Guest Post: The King George "Decoupling" Revisited

Tyler Durden's picture

Submitted by Chindit 13

Congress, always wont to congratulate itself for a job barely done, applauded itself for passage of the one-time audit of the Federal Reserve.  Once is not enough.  That this issue gets so little press owes as much to public misunderstanding as it does the vaunted secrecy the Fed coverts dearly enough to spend taxpayer money lobbying to keep those same taxpayers from having a window into its workings.

In a country that claims to be a democracy, this is a travesty on par with the grievances that prompted our Founding Fathers to seek independence from King George.

Little known to the average taxpayer, the Fed is a public-private entity that not only issues the nation’s currency, but sets interest rate policy and has supervisory authority over the banking system.

Its private owners, who are anything but neutral, number the largest banking and finance institutions in the country, the so-called Too Big to Fail banks.

Along with Treasury, the Fed has been instrumental in what SIGTARP Chief Barofsky has estimated has been $23 trillion of bailouts, loans, backstops and guarantees, since the financial crisis struck two years ago.  To put that number in perspective, it represents almost twice the US GDP and 40% of World GDP.  It also represents $75,000 for every man, woman, and child in the US.

Although not all of that money has been created or spent, much has, which means the US taxpayer now carries the responsibility for paying it back.  Oddly, one might even say immorally, the Fed goes out of its way to prevent even the democratically elected representatives of the people from seeing the inner workings of that entity.  The Fed---with help from the Obama White House---has lobbied to block access to information about what the taxpayer has bought, though the taxpayer is still required to pay for it, either directly in taxes or through inflation and a depreciating currency.  If this is not the definition of “Taxation without Representation”, I do not know what is.

In the last two years, from what little we can gather, the Fed has lowered interest rates to zero in order to help the banks (who are its private shareholders), thereby rewarding the reckless and profligate and punishing the saver and the prudent.  The Fed has increased its balance sheet from a few hundred billion dollars to nearly two and a half trillion dollars over that time, handing out money to bad banks, overpaying for both Treasury issuances and toxic mortgage backed securities, and effectively monitizing the debt of Treasury, which by its charter it is proscribed from doing.  The Fed has also provided more than $2 trillion to certain unnamed banks to shore up the balance sheets, that they themselves destroyed (this is the subject of an FOIA request by Bloomberg News which the Fed is currently appealing).

Apparently it was not enough to bail out American banks only.  Now the Fed is bailing out both European banks and sovereign states such as Greece via an unlimited foreign exchange swap facility whose primary goal is to further weaken the dollar and promote enough domestic inflation so as to make debt repayment easier for the spendthrifts.

What has America received in return for the Fed’s furtive efforts?
Unemployment stands at 10% and underemployment at 17%.  Savers have been punished and encouraged to seek risk rather than security.  Major banks have absolutely no incentive whatsoever to lend because they can borrow from the Fed at virtually zero percent, then lend the same money back to Treasury by buying somewhere along the yield curve, where the spread allows them to cover their operating costs with no risk.  Banks have also used that 0% Fed money to speculate in the stock market, where a low volume rally has carried prices to levels hardly justified by economic fundamentals. It is no wonder why bank lending is still falling.  Why should they bother lending, when they can profit without risk by simply taking free money and playing the yield curve?

In the last week it was reported that three major banks---Goldman Sachs, JPMorgan, and Bank of America---all had 100% winning days in Quarter 1 on their Proprietary Trading Desks or prop desks.  Nobody is that good, and such results could not be achieved unless the desks had access to information and funding which is unavailable to mere mortals.  The odds of achieving this feat are as great as a baseball player hitting 1.000 for the first two months of the season;  it could not be done even if the player was allowed to use his own batting practice pitcher.  Prop desks are where the banks use your money to trade for their account.  In no way whatsoever do these proprietary activities serve society or the taxpayer.  For these banks there is absolutely no risk, while the gains---as evidenced by record Wall Street bonuses in 2009---all accrue to the banks.  As we learned in the last two years, if banks happened to lose money, both the Fed and the Treasury will make sure they are made whole again with US Taxpayer funds.  For the Too Big to Fail banks, this is not only the best of times, but the financial crisis has proven to be the best thing that ever happened to them.  For the rest of America not working on Wall Street and not with an ownership position in the Fed, times are not quite so rosy.

Why is it that a combination of the Fed, Treasury, major banks and the White House have decided that the American people have no right to know all of the things the people are responsible for through the machinations and activities of the Federal Reserve?  Is America not a democracy?  Have we reverted to colonial times, and instead of being beholden to a foreign monarch, we are now beholden to a domestic monarchy in the form of the Federal Reserve and the Too Big to Fail banks?

Those in Congress and the Administration, as well as the Fed and Wall Street, would do well to remember what happened last time the people had to pay without any say.

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chindit13's picture

This was sent to a major newspaper as a Letter to the Editor.  Apologies to the well informed readership of Zerohedge, as this has been dumbed down to meet the awareness level of the general population.

Miles Kendig's picture

Great start!  And it is never a waste to either try and communicate or translate...

Miles Kendig's picture

x Hey sweetie, you're simply fabulous this spring! o  Cool article or what!  I have missed you and simply must see more of you.

Janice's picture

MMMM...such the player you are.....

Miles Kendig's picture

Long time ZH friends and decades of marvelous similarity here hon.  Nice passing pat. I knew you understood.  Welcome to Fight Club. - Layne

Janice's picture

x Hey Sweetie?...Just a friend, huh?

Sqworl's picture

Mewo...More than just a friend???  Miles is the da Man!!..:-)

Miles Kendig's picture

Janice, full on Fight Club creates very special relationships.  Sqworl is like family to me as are many others here. She knows me, warts as well as whatever good stuff my inner shallow hal managed to do right and she's my ZH pal regardless and vis a vis.  Sqworl will most definitely call me out if I drift and slap me with a wet fish, or more, warranted or not if she thinks it's what the moment calls for.  THAT is the real and I trust it and her to be herself.  Completely.   Have fun and remember, this place is, at the very heart of it, Fight Club and your observations are simply classic. 47 y/o, twice divorced LDS with the wagging pinky salute... ROFLMAO.  Just don't turn all mushy on us Janice, stay sharp and call the crap like ya see it!  You won't hurt many feelings at ZH so bring it full on and remember when someone slaps you with a wet fish it usually is a sign of endearment, cluelessness (either way), curiosity or someone thinks you're driftin'.  So, if ya wanna be a commenter cool, but you do have the real Fight Club in ya so feed it.  This is the place and these are the people.  peace

Sqworl's picture

Spring is finally producing Green Shoots for me!!! Doing my NY thing with all the right ppl..xxx

Miles Kendig's picture

Like seeing Chindit13 as Tyler, this is simply awesome news!  The future is in ag sweetness .. and in getting muddy boots with a smile on your face before late lunch at the Seasons or the Metropolitan Club.  It seems spring is being marvelous to and for you.  We simply must break bread soon!  Too much good juice and green shoots not to be a couple of Gossipin' Bitches.  peace pal  xxo  :)

I wouldn't go back now for any amount of money (or anything else) - Miles Kendig

Cursive's picture

@chindit13

Always enjoy your posts and really appreciate this excellent summary.  I may borrow from it liberally to share with others.

Cognitive Dissonance's picture

chindit13

Thank you for your continuing efforts to spread the word. You simply can't dumb down this subject too much. Considering the continuous propaganda and disinformation barrage coming from the MSM, The Fed itself, the government etc, everyone needs to be constantly reminded we are infected with a malignant cancer that needs to be cut out and cremated.

Nuff said. Thanks again.  

aint no fortunate son's picture

That's a really great letter chindit... really summarizes the rape well... I'm putting it in my favorites list to send to anyone who still gives a damn 

Hulk's picture

+6.022 x 10^23.  Should be printed in every newspaper in the country. Time to wake the fuck up...

akak's picture

I'll see your Avogadro's Number, and raise you the inverse of the Ksp of PbS.

Cognitive Dissonance's picture

PBS is a tool of the control system.

Oh........you mean PbS. My bad. :>)

Hulk's picture

I'll see your inverse Ksp of PbS and raise you a mole of maples!

akak's picture

I fold!

 

(Although you do realize, of course, that there is certainly not nearly that much gold in the entire observable universe!)

Hulk's picture

I know, mole of maples just sounded too good to pass on!

 

Bob's picture

That is one exquisitely beautiful piece of work, chindit. 

What a great link to send around . . .

mikash99's picture

Food for thought.  I'd be surprised if they ever pull off the first audit.  If they do, it would surely open the door for closer scrutiny.  Would the Fed cook their books for sake of avoiding further audits?  When you've gone "all in", its hard to draw the line with the future of your institution at stake.  

Assetman's picture

Here's another thing to chew on...

There was no way a continuous "Audit the Fed" bill was going to pass in THIS CONgress.  Senator Sanders likely know the handwriting was on the wall and settled for a one-time audit... that might drag on for 2-3 years, given the Fed's penchant for not providing information in a timely manner.

Back to the issue at hand... we will see what kind of turnover we get in the midterm elections this November.  If there is an incumbents revolt from the electorate, I'm pretty confident we will be revisiting a continuous Audit the Fed bill in 2011.

ZerOhead's picture

While we may be revisiting the issue in 2011 I think the outcome then will be similar to now.

The sheer audacity of the Fed's one-way foreign currency "swaps" concern me the most. With no collateralization required for these potentially interest free 'loans' to foreign CB's and follow through commercial entities... one wonders why the term "gift" would not suffice for "swap".

Compound that with the wave of former million dollar GS employees who left to give something back to the 'little people' by becoming underpaid Central Bankers and there could be some real 'conflicts' occuring here.

Just sayin'...

Assetman's picture

You really know how to crash a party, don't you? ;)

Great points, btw.

Debtless's picture

Makes me want to fucking strangle someone.

Whizbang's picture

Holy whipsaws batman! What an opening. Sorry to change the subject, but that was quite a swing!

Turtle49's picture

Washington DC is Versailles and there is no Madame DeFarge.  The voters are the peasants.  The peasants can barely read and their votes do not count -- see and compare the South Park episode in re voting for a douchebag or a turd sandwich.  If the peasants are hungry let them eat cheesecake.  The too-big-to fail banks are doing God's work and God does not like you and leaves the room everytime someone brings up the do-it-Yourself creature known as humans.  We told Him He should have waited for the environmental impact statement. 

Duuude's picture

Excellent!

*****

It should be kept on top of ZH for a bit so others can send to their contacts as well.

cbaba's picture

Yes, lets remember who owns the FED?

all big banks including Goldman Sachs and others , see the list and interconnection:

http://www.financialsense.com/Market/kirby/2008/0630.html

Rick64's picture

Those in Congress and the Administration, as well as the Fed and Wall Street, would do well to remember what happened last time the people had to pay without any say.

I think they need a reminder.

velobabe's picture

damn, i am going to outlive my money†

cheers, 

°    °

  

…, ...

 

chancee's picture

Great article.  This should be e-mailed to every senator and Congressman's office.

Tense INDIAN's picture

how the hell do i confirm that our RBI ( Indian central bank ) is not privately controlled by these bloody Illuminati. Most probably its not but whenever they attend secret meetings with other central banks,to , well to discuss high level  secret things, it scares the SHIT ut of me.

Janice's picture

I'm not sure about Illuminati, but you will never find out the truth....any and all truth has been distorted or twisted so that you would not recognize it unless God told it to you him/herself...assuming that God has a gender.

AnAnonymous's picture

Taking the list of grievances reported in the Declaration of Independence, which one the US has not already performed and increased the magnitude?

This list of grievances looks like, not what to do to succeed in life, but what to do to succeed in life. All you have to do is to perform better than the guy before.

Cognitive Dissonance's picture

My understanding is that the person who's winning ticket is pulled from the hat gets to keep the proceeds of 60 seconds of the Fed's printing press. That should be sufficient to set someone up for life, at least until the coming collapse makes it all worth no more than the BTU content of the paper alone.

Hey, it was fun while it lasted.

justbuygold's picture

A massive anti Fed rally in Washigton and all over the nation just before the votes on the Senate amendment would have gone a long way towards the Vetter bill getting passed or the Sanders bill not getting watered down.   Americans had their chance to do something about this a failed miserably by sitting on their hands. 

Rick64's picture

Totally agree. We knew this would happen, but did nothing to protest it. We should be ready beforehand especially when we already know what the outcome will be.

Bruce's picture

Andrew Jackson vs. Second Bank of the US.  History repeats.

http://en.wikisource.org/wiki/Andrew_Jackson%27s_Farewell_Address

"It is well known that there have always been those amongst us who wish to enlarge the powers of the. General Government, and experience would seem to indicate that there is a tendency on the part of this Government to overstep the boundaries marked out for it by the Constitution. Its legitimate authority is abundantly sufficient for all the purposes for which it was created, and its powers being expressly enumerated, there can be no justification for claiming anything beyond them."

“The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain. The corporations which create the paper money can not be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public.”

“But when the charter for the Bank of the United States was obtained from Congress it perfected the schemes of the paper system and gave to its advocates the position they have struggled to obtain from the commencement of the Federal Government to the present hour. The immense capital and peculiar privileges bestowed upon it enabled it to exercise despotic sway over the other banks in every part of the country. From its superior strength it could seriously injure, if not destroy, the business of any one of them which might incur its resentment; and it openly claimed for itself the power of regulating the currency throughout the United States. In other words, it asserted (and it undoubtedly possessed) the power to make money plenty or scarce at its pleasure, at any time and in any quarter of the Union, by controlling the issues of other banks and permitting an expansion or compelling a general contraction of the circulating medium, according to its own will.”

“The result of the ill-advised legislation which established this great monopoly was to concentrate the whole moneyed power of the Union, with its boundless means of corruption and its numerous dependents, under the direction and command of one acknowledged head, thus organizing this particular interest as one body and securing to it unity and concert of action throughout the United States, and enabling it to bring forward upon any occasion its entire and undivided strength to support or defeat any measure of the Government. In the hands of this formidable power, thus perfectly organized, was also placed unlimited dominion over the amount of the circulating medium, giving it the power to regulate the value of property and the fruits of labor in every quarter of the Union, and to bestow prosperity or bring ruin upon any city or section of the country as might best comport with its own interest or policy.”

“But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing. It behooves you, therefore, to be watchful in your States as well as in the Federal Government. The power which the moneyed interest can exercise, when concentrated under a single head and with our present system of currency, was sufficiently demonstrated in the struggle made by the Bank of the United States.”

Jackson’s Farewell Address
(March 4, 1837)

 

Rick64's picture

“But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing.

 This is where the people failed.

peripatetic86's picture

Very nice effort. It is well written and the average person can understand all of the salient points outlined within the letter. Did Ron Paul ghost write this for you?  

chindit13's picture

No, but I regularly write to him.  There are few of our elected leaders I would stand up to defend;  Ron Paul is one of them, partly because he is so adamant about the Fed, and largely because most things he says just make so much sense.

As for the vast majority of our other leaders, if I saw any of them threatened I would pick up an espresso or beer (depending on the time of day) and enjoy the theater.  I'm not proud to say that, but I'm practical about the one life I have to give.

velobabe's picture

thats impressive. i bet, he really enjoys reading your work.

the one life i have to give. thats nice.

thanks.

are you shy†

just askin.

chindit13's picture

Please do not be impressed.  Lots of people write to him, though I doubt he sees or hears much has hasn't already thought out for himself.  Few of our supposed leaders are both aware and free from untoward influence.  Ron Paul is one of those few.

velobabe's picture

kiss kiss....t

i have learned so much from you. i think he does read his inbox.

babe, your my hero. plus, the intrigue just doesn't stop.

your a very special person.

i think you are shy. that is good, you obviously have been humbled, through your years.

whatever it takes. i just wish, i knew why you are in burma.

just so scattered.

chindit13's picture

"I've often speculated why you don't return to America. Did you abscond with the church funds? Run off with a senator's wife? I like to think you killed a man. It's the Romantic in me."

....Captain Renault, Casablanca

No, it's not humbled, and definitely not shy.  Just trying to live as much life as time and luck allow.