling a portion of the business to others (equity).
What does this have to do with derivatives, credit default swaps, or even the whole concept of "selling the market short"??? The short answer is nothing whatsoever. All of these things are nothing more than gambling. Goldman Sachs and their ilk have turned our financial system into Las Vegas. Like Vegas, the system is rigged so that the House wins 98.5% of the time.
The one difference between Las Vegas and Wall Street is when a casino in Vegas goes belly up, Washington doesn't rush in with our money to bail them out.
Unfortunately, the situation is about to get even worse. The U.S. government is taking part in the $1 TRILLION Greek bailout both through the IMF and also through the Federal Reserve, which is shipping dollars to Europe to help stabilize the Euro. Of course the money won't be used to put the country on the right path. Instead, it will be given to lazy union members who'd rather sit arounding sipping Ouzo, while bad mouthing America, than work.
I've been to Greece a couple of times. It's a beautiful country that has been completely destroyed up by decades of political corruption.
Why is it our responsibility to pay for their mistakes? Oh, because the country might "melt down". GOOD. The country SHOULD melt down because maybe then the politicians will be forced to confront their problems and eliminate the costly welfare state that has been sucking the life blood out of their country.
We have our own problems too. They are on a much grander scale than Greece's.
17% of our workforce is unemployed or under employed. Our official debt has reached $13 trillion, which is a whopping 90% of GDP -- almost as bad as Greece's. Unfunded entitlements in Social Security, Medicare, Obamacare, and government pension plans top $130 trillion -- more than $438,000 per person. Government spending at all levels is approaching 40% of GDP, which is not far behind "socialist" France at 44%.
With all of these problems confronting us, how dare the politicians hand our money to Greece. How dare they?
Greece and the rest of the PIGS (Portugal, Ireland, Greece, and Spain) caused their own problems. It's time for them to deal with it.
We created our own problems too. It's time for us to boot the SOBs out of office who are making things worse.
Showing posts with label Federal Reserve. Show all posts
Showing posts with label Federal Reserve. Show all posts
Wednesday, May 12, 2010
Tuesday, November 24, 2009
Ron Paul bill to Audit Fed wins in House Committe
Well, here is some good news for once. Ron Paul's bill to audit the Federal Reserve Bank passed the House Financial Services committee by a vote of 43-26. The bill has 309 co-sponsors, so it should sail through the House.
The the Federal Reserve and the rest of the financial establishment are up in arms, panicked with the thought of us rubes on main street finding out what goes on behind their closed doors.
So, at the last minute, Barney Frank tried to sabotage the bill by proposing an amendment that would have essentially gutted the bill.
The bill still has to pass the House, without being gutted by Barney Frank, Mel Watt, and the rest of the establishment. Then it has to pass the Senate. Then the two bills needs to be reconciled and pass the House and Senate again.
We're still along way from knowing what goes on behind the closed doors of the fed. But it's a good start. Congratulations Dr. Paul!
The the Federal Reserve and the rest of the financial establishment are up in arms, panicked with the thought of us rubes on main street finding out what goes on behind their closed doors.
So, at the last minute, Barney Frank tried to sabotage the bill by proposing an amendment that would have essentially gutted the bill.
The bill still has to pass the House, without being gutted by Barney Frank, Mel Watt, and the rest of the establishment. Then it has to pass the Senate. Then the two bills needs to be reconciled and pass the House and Senate again.
We're still along way from knowing what goes on behind the closed doors of the fed. But it's a good start. Congratulations Dr. Paul!
Thursday, November 13, 2008
Bail THIS Out
The comedy show in the District of Columbia gets funnier every day. Yesterday, Treasury Secretary Paulson announced that he won’t use the $700 BILLION dollars to buy troubled assets after all. Instead, he will use all of the money to "invest" in companies. Paulson admitted that he knew that buying troubled assets wasn’t the right solution to the problem while the bill was being debated in Congress.
Regardless, this is going to cost us a lot more than $700 billion. According to Forbes.com, the U.S. government has already incurred a whopping $5 TRILLION of obligations in the various schemes by the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation to shore up the financial system.
The list of companies standing in line to get a taxpayer “investment” is getting longer every day. AIG and GE Capital are going after their second round of hand outs. American Express and the grossly mismanaged U.S. Auto Industry are next.
Guess what is going to happen to the corporate executives who got us into the mess? Bloomberg reports that they are going to get big, fat Christmas bonuses. For example, Goldman Sachs has set aside $6.8 billion for bonuses while Morgan Stanley has allocated $6.4 billion.
To top it off, the Democrats are planning some nice surprises for us next year. Congress is holding hearings on confiscating our 401Ks and turning them over to the Social Security Administration. Of course, many of us are going to get stuck with a big, fat tax increase as well.
It just gets better all of the time…
Regardless, this is going to cost us a lot more than $700 billion. According to Forbes.com, the U.S. government has already incurred a whopping $5 TRILLION of obligations in the various schemes by the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation to shore up the financial system.
The list of companies standing in line to get a taxpayer “investment” is getting longer every day. AIG and GE Capital are going after their second round of hand outs. American Express and the grossly mismanaged U.S. Auto Industry are next.
Guess what is going to happen to the corporate executives who got us into the mess? Bloomberg reports that they are going to get big, fat Christmas bonuses. For example, Goldman Sachs has set aside $6.8 billion for bonuses while Morgan Stanley has allocated $6.4 billion.
To top it off, the Democrats are planning some nice surprises for us next year. Congress is holding hearings on confiscating our 401Ks and turning them over to the Social Security Administration. Of course, many of us are going to get stuck with a big, fat tax increase as well.
It just gets better all of the time…
Tuesday, July 15, 2008
Bush Inflation: So where is your 9% raise???
The Labor Department reported that wholesale prices rose 9.2% in the last 12 months – the worst inflation in 27 years. Did you get a 9% raise this year to keep pace?
Meanwhile, U.S. banking regulators seized mortgage lender IndyMac on Friday and closed the doors after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history. This is the fifth bank that’s failed this year. There are at least 150 additional banks that are at risk of failing.
The Federal Reserve also announced steps to create more inflation to shore up failing mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as their losses threatened their financial survival. Freddie Mac owed $5.2 billion more than its assets were worth, making it insolvent under fair value accounting rules. One estimate shows that bailing them out will cost each of us $16,000. Of course, the government won’t directly charge you for this. They’ll indirectly charge you by further inflating the money supply. If you think 9% inflation is bad, just wait until this happens.
The dollar fell to a record low against the Euro.
The Bank failures and inflation are the result of the same failed policies of the Federal Reserve System. Over the last couple decades, the Federal Reserve board kept interest rates artificially low. This lead to irresponsible behavior on the part of lenders and borrowers alike. Now the bill is coming due. We are going to pay for it, one way or another.
So, what’s the answer?
Freddie Mac and Fannie Mae need to be allowed to fail and the market needs to deal with the correction. Both companies were created by the government. Fannie Mae was created by Franklin Roosevelt in 1938. It was privatized in 1968. The government created Freddie Mac at the same time to provide some competition to Fannie Mae. U.S. taxpayers shouldn't be punished to bailout these government created companies.
The Federal Reserve System also needs to be replaced. How do we replace it? The late Nobel Laureate Milton Friedman advocated replacing the Fed with a computer that would be increase the money supply by 4% a year. Ron Paul advocates replacing the Fed with a gold standard, which is constitutionally mandated. Both of these approaches would work a lot better than the arbitrary system we have now.
However, long-term the right answer is to get the government completely out of the money business altogether by moving to a system of competing currencies, which was advocated by another great Nobel Laureate – Friedrich Hayek.
Regardless of where we go from here, it should be clear to everyone that the Federal Reserve System has been a miserable failure and needs to be changed. Don’t hold your breath.
Meanwhile, U.S. banking regulators seized mortgage lender IndyMac on Friday and closed the doors after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history. This is the fifth bank that’s failed this year. There are at least 150 additional banks that are at risk of failing.
The Federal Reserve also announced steps to create more inflation to shore up failing mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as their losses threatened their financial survival. Freddie Mac owed $5.2 billion more than its assets were worth, making it insolvent under fair value accounting rules. One estimate shows that bailing them out will cost each of us $16,000. Of course, the government won’t directly charge you for this. They’ll indirectly charge you by further inflating the money supply. If you think 9% inflation is bad, just wait until this happens.
The dollar fell to a record low against the Euro.
The Bank failures and inflation are the result of the same failed policies of the Federal Reserve System. Over the last couple decades, the Federal Reserve board kept interest rates artificially low. This lead to irresponsible behavior on the part of lenders and borrowers alike. Now the bill is coming due. We are going to pay for it, one way or another.
So, what’s the answer?
Freddie Mac and Fannie Mae need to be allowed to fail and the market needs to deal with the correction. Both companies were created by the government. Fannie Mae was created by Franklin Roosevelt in 1938. It was privatized in 1968. The government created Freddie Mac at the same time to provide some competition to Fannie Mae. U.S. taxpayers shouldn't be punished to bailout these government created companies.
The Federal Reserve System also needs to be replaced. How do we replace it? The late Nobel Laureate Milton Friedman advocated replacing the Fed with a computer that would be increase the money supply by 4% a year. Ron Paul advocates replacing the Fed with a gold standard, which is constitutionally mandated. Both of these approaches would work a lot better than the arbitrary system we have now.
However, long-term the right answer is to get the government completely out of the money business altogether by moving to a system of competing currencies, which was advocated by another great Nobel Laureate – Friedrich Hayek.
Regardless of where we go from here, it should be clear to everyone that the Federal Reserve System has been a miserable failure and needs to be changed. Don’t hold your breath.
Thursday, December 27, 2007
Dissing the Fed
One of the most interesting things about the current presidential campaign is the sudden interest in the Federal Reserve Bank. When was the last time monetary policy got this much public attention? During Carter's 21% inflation? When Nixon severed the last link between the dollar and gold? We might have to go all the way back to when Roosevelt confiscated gold in 1933.
Of course, all of the chatter is coming from one candidate --Ron Paul.
His most intriguing notion is that the Federal Reserve Bank needs some competition. At first, this sounds like a rather impractical idea. However, I can safely say that the technology needed to make this a reality is already in widespread use today.
Money serves two purposes in society. First, it's a "medium of exchange", which means that it facilitates buying and selling. Second, it's a "store of value", which means that it should retain its purchasing power into the future.
The dollar is a widely accepted medium of exchange in the U.S. because the government mandates it as such. However, the dollar has not been a particularly good store of value over the last 100 years or so. There are a lot of ways to compare the value of a dollar between the creation of the Federal Reserve in 1913 and today. All of them show that the dollar is now only worth between 1 penny and 6 cents. It's not a good track record.
Fortunately for us, the dollar has lost its value gradually enough as to not cause major social unrest. Other societies haven't been so fortunate. In Germany, government monetary shenanigans after WWI caused a hyperinflation that wiped out the middle class and set the stage for Hitler.
In the U.S., you both save and buy things in dollars. However, it's actually quite possible to save in one currency and buy in another. In fact, it's done all of the time. I've been in over 25 countries. In all of them, I can use the debit card from my American bank to withdraw money from an ATM or buy things in the local currency. The ATM network takes care of figuring how many dollars to deduct from my bank account given the amount of local money I'm spending.
It's also possible to have a system where you can save in multiple currencies. Swiss banks allow you to have accounts denominated in any number of currencies, including U.S. dollars, Euros, and Swiss Francs.
So, there isn’t any technical reason that you couldn't save in whatever currency you want and buy things that are priced in another currency. The only thing that prevents you from doing this today are government laws that exist to protect the monopoly of the Federal Reserve Bank.
The same technology that already exists to support multiple coexisting national currencies could also support multiple coexisting privately issued currencies. As is the case with anything else, competition in currencies could help create a more robust and sound monetary system. Currencies that lose value over time would lose customers to better currencies and wouldn't be widely accepted as either a store of value or medium of exchange.
What about cash? There are times when you want your purchases to be anonymous. No problem. There are many examples of cards that have the characteristics of cash on the market today. Pre-paid cell phone cards and Starbucks cards are just two examples. There isn't any reason why the industry couldn't evolve a set of interoperability standards for generic cash cards, just like they have for debit cards.
Who would issue these private currencies? Financial institutions would be a good bet. My guess is that some large technology companies might be eager to do this as well.
So, despite the horror displayed by myopic mainstream pundits, Ron Paul's idea about competing currencies really isn't so crazy after all.
Of course, all of the chatter is coming from one candidate --Ron Paul.
His most intriguing notion is that the Federal Reserve Bank needs some competition. At first, this sounds like a rather impractical idea. However, I can safely say that the technology needed to make this a reality is already in widespread use today.
Money serves two purposes in society. First, it's a "medium of exchange", which means that it facilitates buying and selling. Second, it's a "store of value", which means that it should retain its purchasing power into the future.
The dollar is a widely accepted medium of exchange in the U.S. because the government mandates it as such. However, the dollar has not been a particularly good store of value over the last 100 years or so. There are a lot of ways to compare the value of a dollar between the creation of the Federal Reserve in 1913 and today. All of them show that the dollar is now only worth between 1 penny and 6 cents. It's not a good track record.
Fortunately for us, the dollar has lost its value gradually enough as to not cause major social unrest. Other societies haven't been so fortunate. In Germany, government monetary shenanigans after WWI caused a hyperinflation that wiped out the middle class and set the stage for Hitler.
In the U.S., you both save and buy things in dollars. However, it's actually quite possible to save in one currency and buy in another. In fact, it's done all of the time. I've been in over 25 countries. In all of them, I can use the debit card from my American bank to withdraw money from an ATM or buy things in the local currency. The ATM network takes care of figuring how many dollars to deduct from my bank account given the amount of local money I'm spending.
It's also possible to have a system where you can save in multiple currencies. Swiss banks allow you to have accounts denominated in any number of currencies, including U.S. dollars, Euros, and Swiss Francs.
So, there isn’t any technical reason that you couldn't save in whatever currency you want and buy things that are priced in another currency. The only thing that prevents you from doing this today are government laws that exist to protect the monopoly of the Federal Reserve Bank.
The same technology that already exists to support multiple coexisting national currencies could also support multiple coexisting privately issued currencies. As is the case with anything else, competition in currencies could help create a more robust and sound monetary system. Currencies that lose value over time would lose customers to better currencies and wouldn't be widely accepted as either a store of value or medium of exchange.
What about cash? There are times when you want your purchases to be anonymous. No problem. There are many examples of cards that have the characteristics of cash on the market today. Pre-paid cell phone cards and Starbucks cards are just two examples. There isn't any reason why the industry couldn't evolve a set of interoperability standards for generic cash cards, just like they have for debit cards.
Who would issue these private currencies? Financial institutions would be a good bet. My guess is that some large technology companies might be eager to do this as well.
So, despite the horror displayed by myopic mainstream pundits, Ron Paul's idea about competing currencies really isn't so crazy after all.
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