Fed 'Insider' Exposes The Evils Of US Monetary Policy Recklessness

Tyler Durden's picture

Submitted by Adam Taggart via PeakProseprity.com,

Danielle DiMartino Booth, former analyst at the Federal Reserve Bank of Dallas, has just released the book Fed Up: An Insider's Take On Why The Federal Reserve Is Bad For America.

In it, Danielle describes how the Federal Reserve is controlled by 1,000 PhD economists and run by an unelected West Coast radical with no direct business experience. The Fed continues to enable Congress to grow our nation’s ballooning debt and avoid making hard choices, despite the high psychological and monetary costs. And our addiction to the "heroin" of low interest rates is pushing our economy towards yet another collapse.

This reckless monetary policy pursued by the Fed has resulted in the rich elite becoming markedly richer, while savers and retirees are being absolutely gutted. All while risking a coming conflagration in the bond markets that will destroy a painful percentage of the world's financial wealth:

On The Ticking Bond Market Time-Bomb

That’s the trillion-dollar question. We didn’t used to call it that did we? We used to call it the million-dollar question. But it's now the trillion-dollar question. The punditry up there will tell you that The Fed has been in tightening mode since the taper began several years ago, but I say hooey to that. What we have today is absolute fungibility with central bank purchases on a global basis. You're talking about something upwards of $200 billion every single month.

 

What the global bond market now revolves around, and relies upon, is the assumption that somebody somewhere will be conducting quantitative easing. As long as they do that, we're operating in a bond market that is assuming that every single bond purchased by a central bank globally has been expired permanently.

 

You’re taking supply out of the system, which is the only thing that could get you to justify where bond yields are and, therefore the mirror image of that, where bond prices are, which is at record highs or close to record highs. That I think is at the crux of central bankers’ global dilemma. The first central bank that even hints that they are going to reduce the size of the balance sheet or even worse, sell off a single bond, it is game over at that point for the world bond market.

On The Ticking Pension Time-Bomb

The problem with pensions is that the sins are compounding over time. They are piling up. Every single fiscal year that goes into the history books with a 6%+ gap between what was assumed versus what was returned piles on to the next year of equal, if not worse, relative underperformance.

 

You’re talking about having to make up for all of that lost time, but in spades -- at multiples of what the current rate of return assumptions are. Going forward, on an ongoing basis for years to come. Which is highly unrealistic when you are staring down the barrel of an almost 40-year bull market in bonds and the second longest bull market in US history. The assumptions are simply Herculean in magnitude and impossible to achieve. That’s why you’re seeing rate of return assumptions begin to come down.

 

This is all good, fine and well until you completely square the circle and understand that every time a municipality or a state pension plan reduces their rate of return assumptions, some entity, whether it be the state, the school district, some entity has to write a bigger check in order to make up for the cash flow that is no longer being assumed in by the actuaries via rate of return investments. It doesn’t work. You can’t do it for very long when you’re not bringing money in as a state municipality.

Click the play button below to listen to Chris' interview with Danielle DiMartino Booth (40m:01s).

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Stan Smith's picture

You wont hear this in the media however.   And certainly not from D.C. and the municipalities, cities, counties, and states that are all doing the same thing.

Promises, promises.    All going to go away.

YouJustMadeTheList's picture
YouJustMadeTheList (not verified) Feb 12, 2017 3:54 PM

There is no such things as money anymore. Only 'MONETARY POLICY'.

 

'MONEY' (to some) = the grape drink they purchase with their EBT cards

'MONEY' (to others) = the digital balance of their 401 (kiss it goodbye someday)

 

Somewhere inbetween all of that there's some wealth skimming going on, which, in the end, results in World Wars, pipelines, & pedophilia... & you ain't in that club (so really, YOU'RE the lucky one ~ unless, of course, you have a 401k & live off of a pension).

 

 

withglee's picture

There is no such things as money anymore. Only 'MONETARY POLICY'.

When you institute a "proper" MOE process, there is no such thing as "Monetary Policy".

petar's picture

A crisis every 5-10 years helps destroys the weak and creates space for new ideas. Its been working for over 100 years in the US

Omen IV's picture

false - crisis in that short interval creates no long term investment risk!!!

since you cant have a long enough horizon to reliably cash flow out and protect capital - levergae ratios change to less  equity more debt from dumb money

Dick Buttkiss's picture

Petar, are you vying to unseat MillionDollarBonus or just plain stupid?

Sam.Spade's picture

You have a seed of an idea, but that's about all.

One of the virtues of using equity for money (such as gold) is that the money supply is then inflexible.  On a micro level, this means that if a business owner plays too fast and loose with his finances or has a company that is only marginally profitable and makes a mistake, he won't be able to get a loan to save his ass.  He will go belly up and leave a hole which can then be filled with new blood chasing new ideas.

It's a different point from the one you make in two ways.  First, in this case, it's the market, not some banker cabal, which will decide who dies.  And secondly, it would be a process which would go on continuously, not in a 10-year cycle, so those looking for work after layoffs would find plenty of jobs to move into.  Right now, because we use debt for money, loans keep zombie companies alive while credit is cheap and then they all die at once, (as you say, every ten years or so, if we are lucky, and every 75 years if we are not), creating anything from a recession to another great depression.

The idea that living structures (like economies) grow stronger from continual stress, that the dead wood should be removed on a steady basis to keep the living vibrant and healthy, is one that is well described in Antifragile by Nassim Taleb.  If you haven't read the book, I recommend you get your hands on a copy.  It should be available in any library.  Or, spend the dime and buy a copy.

You won't be disappointed.

Rated 4.3 in 893 reviews:  https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/08129...

Ignatius's picture

The evil was in allowing the banksters to privatize the public's capital by establishing the FED.

"I killed the Bank!"  --  Andrew Jackson, on his deathbed.

Sam.Spade's picture

Not even close.  The evil was in letting debt be used as money to begin with.

Once you do that, you allow the people who print the stuff to use it to buy up all the goods, services, and assets of the rest of us.  Eventually, those who control the presses own everything while the rest of us are paupers.

See my post below for a detailed explanation of why our only path to freedom is to eliminate debt money from our national economy and go to some form of equity money such as gold or Bitcoin.

East Indian's picture

Fractional banking is / was possible even in a fully convertible god standard too. Ask the Rothschillds. In a full gold- standard, the bankster can "create" limited paper money, yes, but it is still > 0.

 

Fractionals banking leads to debt instruments being treated as money. This happens irrespective of the nature of money in circulation - whether it is gold, silver, nickel, copper, paper or bitcoins.

 

Ironically, the only way to kill the debt money (created by fractional banking) is to use a digital curency, or at least one standard software for banking that will not allow the bankster to extend more loans that the deposits with him!

Sam.Spade's picture

You are correct in most of what you say.  Money during the period between the United States 2nd Bank and the Fed was both equity (specie) and debt (bank notes).  But the latter were issued only by individual banks and so they were untrusted and heavily discounted.  As a result, they had a minimal effect on the quantity of the money supply.  So, to repeat a statement I made in another post somewhere around here, American money during that period was predominantly equity-based.

You are also correct about fractional-reserve banking.  The only way to prevent it from occurring is to prohibit banks from taking title to their deposits.  If they don't own those assets, they can't loan them out or encumber them in any way except by committing fraud.

Not that I would put some fraudulent scheme past them.  For that reason, I believe we should also prohibit banks from making any loans.  Together, these two requirements would kill debt money.

Unfortunately, using a 'digital currency', depending on what you mean by that term, won't matter much.  Right now, we are on the verge of going to a 'digital currency' as we eschew cash, but that will have no effect on the use of debt money.  If you want a graphic example, consider the GLD fund.  Shares in that fund are 'gold-backed', and could be traded like money electronically, but they are pure debt, representing less that 1/400th gold content.

If, by 'digital currency', you mean Bitcoin, then, yes, you are correct as much as you are correct about gold.  But, because Bitcoin, like gold, can be used for 'backing' for loans if the bank holds title (and therefore the private keys) to the Bitcoin, the use of this kind of equity money as a base won't solve the fractional reserve problem any more than it would by a gold-based system.

The critical points are three:  1) Some form of equity money must be the base, 2) Banks may never take title to their deposits and 3) Banks may never make loans.

Only these three rules will solve our monetary problems.

withglee's picture

describes how the Federal Reserve is controlled by 1,000 PhD economists and run by an unelected West Coast radical with no direct business experience.

And not a single one of them knows what money is. Think that might be a problem?

Ignatius's picture

"And not a single one of them knows what money is."

Never ascribe to pig ignorance what might be better understood as orchestrated mendacity.

That they hire boneheads to implement their policy shouldn't hide the fact that the architects undersood the meaning, nature and scope of their devious plan.

withglee's picture

Touche ... and what does that make us who tolerate it ... and some morons here who defend it or offer up the "gold is money" nonsense.

flaminratzazz's picture

is the answer to buy a catamaran and live with the natives in the Caribbean Islands?

I am thinking it is

Montgomery Burns's picture

Thats a great idea, until supply chains break down. Then those natives eat you.

 

flaminratzazz's picture

naw, there is alot of fish and fruit for the taking.. we doan need no steenkin supply chains.

check out the island natives off the coast of Panama.. they do resemble the cannibal headhunters but ya gota give them the benefit of doubt.

khnum's picture

The Federal Reserves theoretical reserves are infinity,infinity covers almost every sin,when the bankers that run the Fed pull the plug and only then is when it tanks and they'll have your savings,401k's and your bloody linoleum floor the next time round and nothing will happen thanks to generation stupid.

Helix6's picture

This might be true somewhere, but not here.  The problem with infinity lies in the money creation process, and particularly the role of deficit spending in injecting new money into the economy.  This is a major mechanism.  To find out how much money has been injected into the economy this way, just look at the public debt.  That's the number.

And right now, servicing that debt consumes nearly $200 billion per year.  And the only reason it's this low is because the Fed (or some other CB somewhere) has been supplying ZIRP cash to buy the government bonds, creating a seller's market.  The minute that stops, it's game over.  The cost of financing the public debt will skyrocket.  The government will have no choice but to either raise taxes or print money.  Well, or just default on the debt outright.  Clearly, none of these bode well for the US economy or society.

Even if the buyers keep coming, the debt has been doubling roughly every nine years ever since Reagan.  So even if the near-ZIRP environment continues, the cost of financing the debt (interest only)  is going to double by 2026, and quadruple by 2035.  Clearly, something is going to have to give.  And whatever that something is will probably give long before then.  So if your planning horizon is eighteen years or longer, you might want to think about how you can avoid being caught up in all this.

stopthehandouts's picture

Come on POTUS... one time bomb deserves another. Blow the FED up!

Squidbilly's picture
Squidbilly (not verified) Feb 12, 2017 4:15 PM

OH LOOK! ANOTHER SAVIOR AUTHOR PUSHING A BOOK WE DONT GIVE A FUCK ABOUT ABOUT. SHE JUST CANT MANAGE TO NAME THE (((JEW))) AS THE REASON FOR THE COUNTRIES COLLAPSE.

TAKE A PEEK AT "FED UP"

https://books.google.com/books?id=_YvmDQAAQBAJ&pg=PA101&lpg=PA101&dq=Dan...

Eustace Mullins - Secrets of The Federal Reserve (FULL)  

https://www.youtube.com/watch?v=Ul3Iyq1i_30

June 12 1776's picture

LOL Good post, I was going to make a post expressing same, you've got it covered but I will add:

the Olde World Order's, Star Chamber Liar Lawyer Cartel's, King's Monetary Theory Fraud was installed in the colonies over 240 years ago...........and to this very hour its "insider" class is still writing worthless books to baffle w/ BS their slavery!

besnook's picture

easy peasy. damn the inflation! full speed ahead!

inflation out running interest rates(70s) is the only real monetary answer. the fed has always been afraid of runaway inflation because they know they really have little control over the complexities of the real market. negative interest rates have deflated real asset prices(fn duh!) instead of scaring money out of the wood works. the chinese are dumping dollars into whatever they can buy with it essentially putting serious pressure on the value of the dollar threatening its role as the "sure safe bet". and the consumer still refuses to buy shit saving money instead flooding the market with an oversupply of capital because no one wants to invest in a savings mode consumer putting more pressure on the safe bet dollar.

they have to inflate or pay labor a bigger portion of productivity gains(profit). that is the only way out.

Dollar_Store_Confucius's picture

Thanks Mrs. Smedley Butler. Your valor is admirable, but it sure would be nice if people actually spoke out about this shit in the present, when they can still effect change. Go full Sibel Edmonds or go home, instead of waiting until your window is gone and you just sound like a disgruntled former employee looking for your fifteen minutes.

Squidbilly summed this up nicely a minute ago. Damn.

BlueHorseShoeLovesDT's picture

If Trump wasn't a dumbass he would put DiMartino Booth in a high position at the Fed

MuffDiver69's picture

Whatever your thoughts on the article DiMartino is a lesbian. Them big fake tits and all...

Sam.Spade's picture

You can tell she's a former Fed official, because all she wants to do is re-arrange the chairs on the Titanic.

Here is the painful truth which she won't tell you:  ANY central bank monetary policy (whether owned by private banks or the Treasury Department, it doesn't matter) always concentrates wealth (and, with it, political power) in the hands of the few at the expense of the many.  That's because every central bank creates money out of thin air and, of course, spends that money through their cronies before the price inflation caused by its creation can be felt.  By the time it trickles down to the rest of us,  that inflation has taken hold and made the gains worthless, as well as any savings we might have managed to accumulate.

The second problem, of course, is that the guys who print the money get to buy up our country with it.  Right now, the Fed or it's surrogate own controlling interest in most of the corporations on wall street, bought with printed money.

"In 2008, the FED increased spendable money (cash and checking account deposits) by $225 billion.  Someone spent that money when it was first created.  When they did, they could have paid the operating budget for every U.S. intelligence organization (including the CIA, NSA, and NRO), the U.S. Army, Department Of Homeland Security, and the Department Of Justice, with money left over to buy half of all U. S. TV advertising and pay every political contribution made to in in the name of every Federal candidate in that year."

There is only one antidote to this kind of unrestrained political power, and it's NOT some tweak or too in the way we print money.  If we want TPTB off our back, we MUST deprive them of the ability to create our money.

How?  First, return to equity money, such as gold or silver, which can't be created by a promise.  And, second, prohibit banks from making loans, thus preventing them from printing debt money through that mechanism.

The subject is too complex to describe in a short blog post, but it's not hard to understand once you dig into one of several good books on the subject.  I recommend The Creature From Jekyll Island by G. Edward Griffin.  In it's fifth printing, a best seller since 1980, it's the bible on the subject.

But, if it's too heavy for you (it's not, after all, a beginner's book), then get your hands on a copy of Thieves Emporium by Max Hernandez.  It uses fast-paced fiction to discuss the basics of the problem while keeping you hooked to the very end by a compelling story, after which you will be ready to tackle Jekyll Island. (The above quote was from this book.)

But whatever you do, for your children's sake, get your hands on one of them and read it NOW.  Because if we don't understand how central banks have taken over most countries in the world, including ours, you will be a sucker for whatever the next brand of snake oil they are selling and your children will complete their lives as bit players in a new reality remake of 1984.

Rated 4.7 in 775 reviews:  https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/091298645X

Rated 4.6 in 116 reviews:  https://www.amazon.com/Thieves-Emporium-Max-Hernandez-ebook/dp/B00CWWWRK0

East Indian's picture

Well spoken. 

Full, freely convertible gold standard, with "No Public - or even private - Bailouts of Banks", will be the best system ever. And minting should be by the Government.

All other systems will need a central controller who can create or destroy money- bad for us. 

 

Fractional banking (circulating promissary notes without money to back it up) will still continue a bit, but the fear of bank failures (and a subsequent tar-and-feather of the banksters) will keep it under check. 

Sam.Spade's picture

I upvote you and agree with most of your points.  But not that about fractional banking.  To allow any of it to exist, at all, is to allow the backbone of our monetary system to be a chain of casinos, each betting that loans will be repaid.  A much better analog for what we need are money warehouses, where your money is stored, unencumbered, until you give the warehouse directions on its disposal.

And I must question with your statement about "private" bail-outs of banks.  As long as the funds do not come from public coffers, it seems to me that the entity doing the bailing should be allowed to risk his/her capital in any way he/she wants, not so?

Finally, I must also disagree with your comment on mint ownership.  I believe mints should all be private business, regulated by the government, just as any manufacturer of weight-based products is now regulated, with only one exception:  The penalities for fraud should be much stiffer for a mint than for a manufacturer of sacks of cement. That moves the profit motive for cheating on weight away from the institution that is enforcing the standard.  It's not much protection, but we need all we can get.

East Indian's picture

I am not advocating fractional banking. I am warning that fractional banking will still exist. 

 

Fractional banking always rears its head in a gold- standard this way: when large volumes of money are transacted, sooner or later, a token replaces the actual money, to avoid the inconvenience of carrying all that commodity money. Usually this token is a deposit receipt from a depository. Soon the depositary starts issuing fake receipts for non-existent deposits; and that is how funny money comes into existence.

 

As for private vs public mints, well, you have not seen the third world mints, and I have. 

Sam.Spade's picture

Everything you say about fractional-reserve banking is correct and I upvote you for it.

Just out of curiosity, are the mints in India regulated in any way?  In fact, I mean, not just in theory?

Also, have you read Thieves Emporium?  If not, would you like to?  If so, I would be pleased (as the publisher) to give you an evaluation copy as I think you would like it.

East Indian's picture

I read "Thieves Emporium"; was quite impressed; excellent work. I especially like the end where there is no poetic justice, only plain, real-world ending. Congratulations, you have brought out a legend that will live for a long time.

 

Indian mints are not controlled for quality; they are only controlled for their sales tax purposes.

June 12 1776's picture

Previous ZH poster's below have it covered great, I'll just add:

the Olde World Order's, Star Chamber Liar Lawyer Cartel's, King's Monetary Theory Fraud was installed in the colonies over 240 years ago...........and to this very hour its "insider" class is still writing worthless "books" to baffle w/ BS their enslaved class.

Viva La NUTBUSH!

ah-ooog-ah's picture

+100 for Chris Martenson

this is what brought me here:

https://www.peakprosperity.com/crashcourse

Northern Flicker's picture

The FED needs to go - Ellen Brown has the solution with Public Banking. Why should governments pay interest on monies that can be created out of thin air?  Was already done in the US (Abe Lincoln's green back), Canada (up to 1974 - Canada had almost no debt) and many other countries/states (still in North Dakota) before Central Banks got involved.

The FDA (aka The Pharmaceutical Industry), Dept. of Agriculture (aka Monsanto et al.), EPA/ BLM (aka Agenda 21) are monopolies (mostly controlled by industry) that should all be busted-up or entirely eliminated.  They no longer serve human needs, if they ever did.

Too much government. Trump is right that human-caused global warming is a scam.  Most land-based pollution is satisfactorily coming under control ... perhaps fracking, nuclear energy and ocean-based pollution deserves more attention, but can be easily dealt with.  

Sam.Spade's picture

Absolute BULLSHIT.  Ellen Brown is just a shill for the FED, preparing a position for central bankers to move into when the FED becomes politically intenable.

You want less government?  Than make the bastards earn what they want to spend like everyone else by going to equity money.  Do that, and I guarentee that pretty soon, they will run only programs that have essential value to the country.

Don't believe me?  Then take a look at the monetary history of our country.  From the end of the second bank, through to 1913, (with the brief exception of the Civil War), we were primarly on equity money (gold or silver) and we, as a nation, had little debt and a booming economy.

More to the point, it is no accident that the concept of totalitarianism never existed until central banks legatimized the creation of debt money because the carrot is mighter than the stick.  Let the government print your money and you have given it unrestricted control over all the carrots in our society.

Power is a gold coin in the palm of your hand, a rifle in your closet, encrypted communications with anyone you want, and the anonymity necessary to keep the government from taking any of it away from you.

And that, in a nutshell, is what the novel Thieves Emporium is about.

Better get your hands on a copy before the state forces it off the market.

 

 

Northern Flicker's picture

OK - maybe you are right.  I have Ellen Brown's email so I will send her your thoughts. Maybe we'll get an answer.

Northern Flicker's picture

PPS - I appreciate your comments.

Sam.Spade's picture

Not likely to get an answer, but thanks for trying.  It would be interesting to see what she has to say.

East Indian's picture

"Power is a gold coin in the palm of your hand, a rifle in your closet, encrypted communications with anyone you want, and the anonymity necessary to keep the government from taking any of it away from you."

 

+1000. A small suggestion:


Freedom means a gold coin in the palm of your hand, a rifle in your closet, encrypted communications with anyone you want, and the anonymity necessary to keep the government from taking any of it away from you.

Sam.Spade's picture

Thank you for your suggestion, it is a good one.

I made my statement the way I did because I believe that freedom is never given, only taken.  If you let someone else have power over you, they will eventually take your freedom.  If you have empowered yourself, then you may take it back, but only if you choose to go to the trouble to do so.

The fundamental component is power, Freedom may or may not flow from it depending on the actions/objectives of the holder of that power.

Would you like me to get you an evaluation copy of Thieves Emporium?  I do think you would like it and I would be most interested in hearing your thoughts on the ideas in the book.

The Wizard's picture

"Economics" is a behavioral science. A science of decision making. These academics and hired hands on Wall St. have created econometric models making everyone believe economics centers around financial and monetary markets. It's a closed paradigm which slaps each other on the back with an occassional bit of confrontation. What sort of models are these experts using in their analysis?  Most all of them are based on Keynesian technical stats. How do the models being used factor in manipulation. They don't, making most all of them useless.

The only reason the U.S. is fat and happy is because its fiat currency was accepted as a world reserve with military backing. Those days are numbered. Even the critics don't mention manipulation of the markets.

Grandad Grumps's picture

I suppose the Fed is located in the US, but it is not part of the US Federal government. The Fed itself is constantly claiming that it is separate and above the US government. Therefore if there is going to be any one to blame for what has been happening in America, it has to be the Fed ... and its owner banks of course... and the families who own those bank and their ultimate boss.

Reaper's picture

$4 trillion dollars in Fed assets corrupts absolutely. If Fed employees enrich themselves or their cronies according to the Fed's rules or not, there would be no charges nor information provided to the public to protect their system. $4 trillion dollars is the largest moral hazard in the world. The FBI must seize the records of all expenditures. Large foreign expenditures, aka gifts, would turn the people against the Fed.

JailBanksters's picture

Who's got all the worthless gold stolen from the Feral Reserve at the WTC ?

 

monad's picture

I like North Dakota's solution

nostromo17's picture

In total no one got actually richer.

The wealthier got a larger piece of a shrinking pie.

East Indian's picture

Money should be a tangible proof  of past Work - gold, silver or copper; equating it with a promise of future work - central bankster's notes - or even with an intangible proof of past work - bitcoins - is the first step towards slavery and desolation.

strateshooter's picture

IAm not a finance guy but I have a question....
What happens to society when The Central banks own everything -all bonds and all shares and all mortgages ?