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How The Government Pressured The Fed To Bail Out Italy In 1974, And How The Same Is Likely Happening Right Now With Greece
If you ever wondered just how independent the Federal Reserve is, wonder no more. A recently declassified transcript of a July 16, 1974 phone conversation between Henry Kissinger and then-Fed Chairman Arthur Burns, demonstrates just how very involved in global financial bailouts the Federal Reserve gets under duress of the administration. In the span of about a minute Kissinger advises Burns to do whatever he must to "not let Italy go down the drain." The facility with which the Federal Reserve throws around US taxpayer capital to bail out the "chosen ones" is simply beyond reproach. We are confident that the Fed is currently preparing a comparable bail out package for Greece as a measure of last resort. There is no way that Ben Bernanke will allow Greece to fail, killing the euro and sending the dollar into the stratosphere, destroying all hope of inflating the trillions in bad debt saddling America's banks and the Federal Reserve (which is now the world's biggest bank holding company).
Full memo below, here selection presented:
Kissinger: I called you yesterday about the possible assistance to Italy if that becomes necessary and I understand that one idea is to use the swap line and that you are a little reluctant to do it. I don't want to get into fiscal details which I don't fully understand. I just want to point out from a foreign policy point of view we cannot let Italy go down the drain. Whether that is the way to do it or some other way, I don't know.
Burns: I agree and I have been actively trying to get other countries to contribute a package but what we can do through the swaplines is very limited. The amount could be large but it is a three month loan and that is not what they need.
K. Yes. My people tell me you would not approve more than $300 million.
B. As a start.
K. Yes. Look, on financial things I am not somebody - I cannot get into a debate on numbers. All I wanted to stress to you is to really give this - if it arises - very high priority.
B. I agree and I was active in getting the credit line extended. Also in a meeting with the finance ministers I went around and pushed the Germans and Japanese to contribute to a package for Italy. It is a loan of medium term duration and the swap line does not serve that purpose. That is the essential point.
K. If you can five any other thought to that problem I would appreciate it.
B. You bet I will.
Recently, the Fed had no problem arranging over $500 billion in swaplines to bail out the world. We are confident the same is true right now as the Fed is looking at a comparable bail out plan for Greece. Additionally, as we have pointed out in the past, a back up plan for the Fed is to simply purchase Greek debt, which without any ability to refute, we can safely assume it is currently doing.
Document courtesy of Operations Officer
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Awesome research ZH, you might save (most of us) yet.
The FED is busy getting the real problems under control.
Fed cracks down on gift card abuses. Yahoo Finance
Smoke and mirrors. Reading books on economic theory and studying markets means nothing any more. Instead, waltz down to your local library and check out a few books on magic. They will be extremely useful if you're trying to understand what's going on nowadays.
Why not hang out at the local parole and probation office. Strike up conversations with the better attired parolees as they leave their appointments with the officer charged with managing their parole until you find one convicted of white collar crime. Take that guy to lunch.
He would have to be over 70.
At least back then you could make the argument that it was in America's best interest not to allow a failed state Italy to become fertile ground for direct or indirect Soviet influence. Now what's the excuse?
Oh I forgot...global, not just domestic redistribution of wealth.
I'm sure B'berg, the WSJ, and particularly CNBC will be printing this story. end of sarcasm for the day.
Great job ZH!
don't disturb the dragonflies
Good to know. I thought the Fed told the Government what to do? Guess not back then.
Good comment, my take:
Tyler,
No doubt, there were political reasons back then tied to the fear that communism may spread into Europe. Kissinger was ruthless and his fixation against the spread of communism was what drove his decisions. When Christopher Hitchens still had credibility, he wrote an excellent essay against Kissinger, which then became a best selling book, The Trial of Henry Kissinger.
In today's world, the big fear is that debt deflation will cripple the banking industry, stifling the banksters' profits. The Fed will do whatever it takes to reflate assets, and bring back mild inflation. The big banks own the Fed, and have the final say on who gets appointed Fed Chairman. Fed was never independent, only fools thought so.
"Christopher Hitchens still had credibility"
Really. Concur.
Independent? Try crooked, participants in flagrantly illegal, unauthorized activities. Suggest you begin with Auerbach's Deception. Amazing how few put the 2+2 together and assume the Fed is not being used as a political tool and pocketbook.
Well, that was a different time then (cold war). Today, they may have a different strategy. It's much more profitable.
http://wp.me/px1MN-g5
Tyler , you are incorrect. This time, the game is very much different.
To preserve US$ as a the world reserve currency, the USA must undermine and weaken both euro and gold. A strong euro will greatly undermine both the USA and UK by moving good many US$ denominated commodities into euro.
If the USA bail out Greece now, Spain and Italy will follow right behind in a hurry. And please, do not forget UK. It is in such very deep shit now...
The Fed cannot strengthen the dollar. Political suicide.
You have it wrong. The Fed wants a strong euro and a weak dollar. Greece goes down, so does the euro. The Chinese won't play and devalue and then a collapsing euro....hello black swan!
You have it wrong. Merkel want the euro at parity with the dollar. Whatever it takes.
END THE FCKING FED
The name of the game is Bailout and everyone that has read "The Creature from Jekyll Island" knows it well.
There should be no surprises here...
We are now at the "shit or go blind" stage as the Fed has so many conflicting motivations it basically has to roll the dice to choose an option.
This is like the old comedy skit, "Lucy in the Cake Factory" where Lucy is standing at the conveyor belt as the cakes come out of the oven, she has to put the icing on. But the conveyor belt keeps speeding up and poor Lucy has to keep working faster and faster. The Cakes are the world economy and Lucy is the Fed.
The other analogy is the juggling act with all those dishes and cups rotating on the ends of sticks. We all know how this ends.
What really happened in that Lucy show is even more analogous to what the Fed is doing: Lucy was working in a chocolate factory, boxing up the chocolates as they came off the line. As the conveyor sped up, she was desperately trying to keep up, and eventually started shoving the chocolates into her hands, her uniform pockets and then finally, into her mouth.
The Fed will never have any 'splaining to do. They've sent Ricky on a one-way trip back to Cuba.
As Pedro said to Señor Wences, "Close the box"
http://www.youtube.com/watch?v=AJiYZ6QIAtY
the dual mandate:
full employment in India and China and ZIRP for US savers...the exit strategy is around the next bend behind FNM and FRE.
Cap'n Ben: "Daminit Timmy, it's deflating! INFLATE AT ALL COSTS!"
TinyTurboTimmah: "Cap'n, I kenna keep it pumped! The presses are at warp 9.2, but the more we print, the more debt we create! It keeps flowin' oot as fast as I blow it in! We need more equity!"
Cap'n Ben: "BAHHHHND! I mean BAHHHHNDS! BUY GREEK BAAAAHNNDS!"
+1000
The Fed doesn't have to spend our money, nor lend out money that needs to be repaid. They can simply create new money out of thin air and give it away or back up any bad debts they want. It's what they do.
That works fine...
...Until the people whom with we trade dollars for "stuff" (e.g. "oil") decide that their "stuff" should be exchanged for something of non-arbitrary and tangible value (e.g. other "stuff", like "food" or "machines" or "gold").
The stuff people can afford is always worth less and to that point, that the dumps have better quality materials that have been tossed away. As for exchanging sevices, it may as well be a circle jerk with S & H Green Stamps passed around.
Don't be so sure that a default by Greece (or any GIPSI) would hurt the euro. It should actually help the euro, since euro-denominated balances would go "poof," thus increasing the value of the remainder. This deflation is what has propped up the Yen since '89 and the dollar since '08. Bailouts for GIPSIs, especially if delivered by Europeans, would be euro-negative since they will create 100s of billions more and keep the banks from taking losses.
More here, and some thoughts on why Greeks (and everyone else including US taxpayers) should demand default on the debt their politicians have created:
http://sovereignspeculator.com/2010/03/16/europe-agrees-to-bailout-greece-sets-precedent-for-euros-destruction/
Why all government debt is a racket, and should be repudiated:
http://sovereignspeculator.com/2010/02/08/default-greece-default/
The US tax capital? At present times? Fantasy words.
As a reminder, the FED is extending credit lines, emit new credits etc...
No US tax payers money involved. The ones who are bailing out the world are every people willing to yield their wealth against a USD note. They are the ones who are valorizing the credits emitted by the US. Without the resources they put upfront, the US credit lines would lose value tremendously.
As it is a cascading down game, commodities exporting countries are the ones bailing out the rest of the world. The US provides the medium of exchange here, not the goods to exchange. Countries who are bailing out are mineral assets exporters. Not the US.
In this regard, the FED should have no issue with toying with somebody else's capital as it is not the US tax payers money.
I had to go find the source of this document, and stopped at the linked site. Fascinating, Tyler! But. . . .
I remember Kissinger, and Burns; I was a young college student, watching and learning about politics and finance. Maybe it's the way they transcribe these old recordings, but what I read just didn't sound like human conversation. No drama, no vernacular, almost a script. I'm not trained in forensics, but my dumb-ass gut instinct wonders whether this is real.
GREAT reading, though. . .
Damn I wish Tyler could find his way into the Council on Foreign Relation's vault
I'd be willing to bet everything we want to know is contained within
Eh. Angelina Jolie is a member...they'll let anyone in. Tyler may already be a member.
I'm guessing it's a tiered membership like Scientology. It's only when you get to the inner circle that you find out about Xenu.
The 500 billion swap line was money created by the FED and given to its monetary allies in order to buy the unservicable US government with the understand that the FED will do likewise with unserviceable European debt.
The bailout of Greece is only the beginning and not the end of this bailout bonanza.
The FED and its cronies are now officially at Weimar(t) level except it's being done withthe whole world to keep the fractional reserved Fix It Again Tony monetary system going.
There is way to much "paper wealth" sloshing around growning asymptotically via compound interest. There are not enough human beings nor enough natural resources around to service that interest rated debt.
Eventually it blows up in their faces spectacularly.
This is modern day tulip mania as we know it.
http://funy1.blogspot.com/2010/03/finite-irrationality-of-paper-wealth.html
And Cap'n Ben said Ron Paul's inquiries regarding Watergate/Iraq etc. involvement by the Fed were "bizarre".
The truth is probably stranger than fiction.
Inquiries were bizarre. Kissinger was a member of the administration at that time. His piece of advice is nothing more than a recommendation. In the US, it is admitted that people have free will.
The FED chairman chose the course of action, Kissinger's comment was not an order.
Riiiiight. Politics doesn't really work that way.
Yeah, there was an implied else in Kissinger's statement.
There always was.
Seems like the MSM is already dropping strong 'hints' as to the need to bail out Greece, as per Tyler's article above.
http://news.yahoo.com/s/afp/20100322/ts_alt_afp/eueurozonefinanceeconomygreeceusbank
If they bailout Greece, the rest of the PIIGS (Portugal, Ireland, Italy and Spain) will see that they can get bailed out also. All said and done, the bailouts that Germany and France might have to cough up could be in the couple of hundred billion dollars for all the PIIGS. And all that does is to stop the bleeding and no guarantee that they will do any austerity for their country. Let Greece fail and let them go to the IMF. It may be a black eye to the European Union, but it will let people know that the powerful countries wont' bailout the weaker ones that don't pull their own weight.
The FED believes the Rubicon has been crossed. They decide who lives and who dies. The FED controls our money, the politicians listen very carefully, and somehow always defer to the FED. What more do we need to know? No, you can't remove your hands from the front of your ankles.
Read some history..when you bought into their Fear sale , you lost your Freedom. We are supposed to be the land of the Free and the home of the Brave. There is no Freedom in the home of the Fear.
http://www.zerohedge.com/forum/central-banking-vs-repubic
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