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XMFSinchiruna (27.48)

Food for Thought

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August 27, 2009 – Comments (14)

History certainly has in inglorious way of repeating itself, does it not?

I find this quote from Andrew Jackson fascinating in light of current events. If only we voters had demanded leaders of such character, perhaps we may have avoided the ruinous economic path on which we now find our nation.

I was pleased to see that this quote was submitted to the Congressional record recently by one member of Congress in relation to AIG discussions. Fools may recognize the last sentence, which is commonly cited:

"Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the
bank and annul the charter, I shall ruin 10,000 families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin 50,000 families, and that would be my sin. You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.
"

Jackson spoke these words to the Second Bank of the United States, one of our pre-Fed attempts to create a central bank. There is historical precedent, then, for approaching a central bank entity with skepticism and mistrust.

 

In a separate quote, Jackson forewarns against creating a central bank run by an autonomous corporation the way our Fed is structured, and declares such a structure patently unconstitutional:

"It is maintained by some that the bank is a means of executing the constitutional power “to coin money and regulate the value thereof.” Congress have established a mint to coin money and passed laws to regulate the value thereof. The money so coined, with its value so regulated, and such foreign coins as Congress may adopt are the only currency known to the Constitution. But if they have other power to regulate the currency, it was conferred to be exercised by themselves, and not to be transferred to a corporation. If the bank be established for that purpose, with a charter unalterable without its consent, Congress have parted with their power for a term of years, during which the Constitution is a dead letter. It is neither necessary nor proper to transfer its legislative power to such a bank, and therefore unconstitutional." 

Our founding fathers, dear Fools, are rolling in their graves.

I have contacted my elected representatives to demand a full audit of the Fed's activities in response to this crisis. We have a right to know precisely how our economic future has been plundered.

Personally, I would like to see the Federal Reserve abolished entirely, and a return to sound money, but a truly independent audit would be a great start.

14 Comments – Post Your Own

#1) On August 27, 2009 at 10:03 AM, brickcityman (< 20) wrote:

I find this portion particularly interesting:

 

speculate in the breadstuffs of the country

 

Why not also point your ire at the GS, C, BAC, crowd (as well as all the boutique firms) guilty of said abuses??

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#2) On August 27, 2009 at 10:06 AM, RootnToot (30.03) wrote:

...You tell me that if I take the deposits from the bank and annul the charter, I shall ruin 10,000 families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin 50,000 families, and that would be my sin. ...                  

And in the convoluted logic of today we would ruin 50,000 families to save 10,000.

 This in indeed representative of our times, Thanks for posting it Sinch.

Rec+1

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#3) On August 27, 2009 at 10:50 AM, brickcityman (< 20) wrote:

I think you read it wrong rootntoot...

 

The logic in that quote is the sort that would buttress the argument for government intervention...  Taking a hit of X dollars to prevent further calamity at the hands of unchecked recklessness.  Of course in our case there wasn't anyone like Jackson at the switch, so the damage was done no matter what...

 

The big question is who comes away from the damage the least scathed...  So far it seems to be the culprits who received the assistance...  They've been able to stay open for business, and even report incredible profits while the results of their actions continue to play out.

 

And still people want to own stock in them simply because their stock appears to be headed upwards.  I'm not one to mix morality with investing, but this is a situation I simply cannot stomach.

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#4) On August 27, 2009 at 11:08 AM, GNUBEE (29.01) wrote:

The other sides of the coin. I am for transparency, but also do not want to see consolidated power merely change hands. I believe the Fed is the golden goose, and those who benefit do not want to see its demise.

Soon enough though it will collapse under its own wieght. The question we must ask ourselves is are we happy allowing the system to provide artificial employment and create the illusion of prosperity, or do we want the facts to be laid bare? The facts that US unemployment is actually in line with the rest of the world and we do not produce enough to sustain our standard of living (often simplified in "the US does not produce anything anymore" statement)

This is a real moral dilema. Do you allow a corrupt system that victimizes to support itself to your benefit to continue? (Yes Bent this is a Rome comparo- just because you steal sweat, rather than shed blood does not make them dissimilar) Or do you seek to tear down and rebuild a newer more equitable system knowing that you will experience the sharpest pain?

I'd say that most in power, or those benefitting from that power will chose status quo, and keep that golden goose alive.  

http://www.washingtontimes.com/news/2009/jul/27/a-compromise-on-auditing-the-fed/

Some other ideas (and cursing) too- http://georgewashington2.blogspot.com/2009/08/what-fed-is-really-trying-to-hide-in.html

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#5) On August 27, 2009 at 11:34 AM, TMFDeej (99.41) wrote:

Hey Sinc.  Funny that you should mention Andrew Jackson.  I'm reading great a book about him right now.  No, it's not American Lion.  It is Patriotic Fire by Winston Groom (the author the book that of one of my favorite movies of all time was based upon...Forest Gump).

The book is about Jackson's role in the decisive battle of the War of 1812, the Battle of New Orleans.  The beginning of the well-written book contains a lot of background on the period, including a brief overview of Jackson's life.  He was essentially an orphan who took it upon himself to get his law degree (or whatever it was called back then) and went on to become extremely successful.

One thing that I take away from reading history books like this is, the world always has problems.  It always has and it always will.  Today's problems just seem worse than the ones that have happened and were solved in the past because we forget the past and we hear about today's over, and over, and over again in the news, on the Internet, etc...

Back during the War of 1812, the United States was literally bankrupt...it couldn't even afford to pay its army.  Not only that, but the U.S. economy was in shambles because of absurd Embargo Act that Thomas Jefferson passed several years before, which was designed to punish the British, but ended up hurting us much worse.  In the end, we solved these problems...which were much worse than the ones that we have today.  I have no doubt that The U.S. will eventually recover from today's problems.

Perhaps we will fall into a situation like that which befell the British Empire, a slow, long decline from being THE global Super Power.  I wouldn't be surprised in the least if that happened, but all of this talk comparing America to the Roman Empire, and about how we are going to face massive social unrest, the complete break-down of society, blah, blah, blah are absurd. 

The snap-back from a serious shock to the system and the resulting inventory build may make this look like a "V-Shaped" recover, but it won't be.  I strongly believe that we are headed for a looong period of much slower economic growth than we have become accustomed to over the past several decades.  Having said this, as much as some sensationalist fear mongers would like us to believe it...we're not all doomed.

Deej

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#6) On August 27, 2009 at 11:40 AM, XMFSinchiruna (27.48) wrote:

brickcityman

I do. Repeatedly and consistently. ;)

As for your discussion with Rootn Toot, I think you're both right. Root strikes at the root of the present intervention strategy, which keeps the banks whole at the expense of the citizen, while brick lays a brick foundation for why we must dismantle the disfunctional elements of a failed economic paradigm.

Fool on!

GNUBEE

That's a very interesting thought! The prospective audit does have a Pandora's Box feel to it ... and there would certainly be a massive power vacuum in its wake if abolition were ever achieved. One of my greater concerns is ensuring that we don't trade one power base for a bigger one ... i.e a sort of global central bank function through the IMF. That would be bad with a capital B!

Excellent discussion, Fools!

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#7) On August 27, 2009 at 12:27 PM, XMFSinchiruna (27.48) wrote:

TMFDeej

I listened to an interview with the author on the radio a couple of weeks ago, and thought it it sounded interesting. I might have to check it out.

Difficult challenges have been countenanced before, to be sure, but as a fellow student of history I conclude the exact opposite from you

"Today's problems just seem worse than the ones that have happened and were solved in the past because we forget the past and we hear about today's over, and over, and over again in the news, on the Internet, etc..."

"In the end, we solved these problems...which were much worse than the ones that we have today."

 

The national insolvency we faced in the early nineteenth century was nothing compared to today's leveraged state of indebtedness, either in a per capita inflation adjusted scale or in the sheer overextension beyond our reasonable means to repay.

We are bankrupt, and our president admitted it back in May. The fact that our credit rating has been unaltered by the biggest run-up of debt in planetary history is a continuing fraud, and our creditors are waking up. Our currency is on life support.

$9 trillion in budget deficits through 2019, raising the debt to $20 trillion without even counting failing entitlement programs, and all of which assumes that Congress will constrain spending growth by the fictional rate of inflation, with no foreign appetite for bankrolling our current deficit. Why can't you see where this is heading?

Meanwhile, the talking heads in Washington aren't even trying to unwind the mountain of toxic derivatives that launched the world into crisis, but rather are seeking to reflate it beyond its pre-collapse scale in a desperate hail mary pass to return to the failed paradigm we operated under before the crisis took hold. This is one very frightening data table from Treasury.

If you think Andrew Jackson is a great figure in our nation's history, then ask yourself how he would be tackling these challenges differently ... I can guarantee you that a former regional fed governor would not be at the top of the U.S. Treasury, and that Bernanke would never have been reinstated. Goldman Sachs' market-making manipulation would never have stood. Congress is literally broken, and must be cleaned out entirely. Anyone who voted for the financial services modernization act of 1999 should do the honorable thing and desist from seeking re-election. 

I respect that you hold on to hope that everything will be resolved in an orderly fashion, and that one day we'll look back and recognize these events as less critical than they appear today. I wish I shared your hope ... I just don't. 

Sinch

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#8) On August 27, 2009 at 12:36 PM, XMFSinchiruna (27.48) wrote:

Surprisingly blunt language from a mainstream financial news outlet:

Dismantle Bernanke's 'Happy Conspiracy' ... now!

6 reasons more power for the Fed will destroy capitalism and democracy

ARROYO GRANDE, Calif. (MarketWatch) -- At last week's annual Jackson Hole meeting of Fed execs, Boss Ben Bernanke's braggadocio about saving the world from another Great Depression had the feel of an egomaniacal dictator trying to cement his legacy in history.

Any good behaviorist would tell you Bernanke's got some dangerous biases isolating him from reality (remember two years ago when he was denying the meltdown). His brash claims and radical, secretive policies present a grave danger to American capitalism and democracy.

In fact, Bernanke now appears to be America's (and the world's) most dangerous man, far more dangerous than Hank Paulson and the "Goldman Conspiracy" ever was. He's now acting like the supreme dictator of that larger conspiracy Jack Bogle called the "Happy Conspiracy" in "The Battle for the Soul of Capitalism: How the Financial System Undermined Social Ideals, Damaged Trust in the Markets, Robbed Investors of Trillions -- And What to Do About It."

This indictment of Bernanke as a dictator leading Wall Street's "Happy Conspiracy" became clear after reading "Dismantling the Temple," William Greider's brilliant essay in The Nation magazine. Greider is the author of "Secrets of the Temple: How the Federal Reserve Runs the Country." Greider's essay is an absolute must-read for anyone interested in the future of capitalism, the decline of democracy, the next mega-meltdown, and the real "Great Depression 2" ... from which Bernanke cannot save us.

Why worry? Because the danger really is imminent. The same clueless Congress that did nothing when Paulson and the Goldman Conspiracy nearly bankrupted America is now about to give Bernanke's out-of-control "Happy Conspiracy" even more power, and another bigger chance to destroy our capitalism.

Here is a summary of Greider's history about how the Fed is sabotaging America:

The Fed was created by Congress in 1913, "independent" from "the rest of government, aloof from regular politics and with one powerful exception: the bankers." However, the destructive ideologies of Greenspan and Reaganomics prove how the Fed is manipulated by and dangerously dependent on politicians.

The Fed is "the black hole of our democracy -- the crucial contradiction." And the recent credit crisis blew "the Fed's cover." Voters and taxpayers have no "voice in these most important public policies" because the Fed "operated in secrecy."

"The past year, the Fed has flooded the streets with money, distributing trillions of dollars to banks, financial markets and commercial interests. ... People and politicians are shocked ... confused ... angered."

Where did the Fed get those trillions? They "printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really -- not Congress or the president." The Fed "does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities," keeps Congress and the American people in the dark.

Wall Street bankers own the Fed, it's their private club. They "collaborate closely on Fed policy. Banks are the 'shareholders' who ostensibly own the 12 regional Federal Reserve banks. Bankers sit on the boards of directors, proposing interest-rate changes for Fed governors," serve on a "special advisory council that meets privately with governors to critique monetary policy and management of the economy." The Fed's a legal conspiracy making bankers very, very "happy."

Congress is now "demanding greater transparency." Bernanke says "no," an audit would amount to "a takeover of monetary policy by the Congress." What a dictator. Greider quotes the Constitution: "The Congress shall have the power to coin money [and] regulate the value thereof." He adds that the Constitution "does not grant the president or the Treasury secretary this power. Nor does it envision a secretive central bank" acting as a megaphone for a president's political ideology.

Bernanke's powers go far beyond anything Paulson demanded last year. And he's now fighting a turf war because the "Happy Conspiracy" needs secrecy: no audits, no supervision, no transparency, no oversight, and zero accountability to taxpayers. Why? That way they can steal from the American people at will.

Greider's big warning: Recently Obama made a monumental mistake when he "proposed to make the central bank the supercop to guard against 'systemic risk' and set its own regulations. Obama's proposal gives the central bank even greater power" but does "not propose any changes in the Fed's privileged status."

Giving the Fed more power to self-regulate in secrecy is a guaranteed set-up for a bigger mega-meltdown around 2013, the Fed's centennial anniversary. Now is "a good time to dismantle the temple" warns Greider. "Democratize the Fed. Or tear it down. Create something new in its place that's accountable to the public."

Here are his "six reasons why granting the Fed even more power is a really bad idea:"

1. More power rewards failure, creating 'moral hazard'

Get it? Under Greenspan and now Bernanke the Fed has been a dismal failure: "Like the largest banks that have been bailed out, the Fed was a co-author of the destruction," says Greider. "During the past 25 years, it failed to protect the country against reckless banking and finance adventures," blinded by the politics of Greenspan and Reaganomics. "The Fed did not see this disaster coming ... did nothing to warn people." Or they did see it and let it happen, blinded by Wall Street's greed.

2. Fed policies will continue destabilizing U.S. and global economies

Under Greenspan and Bernanke the Fed has dangerously destabilized the American economy and global credit, stock and currency markets. Greider warns: "Its extreme swings in monetary policy, combined with utter disregard for timely regulatory enforcement, steadily shifted economic rewards away from the real economy of production, work and wages and toward the financial realm, where profits and incomes were wildly inflated by false valuations" as "the Fed tilted in favor of capital over labor."

3. The Fed's not objective, cannot investigate its own systemic flaws

Wall Street owns the Fed and has a monstrous conflict of interest. Greider's example: "The Fed served as midwife to Citigroup, the failed conglomerate now on government life support. ... Now the Fed keeps Citigroup alive with a $300 billion loan guarantee," protecting "the banking behemoths that it promoted, if only to cover its own mistakes."

4. The Fed cannot be trusted to protect taxpayers against Wall Street

Rich Wall Street executives manage the Federal Reserve System. Only a fool (or a clueless Congress) will ever trust the Fed to protect taxpayers. The Fed needs independent oversight. Congress needs to take back its constitutional responsibility.

5. More Fed power means more companies want 'too big to fail' status

If Congress continues neglecting its constitutional responsibilities and gives Bernanke supreme dictatorial powers over the "Happy Conspiracy," Greider says "a new superclass of 40 or 50 financial giants will emerge as the born-again 'money trust' that citizens railed against 100 years ago. But this time, it will be armed with a permanent line of credit from Washington. The Fed, having restored and consolidated the battered Wall Street club will doubtless also shield" companies like GE "against failure."

6. The Fed will be a rich-man's club dominating everything from the top

The Fed will "dominate everything from the top down" if Bernanke is anointed absolute dictator over the "Happy Conspiracy." Obama's misguided proposal will "foster even greater concentration of financial power."

Every "large company left out of the protected class will want to join by growing larger and acquiring the banking elements needed to qualify." And "most enterprises in banking and commerce will compete with the big boys at greater disadvantage, vulnerable to predatory power plays the Fed has implicitly blessed."

If Congress is stupid enough to abdicate its constitutional powers to the Fed, God help America's democracy. And for capitalism, this will go down as the biggest blunder of Obama's presidency, worse that Clinton's dismantling of the Glass-Steagall Act.

And yet, Greider hints that the worst-case-scenario may be inevitable: "The obstacles to democratizing the Fed are obviously formidable. Tampering with the temple is politically taboo. But this crisis has demonstrated that the present arrangement no longer works for the public interest. The society of 1913 no longer exists."

Still, America "has a rare opportunity to reconstitute the Federal Reserve as a normal government agency, shorn of the bankers' preferential trappings and the fallacious claim to 'independent' status as well as the claustrophobic demand for secrecy."

But unfortunately, "many in Congress will be afraid to take on the temple and reluctant to violate the taboo surrounding the Fed. It will probably require popular rebellion." Why? Because Congress (like the Fed) dances to the bidding of Wall Street and its lobbyists who donate megabucks to their campaigns. So don't expect reform until the next crisis, a mega-meltdown around 2013, the centennial anniversary of the Fed.

Till then, you're on notice that the man most likely to destroy American capitalism is Ben Bernanke and his "Happy Conspiracy" of Wall Street bankers that own our Federal Reserve Banks.

 

 

 

 

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#9) On August 27, 2009 at 1:28 PM, outoffocus (22.85) wrote:

Can I give this post another rec please?

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#10) On August 27, 2009 at 1:31 PM, outoffocus (22.85) wrote:

Wow the bullish blog got more recs then the bearish blog. Am I sensing a change in Fool CAPS sentiment?

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#11) On August 27, 2009 at 11:42 PM, ElCid16 (94.10) wrote:

Does the potential $20 trillion budget deficit prediction assume that the current level of tax cuts that have been in effect for the past 4-8 years will continue?  And does it also assume that health care reform [that may or may not take place] will have no effect on the increasing rate that the government pays towards medicare and medicaid?

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#12) On August 28, 2009 at 8:01 AM, XMFSinchiruna (27.48) wrote:

dkilgour16

I'm not sure ... I haven't delved into the data, but the numbers are from the White House's budget office, which causes me to pose a different question ... will even the $20 trillion figure turn out to have been overly optimistic just like every other datum that emerges from the Executive branch? :)

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#13) On September 01, 2009 at 10:54 PM, Tastylunch (29.26) wrote:

Where did your blog for today go Sinchi?

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#14) On September 02, 2009 at 4:42 PM, ReadEmAnWeep (47.45) wrote:

+

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