Rand Paul Rages "The Fed Is Crippling America"
Authored by Senator Rand Paul and Mark Spitznagel, originally posted at Time.com,
The country deserves to understand the extent of its balance sheet
On Jan. 12, Congress is scheduled to vote on the “Audit the Fed” legislation (H.R. 24/S. 264), which, if passed, would bring to an end to the Federal Reserve’s unchecked—and even arguably unconstitutional—power in the financial markets and the economy.
We aren’t the first to be wary of the powers of central banks. Founding Father Thomas Jefferson viewed the powers of central banks as being contrary to the protections of the Constitution. As Jefferson wrote:
“I sincerely believe that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
In a similar vein, the great Austrian economist Ludwig von Mises also recognized that limiting government power in the realm of money was a matter of liberty, not merely economics. Mises explained that
“the idea of sound money … was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”
How far we have come as a country that these words from Jefferson and Mises sound so foreign today. Perhaps we have all been blinded by the credit and equity bubbles that surround us. But what better wake-up call to rally support for legislation that would shine a bright light on the government institution that today has created these bubbles, subsidizes small subsets of the population (thus amplifying wealth inequality), and enables endless government debt?
The Fed was intended to be an apolitical body, a concession to placate the naysayers. But today, the Fed isn’t even shy about entering the political fray: witness Federal Reserve Chair Janet Yellen’s income inequality speech riddled with Democratic talking points during the 2014 elections.
The Fed is, indeed, a political, oligarchic force, and a key part of what looks and functions like a banking cartel. During the 2007-08 financial crisis, the Fed’s true nature was clear to anyone paying attention. As the Treasury began bailing out the investment banks from the consequences of their profligate risk-taking (and in some cases fraudulent schemes), the Fed moved in tandem, further purchasing the underwater assets of these institutions, as well as actually paying interest to the commercial banks (hemorrhaging from risky loans) for reserves they kept parked at the Fed.
To be sure, Fed officials came up with opaque jargon to describe such operations, but the stark reality is that the Fed was treating risky assets as good collateral, and in the fall of 2008 began literally paying banks to not make loans to their customers.
Even today, the recent policy announcement has doubled the rate of this massive implicit taxpayer subsidy to the banks - what they call “interest on reserves.” In the textbook rate-hike case, the Fed sells off assets (or slows the rate of purchases) in order to reduce the supply of reserves. Then, the equilibrium price of borrowing reserves (i.e., fed funds rate) rises. In contrast, now and for the foreseeable future, as indicated by the Fed’s guidance statements, the Fed is raising rates by increasing interest on reserves.
As of Dec. 17, the Fed is paying 50 basis points on both required and excess reserves. So the Fed, itself, is increasing how much it will pay to “borrow” reserves from the commercial banks. Given the estimated $2.6 trillion in excess reserves, at 50 basis points that means the Fed will be paying commercial banks some $13 billion in annual income. Right now, the Fed is paying the same on required and excess reserves, though that in principle could differ.
As the Fed keeps raising interest rates through this same mechanism, the amount paid to commercial banks will only mushroom. You can forgive analysts for not discussing this; it was not even mentioned in the Fed’s Dec. 16 announcement.
As the Fed pays commercial bankers more in interest payments, there is dollar-for-dollar less for the Treasury; in other words, for a given level of federal expenditures, the deficit is that much higher. Therefore, the U.S. taxpayer is subsidizing commercial banks to not make loans to their customers—or rather bribing them to charge their customers higher interest rates on loans. And, the U.S. taxpayer is going deeper into debt to provide this bank subsidy.
This is but one aspect of the farce that is today’s Fed policy. In addition, we actually don’t know the full extent of or the precise recipients of the Fed’s asset purchases and bailouts as its balance sheet exploded from about $900 billion in August 2008 to almost $4.5 trillion today.
Now, the Fed has painted itself into a corner. It can’t sell off its bloated balance sheet for fear of crashing the mortgage-backed securities market—and, indirectly, real estate—and it can’t sell off its treasury holdings because that would push up treasury yields and increase the servicing cost of U.S. debt. This is partly the reason the Fed has chosen to raise rates by paying bankers more.
If treasury yields rise, then the market value of existing treasury securities goes down. The Fed currently holds about $2.5 trillion (all maturities) of treasuries. At the same time, the Fed’s capital is at most $67 billion or so. Given that the Fed is levered to the hilt, if treasury yields go up too much, Fed is bankrupt in an accounting sense.
Most dangerous of all, global credit and equity markets have been manipulated by central bank policies to levels that are unsustainable and highly crash-prone.
Clearly, the country needs to understand fully the extent of the Fed’s balance sheet: what it holds and from whom it was acquired, as well as all of the Fed’s other activities and conceivably even more dangerous shenanigans afoot.
We can’t really know what we don’t know until we look. We owe it to the “swindled futurity” of the next generation to take a long, hard look through a full and independent audit of the Fed.
(19 votes)
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The Best part about Rand is that he wants to end the FED just like dad
Auditing the Fed is like auditing a unicorn. The audit will produce legitimacy as long as you keep believing in the existence of the unicorn.
I was just starting to read up about this guy Colonel House, who apparently advised Woodrow Wilson, and I came across this:
The Rothschilds Declare War On The United States
"That same year (1862) The Times of London publishes a story containing the following statement, 'If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.'”- Source: Eustace Mullins' "Secrets Of The Federal Reserve"
Although I am not generally a fan of political dynasties, I do make a reluctant exception for Rand Paul.
His father was forthright about the problems facing the country-- too forthright, which allowed the media to repackage him as a well-meaning kook and thus destroy his credibility.
Rand has learned from that example and now moves in a more circumspect fashion than he might otherwise prefer.
Auditing the Fed may not be the preferred move but it is a step forward. Getting the public behind such an innocuous-sounding proposal is one baby step towards taking the country back.
Just as we didn't create the mess we now face in a single day, so too will it require patient effort over years if we are to turn things around. Educate the public. Wean them away from their current set of delusions. Remain non-kook-like and wait for the day when the field is fully plowed and the new crops of seeds have sprouted.
+1 Me too. I am also a kook to those by whom I am surrounded... Education of the public is not so easy. The density of total big gov believers and its domince in places like New York City are extreme. You throw a rock in the pond and it skips along the surface...no ripple, not even a chip in the ice.
Rand Paul is what's wrong with politics. The lousy piece of shit thumbed his nose at the people on Infowars, and took the side of his owners. The piece of shit needs to be voted out of office next cycle. He's very vaulnarable right now, and should be put out to the field to return to eye surgery.
I disagree. I think Rand learned from his father's mistakes and is trying to take a tact that'll get him into the positions his father was always excluded from.
Just my take. You don't grow up with Ron Paul as your Dad and become a sellout
Here is what the FED AUDIT is likely to reveal:
1) TRILLIONS OF $ in off-balance-sheet loans to foreign banks
2) TRILLIONS OF $ in hidden assets purchased from foreign banks which include: bad loans, toxic mortgages
3) $4.7 TRILLION OF assets purchased from domestic banks which include: bad loans, toxic mortgages (THIS ITEM IS ALREADY A KNOWN FACT). Assets not marked-to-market, so the true extend of the toxicity is not yet known.
4) TRILLIONS OF $ in U.S. and foreign equity holdings, including ETFs
5) HUNDREDS OF BILLIONS $ in long U.S. S&P 500 mini futures
These are the so-called "tools" that this corrupt Fed thinks it is allow to "use" on the financial system.
This organization needs to be SHUT DOWN, and CRIMES punished to the fullest extent of the law, with individual members being charged and sent to prison upon conviction.
Agreed, provided it can be demonstrated that the activities of the "cartel" primarily helped the banks and not society. The activities of the FED needs to be evaluated and discussed whereas at present "the doctor prescribing the drugs" is not sufficiently forced to explain himself and to demonstrate the truthfulnes of his explanations through a regular audit. The people have a right to such information. Unfortunately civil rights in the US are on the retreat and information rights have been reduced and removed in many areas. It would be quite a surprise if the "FED audit" would become an exception.
Prison? Fucking hang them.
The damage that this organization has done to millions of lives here in the U.S. and the world collectively is incalculable.
People have lost livelihoods, life savings, homes, marriages, and literally lives because of them. Their actions have led to the doubling of the debt, debasement of the currency to oltold levels, perverse manipulation of interest rate and asset markets globally, all in the name of the 'great experiment'. Since when does an agency of the government get to perform experiments on the public?, except maybe Nazzi days. They have brought the country to the brink of ruin, and certain financial collapse when the dollar finally crashes.
This organization needs to be SHUT DOWN, and their CRIMES punished to the fullest extent of the law, with individual members being charged and sent to prison upon conviction.
You may be right BUT my opinion is that if the Fed agrees to being audited it will be because they have sufficiently cooked the books and when audited will reveal nothing. Then the Fed will say, "see we told you everything was on the up and up" and we'll have these fuckers for another 100 years. Just hang these fuckers. Or, do a REAL audit, the kind where you don't ask and you kick down their front door, like a tax paying slave, errrr I mean citizen.
Imagine my shock, I agree with Rand Paul, that has never happened before, not sure who would be trusted with this audit but definitely a step in the right direction. Audit the countries Gold while they're at it.
https://imgur.com/vwMin
Regular audits of central banks are imperative. Transparency is a must. Otherwise all sorts of criminal activity is conceivable. To build trust the audits are clearly a "must have". Central banks influence politics and vice versa. This relation does not necessarily mean that central banks are political bodies. Mafia is also influencing politics and vice versa. This relation does not necessarily mean that mafia is a political body. Central banks might work as cartel and head organisation of large banks. As such they seem do be dedicated to secure the well being of the banks and their shareholders not the wellbeing of the nations and their citizens. If this assumption is true would become obvious in a full and transparent audit. No organisation should stand above the laws of a civil society. What remains intransparent and un-audited stands above the law. This is unacceptable and must be changed.
Their very very existence is lawlessness. Pyramid schemes are fraud and their money system is a pyramid scheme.
Why are we asking them if we can audit them. If it were me they'd just kick in my front door. Fuck them Kick in their front door, audit them and then hang them all. Wtf it's that easy.
<-- Fed == Cabals == 666 == Mammon
They were lending money
fleecing people , became rich
they migrated to America
did the same
then they purchased politicians
& with help of politicians
they hijacked Fed
Now they r fooling all
with pretexts -> sub-prime, TBTF & QE
exporting terror,
creating terrorist groups
with the help of their puppet CIA
creating risk overseas
then starting projects there
& with high risk (as lawful pretext)
spending the money 100 times than normal
printing all the money
& keeping all
lawfully
(blood , gore & refugees - not my problem)
The Fed works for Obama so blame Obama. Blame the status quo.
The Federal reserve act provides for the federal government to buy the Fed's stock. They should print some Money, buy the stock then shut the fraud down. No "audit" necessary.