Ebeling: Insolvency at the Fed | Baker: Parasitic FIRE Economy

We bet you've been waiting for a crackin' explanation of how the [metaphorically insolvent...haha no GAAP for you, Bernanke] Fed will go bust, taking down the DXY with it (reserve currency status: now optional [at least according to S&P, one subpoena ago, status quo ante]).  Getting back to the main point, we discussed this and other matters with Austrian economist, Richard Ebeling, at 2:48 in:


  • At 3:10, we discus QE and the effects of inflating money supply
  • At 4:37, Professor Ebeling draws an interesting parallel to our dire situation in 1945
  • Are interest rates are prices?  You bet!  At 4:50 the Fed mandate is disclosed as nothing more than another price control, not allowing savings and investments to balance
  • At 6:00, we discuss the next economic crisis and the artificial myopic-ness of econometrics.
  • Guess what?  Ebeling spent time with both Hayek and Rothbard.  The former is discussed at 7:37 and the self-deprecating latter at 9:15.  The road to serfdom never looked better paved.
  • We finally get to the Fed's [potential, on a GAAP basis...haha, will never happen] insolvency at 10:15.  Yes, the Fed may have to print money to keep the big bank's QE money parked at the Fed.  Just think about that.
  • How did the Fed justify this?  Turn to page A-11 of the Fed accounting manual.  Yes, those legal opinions, allegedly required by the so-called auditor, Deloitte, are from 1922.  Why does this matter?  See below.

We also get into monetary base expansion, false sterilization and the Fed's so-called exit strategy (spoiler alert: it does not exist).


Dean Baker, co-founder, Center for Economic and Policy Research begins this episode by criticizing the FIRE economy at 2:55 in:

Other highlights:

  • 4:50 Are derivatives simply political theater
  • 5:35: CDO's...whats up with them?
  • 6:00 Greenspan's false [prophet] conciliatory speech to Con-gress
  • 7:20 Bernanke's admission of his flaccid econometric prognostications 
  • 7:45 Breaking up too-big-to-fail and ... dare we say Glass Steagall
  • 8:35 Too-interconnected-too-fail and a derivatives limit Mr. Baker can live with: $200 billion (okay)
  • 10:00 Why Fed monetary policy is gamed by the structure of the FOMC itself (12 banks, 5 votes?)
  • 11:07 Summers v. Yellen?  Yes, we went there.
  • 12:55 The Kabuki / theatrics of the debt ceiling.


Getting back to the whole Fed accounting fraud thing, whereby a quasi-government agency is legally sanctioned to skim "profits" vis a vis Treasury and MBS interest coupons, pay the helicopter fuel bills, then remit any so-called profits to the US Treasury, but only after paying the big banks their IOER dues, we submit the following, upon which we will be following quite soon.  Question: Did Fed General Councel, Scott Alvarez, forge the signature of the office of the US Attorney General (Eric Holder, you there)?  Just asking.



The issue is: if the Fed can pay JP Morgan 6% dividends, then it can pay interest on excess reserves, even if the Fed goes cash flow negative.  It's a backdoor bailout of the big banks during a "tightening cycle" (make that foreign banks, since they have the most excess reserves).  Congratulations, Fed.


Bob (Twitter: EnglishPI)