Fed To The Sharks, Part 1: Robbing Purchasing Power As A Matter Of Policy

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

We're being Fed to the sharks, every day, one morsel at a time. What a way to go....

What can we say about the Federal Reserve's policies that hasn't been said a million times? How about simplifying the two primary purposes of Fed policies? I will cover one today and the second one tomorrow. Both involve feeding the 99.5% to the financier/ Wall Street/bank sharks.

Longtime readers are familiar with Harun I.'s incisive analysis. Two of his recent commentaries can be found in Resolution #1: Let's Call Things What They Really Are in 2014 (January 15, 2014) and Doomed If We Do, Doomed If We Don't (February 12, 2014)

In the above entries, Harun explained how the Fed's money creation has leveraged a global bubble in assets. At 72-to-1 leverage, the Fed's $3.3 trillion money expansion has generated inflation as well as asset bubbles, though the Fed and its cronies deny both asset bubbles and inflation.

Inflation is the Fed's explicit, stated goal. The Fed wants prices to go up because that raises GDP (gross domestic product) and makes debt cheaper to service every year.

But alas, real income isn't keeping pace--it's declining. Median household income is down 7% since 2000, but if we strip out the top 1% households, the decline for the bottom 99% would be more than 7%. And if we strip out the top 10% households, the decline of the bottom 90% of households is much more than 7%.

Household income for the bottom 90% has been stagnant for four decades:

So the Fed is robbing the purchasing power of our money as a matter of policy. In simple terms, the Fed is stealing purchasing power and delivering the stolen wealth to the financiers and banks, who borrow money from the Fed for near-zero rates of interest.

And what do the banks do with the money the Fed stole from us? They loan it back to us at 16% (or more). Those of us who haven't just emerged from bankruptcy get offers from banks on a weekly basis: for transfers of credit card debt, new credit cards, cash advances, auto loans, home equity lines of credit, you name it.

A recent offer from a Too Big to Fail bank offered a teaser rate of 0% for a few months, after which the credit card's interest rate reverted to 16%.

This is how the Fed rebuilds the TBTF banks' insolvent balance sheets: it strips purchasing power from wage earners and savers and gives the banks free money which they loan to debt-serfs for somewhere between 5% and 24%, depending on the length of the loan and the collateral (or lack thereof).

As Harun explained, the Fed steals our wealth, transfers it to the banks who then loan our money back to us at 16%.

It almost makes you wish the Fed would just steal the money openly and give it to the banks and top .01% of financiers directly, without the sleight of hand of inflation and zero interest rate policy (ZIRP).

The Fed implicitly claims (and many foolishly believe the propaganda) to be the ultimate financial power in the Universe:

If the Fed is so powerful, why is it so cowardly and fearful that it has to cloak its theft of our money and its transfer of the wealth to the banks? What's it so afraid of? That we might wake up to the fact that we're being Fed to the sharks, every day, one morsel at a time?

Of related interest:

The Federal Reserve's Nuclear Option: A One-Way Street to Oblivion (February 5, 2014)

Want to Reduce Income/Wealth Inequality? Abolish the Engine of Inequality, the Federal Reserve (January 28, 2014)

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inky's picture

Tyler the force is strong in you today.

I am more equal than others's picture



Based on yesterday's Zombie post (a good one I might add), I can increase my purchasing power by simply getting more credit cards.  Therefore, all problems are solved.  Right?

Two-bits's picture

I find your lack of faith disturbing.

y3maxx's picture

...The Fed fed us to the Sharks...by placing an "Obama floater head" at the end of the fishing line.

Zerozen's picture

The Fed finds your lack of faith disturbing.

Dr. Richard Head's picture

Wealthy you have become, the Federal reserve I sense in you!

new game's picture

i feel a 400 dollar bite each month. and that is lack of roi(assuming 5-6%). if i add inflation, another 100.

so 6 grand/year. what is my retribution? i am a law abidding citizen for the most part. so i ask, what makes someone cross the line?

60,000, 600,000 6m? am i smart enough to get even(and not get caught)?, questions all concerned peoples should be asking. way i see it i am being robbed of past time spent doing something i would rather not have been doing. ANGER ROILS,

but contained...

ah, fuck it, just buy some phyzz somewhere, somehow, someday, someting like dat...

buzzsaw99's picture

which one of you aholez shorted the market a few minutes ago?

buzzsaw99's picture

whenever the market goes up I blame the shorts.

...So, from now on, whenever Private Pyle fucks up, I will not punish him! I will punish all of YOU! And the way I see it ladies, you owe me for ONE JELLY DOUGHNUT! NOW GET ON YOUR FACES! [/Gunnery Sergeant Hartman]

BobPaulson's picture

It is not cowardly as much as smart knowing that it can only operate in the darkness.

_ConanTheLibertarian_'s picture

Inflation is theft in broad daylight. People should be out in the streets and hang them bankers for this, but unfortunatelly they are too brainwashed and/or stupid.

NoDebt's picture

No normal person on the street understands this.  A few might have some idea purely by intuition, but that's easily dismissed when you see how very serious everyone looks on TV, speaking in reverent tones.

Dr. Richard Head's picture

I have found to be insane in a "sane" world is sanity.  Too bad I feel insane when I look around me.

dcau1's picture

Most people don't have one fuck to give. Just as long as the fiat price of their house they're a slave to goes up.

Crash N. Burn's picture

 Agree about the theft but let's remember our whore governments need inflation for several reasons, one of which is:

"One can say without exaggeration that inflation is an indispensable intellectual means of militarism. Without it, the repercussions of war on welfare would become obvious much more quickly and penetratingly; war-weariness would set in much earlier." - Ludwig von Mises


 Add on to that buying votes, paying back debt in cheaper money and you start to wonder who wants it more, the bankers or the whores in government.



HardAssets's picture

The psychopath criminals targeted 'education' more than a century ago, using their non taxed private foundations. If you or your kid are a product of the schools & universities you've been brainwashed. Moreover, your natural intelligence & curiosity has been squashed by that same 'schooling' and t.v.

And that doesn't even get into the more 'out there on the edge' attacks -  through chemicals & other agents in food, water, and drugs.

Rafferty's picture

You have identified the nub of the problem.  The best strategic move our overlords ever made.

NoDebt's picture

I thought banks used the free Fed money to play in the stock market.


Dr. Richard Head's picture

They do, along with launder fraudulent Govt Bonds, buy Maserati's, beach homes, and prop up balance sheets through accounting wizardry.

Rock Sniffer's picture

Something like that.

You don't need money from the Fed, BoE, ECB, PBoC or BOJ when you create it out of thin air.

Loans, deposits - just corresponding entries on a balance sheet; expanding both sides at the same time.  Debt-based money created at a keystroke and loaned out with interest.

Can't be paid back either.  Money supply would collapse.

Spastica Rex's picture

I thought it was all of us together (the 99.99999%) against the 0.00001%.

Charles Hugh-Smith is getting kind of commie. Next thing you know, he’ll have a graph of the bottom 80% vs the top 20%.


seek's picture

I was going to suggest that he needs to re-run the chart not at 90/10% but as 99.9 / 0.1%.

Given this is what the 0.1%/0.01% share of wealth looks like over time, it would not be flattering at all.



PlusTic's picture

It is, and has always been, their only policy tool...

madbraz's picture

It's about time someone sues the FED, takes them to court indicts them - after all they are a private organization.  


At what point does a blatanly criminal cartel has to respond for it's actions?


At what point is there revolt?  Do we have to all be homeless and starving in the gutter?


At what point is there going to be a general strike?  At what point does Occupy Wall Street comes back with a vengeance? 


People in Brazil took the streets by the millions last year to demand change.  What are we waiting for?   Do we not have any grassroot movements anymore? 

inky's picture

I think the main movements the sheeple have recently is bowel from all the fast food theyr stuffing into themselves.

Kayman's picture

Sue the Fed? You might as well smash your toes off with a hammer.  The Fed is a political construct and can only be eliminated politically or with a hammer- which is politics by other means.

kurt's picture

Class Action Law Suit

People VS Federal Reserve Bank-- The people demand repayment of foregone interest on savings, loss of savings, and loss due to manipulation of interest rates. Loss due to artificial loss of monetary buying power, False promises, Lying. Acting against the interest of the People of the United States of America. Suit includes as damages premature withdrawl of retirements monies, tax pentalties, taxes on resultant temporary increase to individual's income. Defrauding the American Public. Looting the government and its people. High Crimes and Misdemeanors.

aleph0's picture



Charles asks why ? ....   They want to stay in power of course.

Now if only Russia would cooperate and make the first strike .... so they can blame them for the USD devaluation.


Dr. Engali's picture

The nice thing is that the iSheeple are so dumbed down  they don't know who the real culprit is when it comes to inflation. It's easy for them to point at those greedy retailers who keep raising their prices, and pretty soon we end up with a guy in office like Maduro who distributes free teevees, phones, or something along those lines..... oh wait....

Two-bits's picture

Time for the national food ID program.


wait.,,47 million already on it.

yogibear's picture

The iSheeple keep buying those ever-higher sporting event tickets. Just put it on credit.

TalkToLind's picture

Yep, that's because 1/3 of every local newscast is devoted to sports.  That's right, "sports news" is basically a free informercial designed to herd the gum chewing public into the local sports venues (built and paid for with taxpayer dollars) so that they can spend someone else's money (credit) on overpriced Bread and Circuses. 

insanelysane's picture

It makes the lives of those at CNBS and Bloomsberg easy.  Just buy, buy, buy because prices have never been better.  You can say that about gasoline, beef, bread, etc because as the dollar loses value the price of everything goes up.  Of course if you purchase a gallon of gas today and store it for 30 years, it will be worth more, but so is everything else so at the end of the day you only have a gallon of gas.

yogibear's picture

"real income isn't keeping pace--it's declining."

It's why Barry announced a steep increase in the minimum wage.

If wages aren't rising they'll force them up. Everything is by brute force now to get the results they want. 

nickels's picture

The Fed's brand of crappy magic is just the sort of thing that killed vaudeville.


madcows's picture

No one is forcing you to borrow.  Borrowing creates inflation.  JUST SAY NO!  Buy your next car with cash.  Work through college... go to a cheap school, no one cares where you get your bachelors degree from.  Don't borrow from the banks, and they'll die.  Starve the beast.

inky's picture


Absolutely spot on +1000

P.s we all know that ^ its just the rest of the world has gota wake up to realize it.My advice = Dont hold your breath.

madbraz's picture

One has to only look at the first 30 minutes of the stock market today to have visual evidence of how the market is rigged to the upside, any and all dips are furiously met by an invisible hand - a panic buying instant - that always occurs, something that can only be done when you are certain of the outcome (manipulation) and endless access to cash or collateral (NY FED).


Al Capone is a saint next to Bill Dudley.

yogibear's picture

William Dudley and Charles Evans are the 2 ultra printers. These guys will destroy the 99% to get what they want. Their intent is malicious. 

madbraz's picture

Agree.  It's downright scary how evil people in such positions can be.  


There is no accountability for Dudley.  I wonder if Richard Fischer has any balls to go against him - I mean, you look at how the balance sheet of the NY FED it's like 99% of the total FED balance sheet - it's a joke.   A guy that is on the phone will Wall Street many times every day, has equity trading desks, trading staff meetings at 8:30AM AND early afternoon....what kind of non-malicious purpose does that serve, other than to be working 24x7 to ensure that the market goes up?  What kind of organization lends $100 billion + in treasuries everyday for free to support the leverage of their buddies in the shadow banking world?  What kind of organization delays rules endlessly for banks that would require them to cut down on sh*t paper like CLOs?



madbraz's picture

One has to only look at the first 30 minutes of the stock market today to have visual evidence of how the market is rigged to the upside, any and all dips are furiously met by an invisible hand - a panic buying instant - that always occurs, something that can only be done when you are certain of the outcome (manipulation) and endless access to cash or collateral (NY FED).


Al Capone is a saint next to Bill Dudley.

Notsobadwlad's picture

Money is just the vehicle used to enslave (to labor) and to steal assets that have actual utility. They trade their money created from nothing for labor and actual assets. That is the real theft. The money policy will always be managed in such a way that they can enslave and trade nothing for something. It is purely parasitic.

... and the large international banks own the Federal Reserve. The banks created a special purpose entity that creates money, pretending to be independent that loans them money at almost no interest and pays them a 6% dividend each year.

In fact the really cool thing is that when the Fed was formed it created the money it loaned to the banks which the banks then invested in the Fed as its capital. The banks had to invest nothing and they owned the Fed. Its a good gig if you want to be an evil parasite.

WSP's picture

This is one of best blog post/articles by Charles Hugh-Smith I have ever read. Why? Simple.

Charles is telling it straight out like it is without trying to predict any inevitable outcomes. So many writers keep saying "unsustainable", "the end is near", etc., etc., and this clouds their otherwise excellent analysis.

Let's face it---we are ruled by a criminal off-shore international banking cartel. EVERTHING IS RIGGED, and any pretense of fairness, honesty, or transparency in the market is either a ruse or written by an idiot. For the big players, the market is a Ponzi scheme to be manipulated, to the off-shore banks that enslave us, the market and money are a way to dominate us and keep us slaving away building their "Elysium’s".

The bottom line is Charles is doing a great service here by just telling it like it is rather than how it should be. Nothing is going to change, the markets do not serve the people, and it is only going to get worse from here. Our ruling "masters" are narcissist psychopaths and sociopaths who enjoy dominating us and screwing us. The "public" will never "wake up" the crime syndicates operations, and even if they did, as that cunt Hillary Clinton said "What difference does it make?" These criminals will do whatever they want and collectively we cannot do a damn thing about it.

So let's all stop talking about solutions and focus on the problem and collectively give the off-shore banks the finger----let them build their own damn Elysium. Fuck you bankers---build your own damn Elysium and go fuck yourself while you are at it.   I quit!  Now that is a solution!  In fact, it is the ONLY SOLUTION!  Just quit---turn those fuckers off and tell them clean their own shit up! I know, not going to happen and they know it! IOW, we are fucked so let’s not pretend otherwise—just tell it like it is and fuck the sheeple that don’t want to hear it!



Notsobadwlad's picture

Agreed... which makes me wonder if someone is starting into the process of murdering bankers... the way that bankers have murdered people throughout history.

Personally, I do not believe that good comes from evil acts and taking pleasure in the deaths of parasitic lost souls benefits no one.

seek's picture

Their deaths without confession are worthless.

This needs to be handled the same way the British handled the Thuggees in India, namely that they can save their skins by confessing to their crimes so that a complete picture of the financial fraud network can be made and the primary leaders removed, as well as preventing the ressurection of the network at a later time by banning participation.

BullyBearish's picture

From the FED: "It's ALL our money and we can do what we want with it.  Be thankful we let you have a little while you pass through our world."

jemlyn's picture

They couldn't do it if we didn't cooperate.  People borrow money to buy things they can't afford.  In my life we started after college with a cheap used car, paid off student loans then bought a starter house for half the price of what a VA loan would have authorized, paid off the house, saved money and bought a better house for cash, etc.  Never had credit card debt.  Their scheme wouldn't work if people didn't borrow money to buy things they haven't earned.

Fix It Again Timmy's picture

Taking the dollar down in value to about $.02 over the last 100 years speaks highly of their disregard for T.C. M.I.T.S.....