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XMFSinchiruna (28.54)

The Fed Ponzi Scheme for Dummies

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July 28, 2009 – Comments (8)

This video of a CNBC segment hosted by Dylan Ratigan on 7/24, with Elliot Spitzer as a guest, is truly remarkable both for the simplicity with which the monetary dilemma is exposed, and the unbridled honesty with which Spitzer and Ratigan lay down the blunt reality of the situation. 

First, for clarification, it's important to note that they may be incorrect in referring to a $13.9 trillion bag of garbage ... the actualy sum of assets acquired we're told is closer to $3 trillion at the moment according to the Barofsky report. Regardless, anything >$1 is still a ridiculusly enormous sum, and should not be confused as somehow "small" because it's less than some of the other figures touted. For that matter, I don't consider Spitzer to be one to toss around numbers without some precision, so maybe he's looking at the figures from an alternate methodology. Second, please keep Spitzer's personal life out of this ... it's utterly irrelevant to the discussion and his expertise on the subject of fiduciary malfeasance is unquestionable. 

Here are a few of the juicier tidbits:

Spitzer after 6:24: "This begs and cries out for tough examination. The FED was quasi-autonomous from the public, but it was run by the banks. If you look at the governing structure of the New York FED, it was run by the very banks that got the money. This is a ponzi scheme, an inside job. It is outrageous. It is time for the Congress to say "enough of this!", and to give them more power now is even crazier."

At the 7:05 mark, Ratigan proclaims: "I feel as though America has suffered the biggest theft and cover-up ever".

And at 8:15: "Remember, the banks send lobbying money to politicians to change the laws so they can create garbage like this, and then stick it with Americans."

8 Comments – Post Your Own

#1) On July 28, 2009 at 2:28 PM, XMFSinchiruna (28.54) wrote:

My, how times have changed. :)

There was a time when calling the federal reserve a ponzi scheme would have stirred controversy and eilcited spiteful retorts. Now you can state it with impunity as evidenced by zero comments to this post. ;)

I guess we have a Foolish consensus, then ... the FED has perpetradted an enormous ponzi scheme that represents the largest theft and cover-up ever committed.

Good ... I'm glad that's settled.

Fool on!

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#2) On July 28, 2009 at 2:51 PM, whereaminow (58.64) wrote:

TMFSinchiruna,

LOL! I think a lot of people have been forced to either abandon the debate or re-think what they were taught in college.  Also, I think very few people would be willing to debate you anymore.  You have a very solid grasp of the relevant information.  Others, like myself, tend to invite dissenters because we don't have that grasp.  Of course, the only way to learn the material is to dive in :)

What is truly worrisome however, is that while the intellectual debate over the Fed may be over on the Internet, the result won't matter in real life.  The Fed will be granted more power and HR1207 and S604 will be buried.  I am 99% certain of it.

It's going to take a lot more time.  It may be another 10 years before enough people get informed to make a change.  I don't know.

David in Qatar

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#3) On July 28, 2009 at 2:51 PM, SolarisKing (< 20) wrote:

Liquidity crisis on an uninhabited island

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zloj
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#4) On July 28, 2009 at 3:57 PM, jesusfreakinco (29.61) wrote:

Chris,

I would say that many of us are discouraged that the game is rigged.  I am wondering if our govt manipulation of the market is much different than living in the USSR in the midst of communism.  The game is rigged for the insiders and friends of politicians.

I can't see this ending without a collapse in the USD - the only wakeup call for our govt and politicians.  It will be interesting to see how much longer our creditors let the game go on.

JFC

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#5) On July 28, 2009 at 4:01 PM, silverminer (37.03) wrote:

Bernanke's Ridiculous PR Blitz, a clear attempt to help people forget about all this.

http://news.yahoo.com/s/nm/20090727/bs_nm/us_usa_fed_bernanke_6

KANSAS CITY, Missouri (Reuters) – Federal Reserve Chairman Ben Bernanke traveled to the U.S. heartland to defend the central bank's actions and reaffirm his assessment of an improving, but still vulnerable, U.S. economy.

Taping a special that will air on television network PBS over three days this week on its program The NewsHour, Bernanke said a financial crisis that rivaled that of the 1930s needed decisive actions.

"I was not going to be the Federal Reserve Chairman who presided over the second Great Depression," Bernanke said.

"When you're in a situation like this, a perfect storm, sometimes you have to do things that are a little unorthodox, out of the box."

About 190 citizens from the Kansas City area, assembled by a nonpartisan civic group, were on hand for the taping at the Kansas City Fed, moderated by veteran news anchor Jim Lehrer.

Some two dozen peppered the chairman with questions ranging from the Fed's role in consumer protection actions, to efforts to stem foreclosures, to the outlook for the dollar.

Bernanke sought to demystify the role of the Federal Reserve, and especially debunk ideas that the Fed has almost unfettered power as an unelected fourth branch of government.

"I'm answerable to the American people," Bernanke said.

PEDAL TO THE METAL

Bernanke said the Fed is doing all it can to turn the U.S. economy around, and that he was confident the nation would be back on a strong growth track within a few years.

"The Federal Reserve has been putting the pedal to the metal," he said, adding that "recessions happen," even though the current one is especially long and painful.

Bernanke's core message was similar to that he delivered last week in congressional testimony: that the recession should end soon, but that considerable risks remain -- especially relating to the labor market.

It takes GDP growth of about 2.5 percent to keep the jobless rate constant, Bernanke noted. But the Fed expects growth of only about 1 percent in the last six months of the year.

"So that's not enough to bring down the unemployment rate," he said.

Latest government data show the U.S. unemployment rate at 9.5 percent, the highest since 1983, and many forecasters expect the rate to keep climbing even after the recession technically comes to a end.

With unemployment high and factories producing well below capacity, inflation should not be a problem -- giving the Fed some breathing room on interest rates, Bernanke said.

"But once the economy starts to grow, and begins to move ahead, it will be very important for the Fed to start to unwind, to raise interest rates."

BRISTLING WITH EMOTION

Asked about his opinion on the dollar, a topic many Fed officials veer away from, Bernanke said the U.S. central bank, in general, supports a strong dollar policy.

"The best way to have a strong dollar is to have a strong economy," he added.

Mostly cool under fire, Bernanke bristled with emotion when asked about a measure before Congress to open the Fed's monetary policy decision-making to scrutiny by a congressional watchdog, the Government Accountability Office.

"I don't think the American people want Congress running monetary policy. That's exactly what (the bill) would do," he said.

Markets would likely assess that inflation would rise if Congress or the administration started to meddle with interest rate decisions, he added.

A group of about two dozen protesters picketed outside the Kansas City Fed building on Sunday night to call for more disclosure by the central bank.

As he did in testimony on Capital Hill last week, Bernanke suggested Congress get its own act together -- and form a plan to get massive budget deficits under control.

"It is very, very important for the Congress and the administration to develop a plan, to say, 'Here is how we're going to get back to fiscal sanity.'"

DOWN TO EARTH

Retirees Elbert and Gloria Willingham of Overland Park, Kansas, who were among the studio audience, gave Bernanke two thumbs up.

"I'm very impressed with Bernanke. I strongly hope that Obama sees fit to reappoint him -- it would be bad for the economy if he didn't," Elbert Willingham said.

"He's down to earth and believable. He's got the ideas, but also the practical understanding," his wife added. "He cares about the small businessman.

Bernanke's term as chairman ends in January and while his reappointment is seen as likely, it is not a given.

Sunday's event was the latest in a series of moves by Bernanke to communicate outside of the Fed's usual channels.

Bernanke recently spoke at the National Press Club in Washington, and last week outlined the Fed's likely "exit strategy" from its unconventional policy programs in an op-ed piece in the Wall Street Journal.

 

Remind me ... why do people keep believing this guy?

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#6) On July 28, 2009 at 4:13 PM, silverminer (37.03) wrote:

Retirees Elbert and Gloria Willingham of Overland Park, Kansas, who were among the studio audience, gave Bernanke two thumbs up.

"I'm very impressed with Bernanke. I strongly hope that Obama sees fit to reappoint him -- it would be bad for the economy if he didn't," Elbert Willingham said.

"He's down to earth and believable. He's got the ideas, but also the practical understanding," his wife added. "He cares about the small businessman."

Man ... that's it in a nutshell, isn't it? It's one thing to get away with what they've perpetrated to date, but its another entirely to have the victims smiling with approval all the while. This country needs a serious wake-up call!

All the irrefutable evidence you need of the Fed's gross and systemic incompetence is laid bare for all to see ... just take a walk through your neighborhood. The allegiance to banking interests before the interest of the people, Greenspan's endoresement of repealing financial deregulation and his advocation of adjusted-rate mortgages as the housing bubble expanded... it's all visible in the consequences we can see right on the street level during a stroll down Main Street. 

If you let your Congresspeople grant the Fed added authority, or let them off the hook with respect to a Fed audit, that's equivalent to endorsing the status quo where Main Street is LAST on the list of interests served.

My representatives know how I feel ... do yours? :)

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#7) On July 28, 2009 at 8:38 PM, QualityPicks (34.50) wrote:

Where does 13.9 trillion come from? I believe this is actually the amount of deposits and bond guarantees together with the money the Fed gave the banks for the collateral plus the TARP. SO it is more like the US is on the hook for 13.9 trillion, but we actually gave the financial system more like 2 trillion directly. We only got shares in some banks via the TARP. The healthier banks repaid the money and we get to keep the crappy ones.

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#8) On July 28, 2009 at 9:29 PM, silverminer (37.03) wrote:

This is loosely the basis for the $13.9 trillion figure IMO:

http://www.fool.com/investing/international/2009/03/24/102-trillion-a-mere-drop-in-the-bucket.aspx

It's the pre-Barofsky tally of all pending and potential outlays under existing response programs.

It's definitely more than $2 trillion in the garbage bag, though. It's at least 3.

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