Guest Post: The Rot Runs Deep 1: The Federal Reserve Is A Parasitic Wealth Transfer Machine

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Federal Reserve is a wealth transfer machine, skimming wealth from the productive many and transferring it to the parasitic few.

Today I launch a series entitled "The Rot Runs Deep" that examines the moral and financial rot at the core of American finance, politics and culture. We have reached a unique junction of American history: the confluence of Big Lie propaganda, neofeudalism and the worship of false financial gods.

The Big Lie propaganda machine of corporate media and the Central State has perfected Orwell's nightmare vision of centralized media and a fascist centralized State which turn lies into self-serving "truth."

Since the Federal Reserve is once again expected to "save" a crumbling, exploitative Status Quo, let's use the Fed as an example. The propaganda machine would have us believe that the Federal Reserve, the privately owned central bank of the U.S., has "saved" the Status Quo from financial ruin on numerous occasions by "smoothing out" the business cycle (credit expands and contracts) and by "stimulating aggregate demand" by lowering interest rates and pumping money into the economy (quantitative easing).

We are constantly prompted to worship the Federal Reserve's supposedly god-like powers to rescue a corrupt and venal Status Quo from the black hole of recession and collapse, and this Big Lie masks its real nature: The Fed is nothing but a parastic wealth transfer machine, skimming wealth from the many and transferring it to the few.

In effect, the Fed is the "enforcer" of neofeudalism in America: the feudal Lords of Finance control the for-sale political system and skim tribute from the 99.5% toiling in the fields below their castles. The Fed enforces this parasitic transfer of wealth by manipulating interest rates to enrich the banks and provides "free money" to the Financial Lords which is then used to buy assets and lend at interest.

The mechanisms of the Fed's parasitic transfer of wealth are well-known. Here's one: the Fed "loans" money to the Feudal Lords at 0% interest. the Lords then loan this free money out to peasants, students and other debt-serfs at high rates of interest. The interest "earned," courtesy of the parasitic Fed, is theirs to keep.

If they can't find enough debt-serfs who can pay more interest, they can always deposit the free money back at the Fed and earn interest from the Fed itself.

Here's another: the Fed "loans" free money (0% interest) to the Financial Lords, who then buy low-risk long-term U.S. Treasury bonds paying 3%. When the Lords spot a better skimming opportunity, they sell the bonds to the Fed, who buys the bonds from the Lords as part of its "Operation Twist."

Peasants who have arduously saved up capital (cash) earn next to nothing as a result of Fed policy, but the Fed insures Feudal Lords earn a guaranteed return on money they obtained for free. The suppression of interest income to near-zero (a negative return once inflation is factored in) is a massive transfer of wealth from savers to Fed-backed speculator Lords and banks.

As a direct and intentional result of the Fed's quantitative easing, huge sums of "free money" slosh into the "risk-on" stock market, where the money provides liquidity for the Lords' high-frequency trading (HFT) skimming operations.

The losers are the peasants who have been locked into 401K plans that divert their earnings into the stock market, where the Lords' HFT can skim billions from the 401K plans.

The Fed guarantees the Lords free money, and also supports the Financial Lords' speculative bets in the stock market; whenever the market threatens to swoon, the Fed intervenes and manipulates the markets up to levels where the HFT machines will trigger momentum buying.

What do we call a power center that enables and enforces neofeudal exploitation and predation? We call it evil. The Federal Reserve is a force of evil that should be abolished at once. Its purpose--enabling and enforcing a neofeudal transfer of wealth from the productive many to the unproductive, parasitic few--is evil. Those within it are serving evil. Those who defend it are serving evil. Those who worship its power are serving evil. Those who mask its true nature are also serving evil.

In a society and culture that has lost its moral compass, a culture of greed, self-serving lies and corrupt vested interests, the word "evil" has lost its power. It has been reduced to a cartoonish label, a cynic's smarmy joke.

The Soviet Empire was evil, and President Reagan was mocked by "sophisticates" for labeling our global competitor evil. In the relativist terms of propaganda, the only difference between the U.S. and the U.S.S.R. were two letters; this is the mindset created by a reliance on propaganda. There is no good or evil, there is only the paycheck "earned" by serving one master or another.

Anyone daring to label the widely worshipped Federal Reserve as a false god, a purveyor and enforcer of predation and exploitation, will also be mocked by presumptive "sophisticates" of the many Cargo Cults that depend on the neofeudal skimming, exploitation and lies for their own share of the spoils. Their self aggrandizement and share of the swag demands obedience to the Fed's godlike power to skim from the many and distribute to the few.

Since they are among the few, they will do anything for their Master, the Federal Reserve, for it has the power they worship: the power to transfer vast wealth from the productive many to the parasitic few.

Should we be surprised that the parasites in the media, academia, politics and finance support the evil that enables their own predation and exploitation? Of course not, for self-service and self-justification are the ultimate American gods.

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Sun, 08/26/2012 - 16:11 | 2738983 Renewable Life
Renewable Life's picture

Oh Tyler, why do you have to be hard on parasites???

Sun, 08/26/2012 - 16:14 | 2738987 JR
JR's picture

Parasites are people, too!

Sun, 08/26/2012 - 16:20 | 2739006 flacon
flacon's picture

Parasite begins with "Ph.Dee" and itches like a Poison Ivy League.

Sun, 08/26/2012 - 17:35 | 2739137 XitSam
XitSam's picture

Occupy parasites! Before they occupy you.

Sun, 08/26/2012 - 19:24 | 2739449 saturn
saturn's picture

Boycott the evil. Use your own money, not theirs. It is THAT easy!!!

Sun, 08/26/2012 - 23:18 | 2740051 Mithril
Mithril's picture

One Banking Ring to rule them all and in the darkness bind them....The newly formed "Financial Stability Board" of the Bank of International Settlement. Yes the one that Obama signed onto, is going to make a one world currency... Effectively taking away everyones sovereignty.... Don't let it pass into law!!! They are going to ride in on a white horse to "save the day" after they created this shit with a new world fiat currency of SDR's. End the Fed and get the pitchforks! Stand up for your Constitutional Rights... Our founding fathers are rolling over in their graves... Tyler and George help spread the word. Stop these Bastards NOW! Fuck you Ben and Timmy.

Mon, 08/27/2012 - 04:46 | 2740331 AldousHuxley
AldousHuxley's picture

fed exists to avoid great depression, but not it is a crutch used by banksters and politicians to stay in power.


It is the arrogance of the Fed (Greedspan) that turned itself in. Bernanke is just a finishing touch.


Greedspan said middle class makes too much money so let's kill the middle class. reagonomics, thatcher, and wall st. deregulation....all designed to follow elite's agenda of getting rid of the middle class



Mon, 08/27/2012 - 09:06 | 2740604 Element
Element's picture
The Creature From Jekyll Island (by G. Edward Griffin) - 1 hour 47 mins

Sun, 08/26/2012 - 20:37 | 2739692 ElTerco
ElTerco's picture

I didn't know the Koch Brothers were Ph.D.s!!!  On second thought, "Piled Higher and Deeper" does seem to sum them up.

Sun, 08/26/2012 - 16:28 | 2739019 Mr. Fix
Mr. Fix's picture

This may be a stretch,

 but I do not consider parasites people too.

 They are a disease, which will annihilate the human race if not confronted, and exterminated.

 The easiest way to do that, is simply identify them, and cut them off.

 If you stop looking at parasites as people too, than

 you will be much much further along towards finding the solution.

Sun, 08/26/2012 - 16:35 | 2739033 fourchan
fourchan's picture



maybe calling the fed "fucking evil" would be more accurate than just the run of the mill mother raper child killer evil?

Sun, 08/26/2012 - 16:35 | 2739034 fourchan
fourchan's picture



maybe calling the fed "fucking evil" would be more accurate than just the run of the mill mother raper child killer evil?

Sun, 08/26/2012 - 19:38 | 2739504 Roandavid
Roandavid's picture

You go fourchan.

I bumped you twice.

Sun, 08/26/2012 - 16:41 | 2739043 knukles
knukles's picture

But Corporations are People, too.
And Animals have Legal Representation.
And Politicians are well....

Now, I may not be the brightest bulb in the egg carton, but even I can figure out how to do some really self aggrandizing shit if I was in charge of an organization that:
Makes money out of thin air
Has no oversight whatsoever
Is not audited
Is protected by the Law Makers and the Law Enforcers
Can wire money anywhere in the world
To any account
Without question
Which the politicians, plebes and peasantry believe is an absolute necessity of an organization

And if somebody fucks with my precious said organization what with all the powers heretofore elucidated, they will get their  ass sent to Heaven, Real Fucking Quick (and I don't mean Becky)

WTF does nobody understand?
Congress understands it, because the Fed still gets to make money out of thin air, have no oversight....


Sun, 08/26/2012 - 16:53 | 2739071 Michael
Michael's picture

Shouldn't those persons be paying the alternative minimum tax then?

Let me see if I get this strait;

The Federal Reserve is handing its corporate member banks on a silver platter hundreds of billions of dollars in free money by collecting interest on Fed deposits in their banks. That's what the 28 trillion dollars is for?

Sun, 08/26/2012 - 17:28 | 2739125 slewie the pi-rat
slewie the pi-rat's picture


what's that?  L0L!!!

i hope charles anti-Orwell doesn't have worms!

every word charles writes costs everybody!   sounds like he's having a rough year beating dead horses

i'm not sure he'd recognize a live one!

Mon, 08/27/2012 - 06:08 | 2740392 slewie the pi-rat
slewie the pi-rat's picture

The Federal Reserve is a force of evil that should be abolished at once.

Games  <: this link explains some of the psychology which tyler and charles are tripping on here

Playing “Ain’t It Awful” « The Outpost <:  same stuff, political angle (from a "lib" though so probably not true.  L0L)

charlesBinLaden?  the greatSatan is gonna fall to charlesSmith?

and anyone who questions this nonsense must have forgotten to take his meds!  that's the ticket!

if you don't understand you have been brainwashed by the propagandists and need remedial psychology b/c we're anti-orwell

are you shitting moi?  this is gonna be a series? what's thePlan, chasmo? 

slewie predicts that if charles lives w/in a 50-mile radius of the chairsatan or any FED regionalBank, he will be rooming w/ sgtRaub when he receives thePulitzer for best comedy jihad in an election year

if this gets any funnier, i am gonna need new carpeting soon!

keep drinking, tyler!

Sun, 08/26/2012 - 21:17 | 2739800 traderjoe
traderjoe's picture

With fractional reserve banking - the corporate banks can create all the money they want out of thin air - thank you very much.

Sun, 08/26/2012 - 22:58 | 2740025 robertocarlos
robertocarlos's picture

As long as the only take out loans and then pay the loans back, it should be OK.

Sun, 08/26/2012 - 18:15 | 2739229 Ignatius
Ignatius's picture

Debt free money -- or, conversely, money issued as an asset -- is the civil rights issue of the 21st century.

End the Fed.

Sun, 08/26/2012 - 16:49 | 2739063 JR
JR's picture

Mr. Fix, my dear literalistic friend, I do not consider parasites people.

Sun, 08/26/2012 - 16:15 | 2738991 Silver Bug
Silver Bug's picture

The Federal Reserve will eventually implode on itself.

Sun, 08/26/2012 - 16:22 | 2739008 centerline
centerline's picture

By design.

Sun, 08/26/2012 - 16:22 | 2739010 LawsofPhysics
LawsofPhysics's picture

"Ryan is the perfect conservative pick"

Paul Ryan is a career puppet who voted for bailouts (GM, AIG, TARP, TALF, Fanny, and Freddy - all to save banks and financial houses).  The best part is he voted against any oversight of those bailouts.

Perhaps you could explain to me how the fuck these are conservative actions?

Left... right... left... right...

soon the sheep and their children march off to war and their slaughter.

Looks like more of the same to me as the owners of the Federal Reserve prepare to simply change the game and call it something else (like an SDR).

Nothing changes until the guillotines are put to use on the real owners, period.

Sun, 08/26/2012 - 16:27 | 2739018 sessinpo
sessinpo's picture


There is no right anymore.

Sun, 08/26/2012 - 18:04 | 2739072 ZerOhead
ZerOhead's picture

Right and left have both simply been replaced by wrong.

Wrong and wronger, corrupt and corrupter, and dumb and dumber...


God bless America... land of the fleeced and the home of the slave.

Sun, 08/26/2012 - 21:45 | 2739870 defencev
defencev's picture

Even the author of the "article" whom I consider to be a proven idiot took pains to distinguish between USSR and USA. The readers seems to me lost any sense of reality by putting everybody in the evil category. Well, I have a news for you:Federal reserve as an institution is not evil. It provides specific tools to regulate the economy and hence more flexibility. There is absolutely nothing wrong with that. The people who run ZIRP definitely are evil. What is a point in having zero interest rates if the only beneficiary of this policy are market participants who do not need it (big corporations who have ability to borrow money under low rates but have plenty of cash,anyway) or the government who use this opportunity to borrow and waste more with very low interest. Small businesses cannot borrow, anyway. Why not to have higher interests? That would at least award savers and put some discipline on government wasters. Well, you can have higher interests, if and only if.. there is a Fed and people who run it make some sense.

Sun, 08/26/2012 - 20:15 | 2739630 Papasmurf
Papasmurf's picture

There is no wrong anymore.  And that is the problem.

Sun, 08/26/2012 - 16:29 | 2739021 Everybodys All ...
Everybodys All American's picture

For someone that is against the machine you sure have a left lean to your rants.

Sun, 08/26/2012 - 16:47 | 2739057 LawsofPhysics
LawsofPhysics's picture

There is no right or left anymore.  Soon there will be no dollar and all that you may have in "wealth" or "security" will be found in the genuine productivity, intellect, and innovation of yourself, your employees and those you chose to associate with.

I don't necessarily view this as a bad thing.  A true conservative wouldn't either.  Want a better society?  Let bad ideas,  bad management, bad corporations, and bad institutions fail.  Nature makes sure that there are real consequence for bad behavior and a good republic should as well.  Either way, Nature wins.

Hedge accordingly (that is all you can really do anyway).

Sun, 08/26/2012 - 16:53 | 2739070 Everybodys All ...
Everybodys All American's picture

I agree whole heartedly with everything you said. I still unfortunately in your view I suppose hold out hope for for the right and/or left to at some point reform their parties. Granted it may be too late very soon.

Sun, 08/26/2012 - 17:05 | 2739086 CH1
CH1's picture

With respect: By holding out hope, you remain immobilized inside of that paradigm.

The only 'hope' is to ditch the evil system and get busy building better things.


Sun, 08/26/2012 - 18:04 | 2739192 Spastica Rex
Spastica Rex's picture

You cannot go against nature, because when you do (go against nature), it's part of nature too.

Welcome to human nature.

Sun, 08/26/2012 - 21:11 | 2739787 LawsofPhysics
LawsofPhysics's picture

Not sure i understand. Please, stop drinking all fluids and let us know how that works out for you.

Sun, 08/26/2012 - 16:42 | 2739049 knukles
knukles's picture

Perhaps the chap meant (or is otherwise mentally infirmed) that Ryan is the perfect Neo-Con pick.
A true conservative would never display that voting record....


Sun, 08/26/2012 - 18:21 | 2739246 Anusocracy
Anusocracy's picture

Ryan is the perfect neocon prick.

Sun, 08/26/2012 - 16:56 | 2739075 resurger
resurger's picture


Sun, 08/26/2012 - 17:21 | 2739111 grid-b-gone
grid-b-gone's picture

The only non-puppet this year lost in Maine due to voting fraud.

Iceland is now the model for freedom, as the U.S. was nearly 240 years ago. That's three saeculum cycles - not a bad run in historical terms. Now, it appears we must struggle just to save what we took for granted as permanent.

Like Iceland, struggle need not mean any dangerous action. Just say no to actions that run counter to The Constitution. Starve the beast and help a neighbor. 

That's about all it would take, except so much of the inane texting and tweeting citizenry does not yet comprehend the situation. 

We all laughed at Leno's "Street Walking" segments, but that all-too-typical cluelessness is what we need to break through before this situation can be reversed.

Sun, 08/26/2012 - 18:26 | 2739254 banksterhater
banksterhater's picture

and he wants/sponsors PERSONHOOD, making even birth control and invitro a crime. Yea for progressive womens rights.

Sun, 08/26/2012 - 17:27 | 2739118 FreeSlave
FreeSlave's picture

Why ZH would not put a news that Ron Pauls Convention going on? What is up with you Tyler!??? You can see that live

Sun, 08/26/2012 - 19:04 | 2739380 Turin Turambar
Turin Turambar's picture

It'll implode alright, but on us.  :-(

Sun, 08/26/2012 - 17:28 | 2739123 Landrew
Landrew's picture

Remember it IS a GUEST post.

Sun, 08/26/2012 - 16:15 | 2738989 LawsofPhysics
LawsofPhysics's picture

That which cannot be sustained, won't be.  Entropy's a bitch, but I certainly am looking forward to beer becoming the new "gold standard".  In terms of trade and civilization, throughout history agriculture and commodities in general always win in the end.  Fucking bring it.

Sun, 08/26/2012 - 19:45 | 2739530 Shigure
Shigure's picture

Brewing beer is next on my list of new skills to aquire

Sun, 08/26/2012 - 20:21 | 2739650 Papasmurf
Papasmurf's picture

Stay thirsty, my friend.

Sun, 08/26/2012 - 16:15 | 2738993 Meesohaawnee
Meesohaawnee's picture

but wait. they call it "stimulus" .. i thought that was good <sarc>

Sun, 08/26/2012 - 16:44 | 2739051 Goldilocks
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Diffrent strokes Tv show intro (0:50)


Bitter Creek Western Live Steam Narrow Gauge Meet 2007 (4:39)

(remember to breathe) Alberta - Travel Alberta (3:00)

Sun, 08/26/2012 - 20:39 | 2739697 msmith9962
msmith9962's picture

If the stimulus lasts more than 4 hours call an ambulance.

Sun, 08/26/2012 - 16:24 | 2739001 LMAOLORI
LMAOLORI's picture




This is an article everyone who frequents ZH should be able to agree with 

btw speaking of Orwell

The BBC declined to have a statue of George Orwell outside its headquarters. Quite right - his genius deserves better


"In a society and culture that has lost its moral compass, a culture of greed, self-serving lies and corrupt vested interests, the word "evil" has lost its power. It has been reduced to a cartoonish label, a cynic's smarmy joke."

And speaking of smarmy


Crony Corporate Elitist Hosts Wedding of Daughter of Fed Bankster



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