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"I Print Therefore I Am" - The Fed Justifies Its Existence, Fails

Tyler Durden's picture


In an brief two paragraph blurb on its brand spanking new blog Liberty Street Economic, a post by "Blog Author" (one wonders if the New York Fed is as cheap in providing its bloggers with a blogging facilities as it is when "giving" the POMO interns Bloomberg terminals), the FRBNY provides a trite if enjoyable summary of the thinking that prompted the creation of the Fed, courtesy of one F.A. Vanderlip, president of Citibank, which apparently was as insolvent back in 1907 as it is now. The premise: the Fed is the cause of monetary stability and the prevention of "disorderly retreats or advances." That's actually supremely ironic because as John Lohman points out the main trade off, namely the 2,313% increase in CPI, ended up shafting the market to an even bigger crash in 2008 than the panic of 1907. But at least in the interim 101 years the Fed's overlords from Wall Street, managed to steal over 98% of the wealth of Americans in the form of shadow currency devaluation better known as inflation. So who cares about facts when that 5th private Polynesian island for Jamie Dimon has been fully paid for and all three underground cellars are stocked with gold...

From the Fed's blog:

An article written in March 1907 (on the cusp of a financial panic, and before the creation of the Federal Reserve) poses the question, “Is there money enough.” The author, F. A. Vanderlip, President of National City Bank (later Citibank), observes that a banking system without a central bank is prone to disorderly “retreats or advances,” with every banker acting for himself and none for the greater good:

“Many Europeans tell us that we are barbarously wasteful of money under our current banking system. They say that with our system of twenty thousand unregulated organizations, we are like a nation going to war with an army that has no centralized authority, with an army where each man is fighting as he independently thinks best; with no one to give general orders for retreat or advance….With us in any time of stress, each bank looks only to its own position, and reaches for reserves for its own vault, at no matter what cost to the whole system.”

In 1910, Vanderlip would take his views and memories of the “bankers’ panic” of 1907 to Jekyll Island, Georgia, to participate in the meeting that would lead to the creation of the Federal Reserve System.

So far so good. Yet here is the counterpoint, courtesy of John Lohman:

Over the 100 years since Vanderlip’s prescient vision, the Federal Reserve has been able to fine-tune and perfect its tools for managing the domestic economy.  The 2,313% rise in the CPI (from 9.23 to 222.7) is a very small price to pay for the security of knowing we will no longer have financial crises, and the associated economic downturns, like those of 1907.


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Fri, 04/08/2011 - 13:48 | 1150613 Debtless
Debtless's picture

Too bad the new Fed blog doesn't allow comments from readers. THAT would be entertaining.

Fri, 04/08/2011 - 13:53 | 1150624 bank guy in Brussels
bank guy in Brussels's picture

Ha! +1

Tyler himself would want to register for that one.

Fri, 04/08/2011 - 14:00 | 1150661 Great Unwashed
Great Unwashed's picture

But they do! From the rules for submitting comments:

Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. The moderator will not post comments that are

  • abusive, harassing, or threatening;
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  • make us look silly; or
  • commercial in nature;

as well as comments that constitute a personal attack.  We reserve the right not to post comment from zerohedge readers; no notice will be given regarding whether a submission will or will not be posted.

Fri, 04/08/2011 - 14:23 | 1150744 NOTW777
NOTW777's picture

so only steve liesman and erin burnett can comment?

Fri, 04/08/2011 - 14:37 | 1150808 NotApplicable
NotApplicable's picture

Don't they fall into the obscene and vulgar category?

Fri, 04/08/2011 - 14:57 | 1150883 davepowers
davepowers's picture

only liesman

Fri, 04/08/2011 - 14:16 | 1150718 redpill
redpill's picture

Simon Black tears apart Christina Romer's ri-goddamn-diculous defense of QE:

Fri, 04/08/2011 - 14:29 | 1150773 John Law Lives
John Law Lives's picture

That Romer interview made me want to punch my screen.  What a load of crap.

Fri, 04/08/2011 - 14:48 | 1150843 chumbawamba
chumbawamba's picture

Fuck that, I'd punch Romer herself.  Some women just require a beating.

I am Chumbawamba.

Fri, 04/08/2011 - 14:37 | 1150811 NotApplicable
NotApplicable's picture

I don't think Romer's babbling qualifies as double-think. In her case you'd have to divide, and end up with half-think.

Fri, 04/08/2011 - 15:48 | 1151087 SheepDog-One
SheepDog-One's picture

Romer looks like she eats shishkebab pot roasts by the dozen.

Fri, 04/08/2011 - 14:27 | 1150757 TruthInSunshine
TruthInSunshine's picture

Ben Bernbankincide rank amateur PR efforts are just pathetic.


Fri, 04/08/2011 - 14:50 | 1150854 covert
covert's picture

I spied on that meeting, it was my first assignment. those were the best days.


Fri, 04/08/2011 - 13:51 | 1150616 Miles Kendig
Miles Kendig's picture

Ax nuclear test ban treaty and fire up Jamie's islands, along with some of those private old world "chateaus".  Problem solved.

Fri, 04/08/2011 - 13:52 | 1150623 AccreditedEYE
AccreditedEYE's picture


Fri, 04/08/2011 - 14:24 | 1150755 chumbawamba
chumbawamba's picture

Pardon me for stepping on your toes, Miles, but I had a thought:

Would it be possible to actually compute the amount of money/capital that the banksters have siphoned off of the economy since the Fed was instantiated?  That would really be a number to splash in front of people.

"Say, did you know the Federal Reserve and its banker owners/co-conspirators have literally embezzled $n trillion from the American people and government since 1913?"

Then they go, "Huh", and return to their internet browsing.

I am Chumbawamba.

Fri, 04/08/2011 - 15:00 | 1150894 NotApplicable
NotApplicable's picture

Interesting idea, but since the answer is denominated in dollars, it just gets blown out beyond comprehension.

A better method might be to measure it in percentage of all wealth, especially if data is available to contrast continuous increase of the bankster's share since 1913.

One way that I like to point this out to people, is to tell them to look around while thinking to yourself that with the exception of older cars/houses, everything you see is owned by a bank, with the title holders only owning a small percentage in equity (if any at all) that is tied up in support of the note.

Before interest rates dropped to 0% for autos and 4.25% for a 30 yr. fixed, Americans actually had more equity. Today, they own far less of these durable goods, having  tapped its equity for toys and other unneeded consumption. Or worse, they traded themselves into a home they will eventually default on.

Fri, 04/08/2011 - 15:31 | 1151011 Clampit
Clampit's picture

Would you include donations, like that of Mr. Buffet? And then how about businesses like GM that wouldn't exist without inane top down funding? Patents and other forms of government privilege favor those with access to capital ... I don't see where this calculation would stop and then you risk the straw argument that we owe everything to the holy bankers. 

Fri, 04/08/2011 - 13:51 | 1150618 Internet Tough Guy
Internet Tough Guy's picture

Oil breaking out here.

Fri, 04/08/2011 - 13:55 | 1150635 alien-IQ
alien-IQ's picture

I'm pretty sure my head is about to explode.

Fri, 04/08/2011 - 15:05 | 1150914 lincolnsteffens
lincolnsteffens's picture

Not to worry. With the kind consideration of Japan's fragrance decending upon you

will grow another one.

Fri, 04/08/2011 - 13:55 | 1150640 disabledvet
disabledvet's picture

i really hate to say this but "we really need to get off this subject" outside of Banzai of course.  Not that I don't agree--but we've been speculating for a while on this whipping boy--and losing.  The way I look at it now which I think is inherent in the ZH ethos btw and which is in my view "data-fiable" is simply:  are we going right back into 2008 again and if not why not?  In short "has a god damn fucking thing changed?"  I say this relative to the bailouts "having changed behavior." i fail to see how anyone other than "laughing boy" (and yes, he is still CEO) can say "yes, Wall Street is completely reformed!"  in short "doesn't the bailout mean business as usual is okay?"  and "if that business is the business of blowing up the economy and ultimately itself" who are we to argue "they won't succeed again?"  Now..."on to the non-surprise of the budget stand-off!"

Fri, 04/08/2011 - 14:13 | 1150711 flattrader
flattrader's picture

>>>i really hate to say this but "we really need to get off this subject"<<<

I hear ya.

But, you have to realize that the world of ZH commentors is just a very big ideological echo chamber for the most part.

It's an OK place to hang out while you watch the tic and trade.

  • Occasionally you learn something new.  There are some very smart people here.
  • Tyler(s) post something original and fascinating on occasion.
  • The Bloomie gives them the scoop on news.

Those reasons above make it worth the bother.

Fri, 04/08/2011 - 14:17 | 1150731 camoes
camoes's picture

ZH is so much better than BBG terminal...we get all the scoops in Chinese Fraud trades and silver price updates...there's just too much information in BBG that I get a headache from watching that monitor...Tyler should launch a ZH terminal with option of silver or gold plating and adornments...just add IB and porn, we're ready to go 21st century trading!

Fri, 04/08/2011 - 13:54 | 1150642 Dick Darlington
Dick Darlington's picture

Nuff said. So can we please end the central banking cartel now?

Fri, 04/08/2011 - 13:57 | 1150649 lieutenantjohnchard
lieutenantjohnchard's picture

good post. shining a light on these fellows is excellent disinfectant, as they say.

Fri, 04/08/2011 - 14:00 | 1150657 nah
nah's picture

dude, it was just plain harder to panic way back in them days

Fri, 04/08/2011 - 14:01 | 1150662 Victor Berry
Victor Berry's picture

Forget the Polynesian islands, our Wall Street overlords are buying ranch properties in the Colorado Rockies.  Evidently, their Blackwater private security details are advising them that it's easier to protect and defend high ground when the vulgar masses come marching to exact vengence. 

Fri, 04/08/2011 - 23:56 | 1152731 Natasha Fatale
Natasha Fatale's picture

It's true, it's all about the mountains. Case in point is Switzerland; without the Alps, Zurich and Geneva wouldn't be the $$$ havens they are today. 

Fri, 04/08/2011 - 14:00 | 1150666 sbenard
sbenard's picture

Crude just hit $112.50, up more than $2 just today!

Obama and his green tyranny must be thrilled! So he can shut down the government now and go on another holiday this weekend with joy and rejoicing, knowing that he and his environmental elitists and arrogant academics (educated imbeciles all) are destroying the US economy. Oh, such rapture! What brutality bliss! What totalitarian joy he must be feeling right now!

His progressive policies are bringing energy agony to America! It's Democrat despotism! Soon, we'll only be afford to live in caves again. Next, we'll revert to grunting to communicate!

Fri, 04/08/2011 - 14:07 | 1150682 Cheyenne
Cheyenne's picture

Frank Vanderlip... Frank Vanderlip... ah, here it is:

"This leads to another reason behind my dislike of conspiracy theories: I am connected to one of the more popular ones right now. My great-grandfather was Franc Vanderlip, one of the men that helped conceptually design the Federal Reserve. "

Fri, 04/08/2011 - 14:11 | 1150702 mfoste1
mfoste1's picture

when does scum cleansing begin?

Fri, 04/08/2011 - 14:10 | 1150704 digalert
digalert's picture

CNBS newsflash:

SEC won't be able to regulate fair markets if there is a government shutdown!

Fri, 04/08/2011 - 14:15 | 1150720 Sabibaby
Sabibaby's picture

That's too bad, they probably won't beable to watch porn from the office either.


at least the Squid is hiring!

Fri, 04/08/2011 - 14:22 | 1150748 NOTW777
NOTW777's picture

maybe they intended - won't be able to facilitate the ponzi if gov shut down

Fri, 04/08/2011 - 15:50 | 1151100 SheepDog-One
SheepDog-One's picture

The invisible hand is wearing an iron glove.

Fri, 04/08/2011 - 14:17 | 1150721 AN0NYM0US
AN0NYM0US's picture

Vanderlip Defends his Currency Plan

NYT October 27, 1913,

Fri, 04/08/2011 - 14:17 | 1150722 JenkinsLane
JenkinsLane's picture

Don't be fooled by the ink that I got, I'm still Benny from the block,

Used to print a little, now I print alot, I'm still, I'm still Benny from the block

Fri, 04/08/2011 - 14:16 | 1150724 JW n FL
JW n FL's picture

Silver is $40.71 per oz... They Print and Silver will see $100 an Oz... easily, quote me.. bubble the printing machine.. silver has not gone up, the dollar has went down.

Fri, 04/08/2011 - 14:26 | 1150758 fuu
fuu's picture

Print more, I love it at this point. The faster they print the faster the end approaches. Bail it all out. Every last stinking dollar of debt, print it away in one fell swoop please.

Fri, 04/08/2011 - 14:19 | 1150728 PrDtR
PrDtR's picture

Don't need any Gold or Silver.. when Jesus returns just my repentant heart will do.. no fear here!  All you are witnessing MUST come to pass..


Fri, 04/08/2011 - 20:28 | 1152169 akak
akak's picture

Cheesus will return when Elvis accompanies him on the back of a unicorn.

You believers in myths and fairy tales are a hoot.

PS:  Next time you're talking to the Lord in your megachurch (don't pass up the collection plate, or he won't listen to you!), please tell him that he fucked up big time --- back to the drawing board, Yahweh you bumbler!

Fri, 04/08/2011 - 14:17 | 1150729 X. Kurt OSis
X. Kurt OSis's picture

That's fucking awesome.

Fri, 04/08/2011 - 14:20 | 1150740 Porkbellytrader
Porkbellytrader's picture

Security risk blocked for your protection


This Websense category is filtered: Parked Domain.

Sites in this category may pose a security threat to network resources or private information, and are blocked by your organization.


Fri, 04/08/2011 - 14:21 | 1150743 Highrev
Highrev's picture

What's the surprise, surprise this weekend going to be?

Fri, 04/08/2011 - 14:39 | 1150750 web bot
web bot's picture

<ahhem, ahhem...>

Boys and girls... don't be fooled by what is going on.

7.1 earthquake hits Japan. Japan Debt/GDP 200% and Nikkie is up 2.52%

UK with over 4% inflation per month. GBP index is up

Silver above 3%...; Euro up, Dow down... you get the picture.

There are huge pools of capital at work right now goosing the market. You know the faces on CNBC... you know their names... they are playing this like a Stradivarian.

A major correction is coming.

Fri, 04/08/2011 - 15:14 | 1150944 lincolnsteffens
lincolnsteffens's picture

"A major correction is coming"

Stradivarius not Stradivarian!  Now get to your fall out shelter before this major correction

hits you too!

Fri, 04/08/2011 - 14:24 | 1150751 lsbumblebee
lsbumblebee's picture


Plese I need yur help with my hi schol paper. What did Presidint Wilson meen when he sayd this?

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."

Fri, 04/08/2011 - 14:32 | 1150785 Moe Howard
Moe Howard's picture

He meant BTFD.

Fri, 04/08/2011 - 15:17 | 1150959 lincolnsteffens
lincolnsteffens's picture


Fri, 04/08/2011 - 14:23 | 1150752 X. Kurt OSis
X. Kurt OSis's picture

TD, you need to make a t-shirt/coffee mug/women's underwear out of that chart.


On that note, just a few more hours 'til we're partying like it's 1995!!


Fri, 04/08/2011 - 14:27 | 1150762 buzlightening
buzlightening's picture

Throw all fraudsters from washington to wall street on the heapin pile of burning fiat dollars.  Country needs a good traitor fry!

Fri, 04/08/2011 - 14:32 | 1150781 greased up deaf guy
greased up deaf guy's picture

"... a banking system without a central bank is prone to disorderly “retreats or advances,” with every banker acting for himself and none for the greater good."

good thing it's soooooooooo different today with the presence of a central bank.


Fri, 04/08/2011 - 14:34 | 1150786 russwinter
russwinter's picture

Treasury purchases and strong correlation to the Minsky Meltup in Commodity and Consumer Inflation

Fri, 04/08/2011 - 14:34 | 1150790 Let them all fail
Let them all fail's picture

Glad to see the Fed is looking out for the greater good - Because if history tells us anything its that centralized authorities, especially those not voted into office, only act in the interest of the greater good of the people as a whole.

Fri, 04/08/2011 - 14:34 | 1150793 augie
augie's picture

I need a summer internship, I wonder what depravity i would have to submit myself to in order to gain access to a bloomberg terminal.

Fri, 04/08/2011 - 14:35 | 1150797 onarga74
onarga74's picture

Benny still has a few implements left.  The most obvious and the most likely is Swan E River to get everyone's attention (away from him)

How do you think these foreign students get a shot working with GS?  "Son, write me a couple of algo's that would take advantage of peoples darkest fears..with no non-correlations and no power to the options pits.  Also, write one to fix it when we deem necessary".



Fri, 04/08/2011 - 14:36 | 1150804 lieutenantjohnchard
lieutenantjohnchard's picture

the folks are so much aware of fed printing that silver is up 8 straight days, counting today.

Fri, 04/08/2011 - 14:40 | 1150822 AboutAverage
AboutAverage's picture

These people create money out of nothing and buy services, make bets on the street, and build large businesses and assets.   When the ventures flop, they hand the tab to the tax payer in the form of money printing.   How is that capitalism?   Las Vegas is more capitalistic in nature than this system.  In Vegas you place a bet - if you win, then you are rewarded - if you lose, then your bet is lost - that simple.   I heard bloggers say "privatize profits and socialize loses".  This is no way to run financial system and we are experiencing the poor results of this system through massive commodity spikes now.    ridiculous.   really truly ridiculous.  


Fri, 04/08/2011 - 23:38 | 1152690 thames222
thames222's picture

It's not capitalism--it's piratism, and sheer greed.  Your average American knows none of the consequences of printing paper money--he just thinks we can make more out of thin air like it's no big deal.  The Fed knows this, and deliberately masks its true intentions time and time again.  let's destroy it

Fri, 04/08/2011 - 14:44 | 1150836 AN0NYM0US
AN0NYM0US's picture


VANDERLIP REVEALS MORE OF BANK PLAN; Tells Bankers a New Currency Based on Gold Is Imperative

New York Times - Dec 18, 1921


Fri, 04/08/2011 - 14:49 | 1150850 glenlloyd
glenlloyd's picture

The mistake vanderlip made was believing that acting in the best interest of your institution was a bad thing. I would think share holders would strongly disagree with his perception that a private company ought to sacrifice itself for the greater good. The correct response would have been to seek out a path that makes your organization less vulnerable against crises rather than rely on a central authority to make everything all better.

In the end the desire to create in institution that controlled all of the subscribed banking system only transfered the problem from one place to another, and the only tool they have to deal with any of it is money creation, no matter what they claim they have. In the long-term all chickens come home to roost.

The idea that FRBNY would trot this out as an example of why a central authority is necessary can be responded to with what Faber said earlier, that clearly there's no inflation at the FRB. Denying that it exists does not make it go away, and I can hear the responses from the Fed later, like 'subprime is largely contained,' that 'no one could have seen it coming.'

Fri, 04/08/2011 - 15:09 | 1150932 Hondo
Hondo's picture

And who or what CB gave the banks in 2006 the retreat orders from making reckless and Ponzi CB did, that's why we don't need no stinking CB.  Prior to the creation of the wealth destroying CB recessions were self-correcting and self-cleansing.  Vanderslip had destroyed his institution and wanted a bail-out…….Morgan stepped in but he didn’t want to do it again at his risk.

Fri, 04/08/2011 - 16:20 | 1151230 BlackholeDivestment
BlackholeDivestment's picture

''Genral Orders'', yeeah riiight. A ''Private'' in the valley of the ''Shadow of Death'', subject to these New World ''Genral'' Orders established to secure dickhead bankers that erected funds for thier obelisk durning the civil war, then mapped out their market beast timing at Jeckyll Island, for the next battle field they created, sold arms through the political squid vicious and religious Fight Cub members in uniforms they manufactured while they educated and jazzed up commie fascism and right left brotherhoods that could not spare a pair of dime ''punches to the gut bitchez'' in the Great Depression, ...well, that Private was young and dumb enough to be as deceived as the dumbshits that came up with the notion that this bullshit new world ''order'' singular market beast ever had a defense.

Vanderlip and the crazy Jamie Dimon's, sippin on Johnny Come Marching Holmes's juice, may think they can Gin up a recovery with their Skull and Bone thuggary Capitol Cryptofascist Psychbath of illiquidity but, they are obviously blind and delusional to think they cloud speak easy to the soldier now. ...of course we know the true stroy of that revolution now.

Fri, 04/08/2011 - 16:25 | 1151257 BlackholeDivestment
BlackholeDivestment's picture

... could you get off of my cloud? lol, oops, I dont's speak easy on bathtub gin.

Fri, 04/08/2011 - 16:39 | 1151339 Crack-up Boom
Crack-up Boom's picture

"They say that with our system of twenty thousand unregulated organizations, we are like a nation going to war with an army that has no centralized authority, with an army where each man is fighting as he independently thinks best; with no one to give general orders for retreat or advance…."

Yeah - before 1913 the banks were going to war with the citizens indepdently, and after 1913 they could all gang up on us.  

Fri, 04/08/2011 - 16:43 | 1151350 eureka
eureka's picture

I see all Fed Banks burning...

I see bullets penetrating Jamie Dimon's skull...

and Blankfein's, little Ben's and the upper 1%'s

Fri, 04/08/2011 - 16:55 | 1151426 monoloco
monoloco's picture

When a couple of million angry people protest on Wall Street, who will enforce a no-fly zone over lower Manhattan? The French?

Fri, 04/08/2011 - 17:04 | 1151504 tony bonn
tony bonn's picture

"the Fed is the cause of monetary stability and the prevention of "disorderly retreats or advances."


is that you dennis? or did the chairsatan himself produce that turd dropping? the fed is necessarily the cause for vast economic dislocations pursuant the boom-bust cycle intrinsic to fractional reserve and centrally planned banking....

whoever wrote this drivel wins the tungsten fucktard award for advanced economic misinsight and most consumed horse manure in a single sitting....

i sentence you to 40 years of memorizing murray rothbard....

Fri, 04/08/2011 - 20:19 | 1152160 tomster0126
tomster0126's picture

wow that 1907 article perfectly describes our system today...genius.  What is it about humans that we're so stupid we can't learn from our mistakes in the past?  History repeats itself.  cliche but so true.

Fri, 04/08/2011 - 20:22 | 1152163 myTPisUSD
myTPisUSD's picture

maaaaaaaaaaaan a Fed blog? calling all trolls! I repeat calling all trolls!

Fri, 04/08/2011 - 23:46 | 1152710 Natasha Fatale
Natasha Fatale's picture

Tip of the hat to Tyler for working the Cartesian Dialectic into a ZH headline. Priceless (pun intended)

This is why I keep coming back.


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