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View Full Version : Brawls at the Fed, as the System Comes Down



MorningSong
26th August 2010, 21:43
And the walls come tumbling down....


August 25, 2010 7:15AM

A senior Washington intelligence source reported this morning that a serious fight has erupted inside the Federal Reserve over hyperinflation, and that people close to the Fed are going to be leaking details, which means the fight will intensify and become more public. He added that that fight is now erupting inside this week's annual Jackson Hole economic summit of the Fed, whose host, Thomas Hoenig of the Kansas City Fed, has publicly dissented from Bernanke's hyperinflationary decisions at each of the last eight meetings of the Federal Open Market Committee. And indeed, sources at that Jackson Hole gathering report that it is an extremely interesting one, especially its off-the-record discussions.

Lyndon LaRouche responded, "I'm not surprised about the brawl in the Fed; for me it's not commentary. I know what's going on. If we don't get rid of this President, you're not going to have a country. We're talking about very short term. I think interpreting events is a mistake, because you're not interpreting the non-events, or the events which are happening but which are not being reported or not being referred to."

Returning to this topic, he added, later: "The break actually happened several weeks ago, and what you're seeing with this Jackson Hole meeting of the Fed, and things like that, is you're seeing reflections of the fact that anybody on the inside knows, without any statistical mumbo-jumbo, that this system is coming down fast."

Similarly, today's Wall St Journal reports that the Aug 10 meeting of the Federal Open Market Committee, whose decision to purchase hundreds of billions of Treasuries was part of the Weimar-hyperinflationary turn in policy that LaRouche had forecast, was the "most contentious" such meeting in "bubbles" Ben Bernanke's four-plus-year tenure as Chairman. Although Hoenig was the only dissenter on the final vote, the Journal reports that no fewer than seven of the seventeen committee members expressed serious reservations concerning that insane decision.

On Monday, Aug 23, Hoenig testified before a field hearing of the House Subcommittee on Oversight and Investigations. In his testimony, available at the website of the Kansas City Fed, Hoenig showed that it is the community banks which are still providing credit to American businesses, while the bailed-out Wall Street banks have ceased to do so for practical purposes. But that the great danger to these community banks is the "too-big-to-fail" giants of Wall Street. The Kansas City Fed website also features Hoenig's address to a Lincoln, Nebraska, Town Hall Meeting of Aug. 13, where he detailed his arguments against Bernanke's zero-interest rate policy. Sources around the Fed report that Hoenig feels obligated to publicize his opposition the more, because of the large numbers of other opponents who are unable to go public as of now.

Additionally, on Tuesday, Aug. 24, Dallas Federal Reserve President Richard Fisher gave a Fox Business News interview expressing cautious reservations about the Bernanke policies in diplomatic language. Both Hoenig and Fisher are Glass-Steagall supporters who also supported the Sen. Blanche Lincoln efforts to limit bank derivatives trading.


http://larouchepac.com/node/15589

Humble Janitor
27th August 2010, 00:54
Oh geez, Lyndon LaRouche? Isn't he nuts?

mgray
27th August 2010, 01:39
I would not take Lyndon LaRouche's comments very seriously.
However there is much worry in The Fed over deflation. What some say as measures, which are hyperinflationary others see as staving off the deflationary trap.
The Obama administration would prefer inflation, because it cheapens the debt obligation we owe.
The Fed has too few tools to fight deflation right now. The durable goods and tomorrow's slashed 2Q GDP revision will confirm no growth in economic stats and prices falling.

Lost Soul
27th August 2010, 04:20
The Feds are worried about deflation? Four stimulus bills plus several smaller ones means there's more money in circulation (or more aptly, debt) out there owed by the government and the taxpayer than ever before. We're talking over $13 trillion and growing by $3.9 billion dollars a day. Little wonder those who hold our debt are worried. They know that what they'll be paid will be less than what they paid for. No, we're not looking at deflation but hyper-inflation. In a sense, that would be good because that would be one way that our children not-yet-born can escape the mess created by this generation. We're following the Zimbabwe/Weimar Republic model of hyper-inflation folks.

Luke
27th August 2010, 06:31
Timely piece from Gonzalo Lira:
Hyperinflation, Part II: What It Will Look Like
(http://www.zerohedge.com/article/guest-post-hyperinflation-part-ii-what-it-will-look)

Right now, there are two forms of paper currency: Actual dollars, and Treasury bonds. One is a medium of exchange, the other a store of value.

If Treasuries—the store of value—were to collapse in price, and the Fed—as I predict—tried everything in its power to at least initially prop up their prices, would those sellers who managed to get out of Treasuries in time then turn around and invest in even dodgier bits of paper, like stocks? Or REIT’s? Or even precious metal ETF’s?

No they would not: They would get out of Treasuries—supposedly the “safest” investment there is—and get into something even safer—something even more tangible: Actual commodities. Not ETF’s, not even futures (or anything else that entails counterparty risk)—sellers of Treasuries would get into actual, hard commodities. Because if suddenly even the safest of all investment vehicles is now unsafe, do you really want to get behind the wheel of an even more unsafe vehicle, like stocks or corporate bonds or ETF’s? I mean, c’mon: If Treasuries crash, what else might crash?


Would there be Federal government intervention of some sort? Most definitely—people would be screaming for it. Would food rationing be implemented? Probably, and probably by way of the current Food Stamps program. Troops on the streets, protecting gas stations and supermarkets? Curfews to prevent looting? Palliative dollar printing? Yes, yes, and very likely yes.


Palliative dollar printing will take place when the Federal government simply runs out of options. Smart economists will get on CNBC and argue that, “The velocity of money is destroying the economy—we must expand the currency base!” It’ll sound logical, but palliative money-printing will be a policy option born out of panic. The final policy option. It won’t be done for evil conspiratorial reasons—always remember Aphorism #6 (“Never ascribe to malice what can be explained by incompetence.”). It’ll be carried out because of fear and panic.

A whole boatload of fools in Washington, on seeing this terrible commodity-driven crisis unfold, with consumer prices shooting the moon, will scream for dollars to be printed—and their rationale will be perfectly reasonable, I can practically hear it now: “We've got to get cash into the hands of the average American citizen, so he or she can buy food and heating oil for their families! We can’t let Americans starve and freeze to death!”


That’s Baron de Rothschild’s famous line—but it hides a key insight, one which should be highlighted perhaps even more forcefully than the line itself:

Even in the midst of Apocalypse, things will get better.

That’s something people don’t quite seem to understand. In fact, it’s why teenagers tragically kill themselves over some girl or boy: They don’t realize that, no matter how bad things are now, they will get better later. To repeat:

Even in the midst of Apocalypse, things will get better.

sjkted
27th August 2010, 07:01
Timely piece from Gonzalo Lira:
Hyperinflation, Part II: What It Will Look Like
(http://www.zerohedge.com/article/guest-post-hyperinflation-part-ii-what-it-will-look)

I had a talk with some of his supporters at a booth near a local supermarket. My conclusion is that they are trying to capitalize on the awakening political majority, similar to how the Tea Party is being infiltrated. Apparently, his economic "solutions" include continuing on a debt-based currency and effectively printing more dollars (or creating a tax-based bailout) to loan to private businesses to "jump start" the economy. I got the idea they were pro-bailout, but just wanted to see more of it go to the common guy.

For those who have transcended our political system and understand it's a two-headed one-party system and the "representatives" are only there to get in power, stay in power, bow to the corporate masters, do what they're told by the higher-ups, and represent themselves to keep their seat, replacing the President is not THE answer. Obama's policies are basically George Bush v2.0. Anyone who tells you that replacing the president is THE answer is just trying to suck you back into the divide-and-conquer polarity-based system in order to make you complicit.

--sjkted

sjkted
27th August 2010, 07:08
The Feds are worried about deflation? Four stimulus bills plus several smaller ones means there's more money in circulation (or more aptly, debt) out there owed by the government and the taxpayer than ever before. We're talking over $13 trillion and growing by $3.9 billion dollars a day. Little wonder those who hold our debt are worried. They know that what they'll be paid will be less than what they paid for. No, we're not looking at deflation but hyper-inflation. In a sense, that would be good because that would be one way that our children not-yet-born can escape the mess created by this generation. We're following the Zimbabwe/Weimar Republic model of hyper-inflation folks.

Short term, we're looking at deflation. Yes, there's massive money printing, but how much of it is in circulation? If there were more money in circulation, you would see more and more spending and at higher dollar amounts. If we were going through an inflationary pace, you would see prices rising, which is not happening in many counts.

There's a lot of variables here, and ultimately I think that massive inflation or hyperinflation is the natural course. But, in all of the examples of hyperinflation we've seen, the market has been allowed to run it's natural course. This is not being done right now with the massive accounting fraud, likely because the US is the reserve currency of the world.

There's so many possible scenarios such as a major creditor like China dropping the dollar, a panic causing people to exit from stocks or the banks, a new currency being issued, massive increase in gold and silver that cause people to drop ETFs (or demand delivery) which causes a panic that ultimately causes a drop in confidence in the dollar. Any of these is possible, and one or more of them have to occur eventually. But, for now it seems the whole world is pretending there is no freight train coming our way.

--sjkted

steve_a
27th August 2010, 08:12
Hi Humble Janitor,

Larouche may be nuts, but I'm not too sure Bloomberg is. There is a similar story on Bloombergs website: http://www.bloomberg.com/news/2010-08-26/bernanke-diverges-from-trichet-in-wyoming-as-u-s-falters-germany-surges.html

When a person backs up their comments with names and places, they have to be taken seriously. Much of the time they are right. It's those that offer no reference to their story that we have to be aware of. Nuts or not.

Best regards,

Steve

mgray
27th August 2010, 11:45
In order to have inflation you need monetary velocity. If Bernanke cranks up the printing presses only to leave that money on the Fed's balance sheet under the names of JPM, GS, MS, et. al. there is no velocity. This is why there is no lending by US banks. The Fed wants that money contained for easier mop up if and when.
US wage growth is less than 2% yoy. Don't forget the US CPI does not take the home price decline of 50% in some cases into account and yet it is still very low.
Taking all this into account, deflationary pressures are building, which is contributing to the crowding of US Treasuries.
Hyperinflation worries may make for exciting writing, but the evidence for it is sketchy at best.

Luke
27th August 2010, 12:13
Hyperinflation worries may make for exciting writing, but the evidence for it is sketchy at best.
Right now, sure.
Point is, expecting economy to grow in current condition is sign of mental deficiency. There is no reason for growth to go back. You need investments, new avenues of progress opening, and that is not happening. There is no capital to build new investment. All the old players are afraid to loose what they have. Company values, stocks and other things are not traded much, and when they are, they are priced far below book value (not mentioning stock market manipulation by traders using HFT algos)

So it's easy to see that things will be deteriorating, with more and more companies bankrupting, and there is retail space bubble burst incoming. This process is slowed by the FED/administration.

All those things are deflationary.

BUT there are provisions in recently passed financial reform bill which allows for FED to lend money directly

- Full Highlights From Dodd's Financial Reform Bill (http://www.zerohedge.com/article/full-highlights-dodds-financial-reform-bill) Limits & Disclosure for Federal Reserve Lending: Updates the Federal Reserve's 13(3) lender of last resort authority to allow system-wide support for healthy institutions or systemically important market utilities with sufficient collateral to protect taxpayers from loss during a major destabilizing event, but not to prop up individual institutions. The Board must begin reporting within 7 days of extending loans, periodically thereafter, and disclose borrowers, collateral, amounts borrowed unless doing so would defeat the purpose of the support. Disclosure may be delayed 12 months if it would compromise the program or financial stability.
also read here New Controversy: Financial Reform Bill Contains Quotas For Minority Hiring On Wall Street (http://www.businessinsider.com/new-controversy-financial-reform-bill-contains-quotas-for-minority-hiring-on-wall-street-2010-7)

And now with the Dodd-Frank Act, according to POLITICO, there's a measure, authored by Maxine Waters, that essentially mandates a certain amount of minority hiring at firms that do business with the government, which is everyone. and here http://www.politico.com/news/stories/0710/40313.html

So now any bussiness deemed important will be lent money directly by FED, circumventing bank system. These funds will go to the market, flooding into any politycally-connected plan (which according to Keyensians is a way to go). THIS will make the hyperinflation possible, as this funds will be augmented by normal people money fleeing from Treasuries and financial market to the hard assets and commodities, especialy commodities. All you need is enough political tension for White House to order FED to lend to Main Street. Once the faucet would be open for one case, there would be others, same as it was in Weimar Republic.

conk
27th August 2010, 20:15
Got gold? No? Get some!

Ba-ba-Ra
28th August 2010, 17:27
Through this economic mess, I'm reminded of an old Cree prophecy:

Only after the last tree has been cut down
Only after the last river has been poisoned
Only after the last fish has been caught
Only then you will find that money cannot be eaten.

And this I believe is true of gold, treasury bonds, etc.

mgray
29th August 2010, 11:43
I am no apologist for the Fed, but if you look at the data the money supply is tightening. Please see M3 chart http://www.shadowstats.com/charts/monetary-base-money-supply
So save your wheel barrels, you will not need them anytime soon to go to market.

Luke
29th August 2010, 12:20
I am no apologist for the Fed, but if you look at the data the money supply is tightening. Please see M3 chart http://www.shadowstats.com/charts/monetary-base-money-supply
So save your wheel barrels, you will not need them anytime soon to go to market.

It seems to me, you're missing the point altogether.
Yes , there is less and less money on the market, as debt is destroyed. This trend will continue, unless US Govt will not lend money directly to "critical industries", as allowed by Finance Reform Bill. When this will happen- I do not know, but all signs point to time before us elections, when political tension to prop up selected branches of "economy" would be greatest. From then It'll be matter of expediency.
On the other hand prices of food and other commodities are constantly on the rise as we speak, in many cases due bad/destroyed crops.

"Wall Street economy" and public debt and obligations area, which holds about 20x amount of money in tangible economy are still relatively untouched, with all math gimmicks and "mark to fiction" valued assets. All this money will flood market the moment investor's see futility of financial game.

The purchasing power of dollar and other funny money is declining as we speak.

To sum it up:
1. Govt have tools to flood market with printed money the moment it'll be politically expedient
2. Dollar have declining purchasing power in deflating economy. As bad sign as one can get.
3. There is giant amount of assets in virtual market, that will flow to commodities on panic sign strong enough, which will drive prices to sky and beyond.

Only way to not have hyperinflation now would be get interest rate up, while simultaneously outlawing virtual market. This of course would stop-freeze the economy, halt international trade, and I see no political force to do it. It's only matter of time political pressure would get printing money for govt contractors. Ofcourse it'll just stave-off the inevitable worldwide "market" crash.

wynderer
29th August 2010, 13:12
just quickly reading this thread -- it doesn't seem that anyone is pointing out that the collapse of the entire monetary system/structure is planned as one way to bring in the NWO -- 'order out of chaos' -- interesting tracking of how it's being done on this thread, tho --

also i don't think anyone is making it clear that in the USA, the fed gov, thru collusion w/banks & other financial institutions, has recently stolen trillions of dollars from We the People, who are still sleeping

in the PC interview w/Joseph Farrell, he made a comment in passing that has always stayed w/me -- something about the way money is tied into the 'new' physics -- i've always wondered about money , why it is so important to so many -- it is just a symbol, after all, as is gold also -- valuable only because people [humans] believe it is -- apparently gold is important to the reptilians, for their physical well-being -- so this might explain why it has become so important in the minds of the manipulated masses -- & then, too, the reptilian NWO controls humans thru symbols, & money/gold is an extremely powerful one -- so 'stealing' trillions of dollars is a very potent action in the collective unconscious?

Fredkc
29th August 2010, 14:01
I dunno MGray,
In late 2007-2008 the Bernanke-Paulson show flat doubled the quantity of M1 (little wonder they stopped publishing M1 figures).
Then by 12/1/2008 ... (http://www.lewrockwell.com/blog/lewrw/archives/024178.html)

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars.

Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures combined:

Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

And all of that while Bush/Cheney were trying to sneak out the back door, pretending everything's peachy.

Then Bernanke found a new fool/minion in Obama.
The only reason we aren't using the wheelbarrows is the fact the banks gobbled it all up and sat on it. It's the only thing covering the smoking holes in their balance sheets that go clear to the basement. ;)

But this solves nothing. By depositing their money in Fed. Res. accounts they're earning zero on this money. Meanwhile they're obliged to pay depositors (whats left of them) interest. Means they can only play this game so long, before they go broke all over again, or they need a "new bail out". Can't wait to see them sell that to the people.

Fred