Thursday, July 17, 2008

Foolish Consistency

From the statement of the FOMC on June 25, when it kept the fed funds rate at 2%:

"The Committee expects inflation to moderate later this year and next year."

From Ben Bernanke's prepared testimony this week, just thirteen business days later:

"Inflation seems likely to move temporarily higher in the near term."

Look, this insanity has to stop. Was he asked about this on Tuesday or Wednesday? I didn't catch the full sessions, but I'd bet my last American peso that he wasn't. It's clearer every day that the Fed is in serious need of oversight and reform. Have you ever read the minutes of an FOMC meeting? There's more accountability on one of those muffled surveillance tapes from the Ravenite Social Club. There are no names or faces at Fed meetings. Except for indicating at the end how each member voted, the minutes are a stream of "some participants felt" and "others were concerned." If the Fed won't keep minutes that conform to basic corporate or even small-town standards, Congress or the GAO must sit in on all meetings and issue a separate report. Give an independent monitor an office next to Bernanke's, with full access to anything that happens in that building.

While we're on the subject of Fed reform, how about restricting the ability of Fed chairmen to collect huge paychecks from Wall Street when they leave? It's amazing this hasn't been done already. Do you know how much money Alan Greenspan has made from the same firms that flourished during his monetary munificence? In a world of accountability he might be keeping a low profile right now, or even having some quiet preliminary chats with a Stan Brand type in case things in this country really go south. Instead he's depositing fat checks. Bernanke will do the same one day, unless Congress takes away his future "bailout bonus" right now.


Blogger David said...

CR, you're rearranging deck chairs on the Titanic.

Since it's inception the Fed has overseen a systematic (but largely invisible) looting of the general public.

If you graph the Dow 30 vs. the price of an oz of gold since 1913, you'll discover that today it takes LESS gold to buy the Dow than in 1929. That means that, in constant "gold value," the productive value of the US is less today than almost 80 years ago. The value of the dollar has been almost entirely eroded, and here we are watching it plunge in real time.

The only reason this isn't obvious is that the great productivity of humans has largely still gained ground despite this vampire sucking the blood of the nation's produtive citizens and diverting it to the political elite and their welfare/warfare game of RISK(tm).

Nothing will change until the Fed and its rapacious public/private monopoly on defining "money" is utterly discredited and destroyed. Sound money only arises when no man or specific group of men is empowered to define what money is, and the existence of a central bank is the polar opposite of this condition.

7/17/2008 11:49 AM  
Anonymous Anonymous said...

Good points! I hope our representative governmental leaders are listening.

Where is accountability and ethics these days? Charlie Rose had Allan Sloan and Gretchen Morgenson on his show. It's very concerning how the Fed isn't even phased by passing on the bailout of Wall Street to the taxpayers, and how loose the Fed is with printing. Scarier yet, they both thought that the Fed and Treasury used up their tools. They have played their hand, and the world has a significant hand to play at the table today. Isn't this becoming a National Security issue?

For most people, no one had to show them a chart to know we had inflation. For some 18 years everything one had to have to function and survive in our society was going up, a lot, and things they didn't need, junk, was cheap. And they kept telling us how happy we should be because junk was cheap. A significant side affect during this period, overall quality has deteriorated.

As folks work harder, with less free time, and continue to play by the rules, we assume, those in other positions and professions in our civil society - including our Representatives, SEC, Fed, Treasury, Bankers, are doing the same. Because our common goal, we all thought, was to have a healthy and sustainable Nation, and World. Most understood, and still think this way, you do your part, I'll do mine, and we all benefit for generations to come.

When I hear Paulson or Bernanke talk about their responsibility is for stock market stability, it seems they are addressing the 2%, and the 98%, sorry and good luck. This seems problematic. Aren't lg #'s of baby boomers retiring soon? Are they going to encourage the baby boomers to take on more risk to save Wall Street corporations and billinaires? The "experts" say, DO NOT put money you can't afford to lose in the stock market. Or, DO NOT put money you need within 10 years in the stock market. Or, do not invest in things you DO NOT understand. By those rules, our financial asset allocations should be a lot different. The demise of the traditional pension will only exacerbate this situation, because folks without a known cash flow (i.e., traditional pension) should be taking on less risk.

I am amazed beyond words at how much advertising of all sorts is being done in name of analog to digital TV conversion. Could you imagine if our government did the same for something really important. Oh, like, money and risk management, how to pick a good mortgage, saving or reducing fees in your retirement acct, rather than leaving it to Wall Street, crooks, and Infomercials. How about a $40 voucher for an investment/economic class. Ah, but an educated populace, where would that get us.

It's a good thing we have our priorities straight ;-|

7/17/2008 6:20 PM  
Anonymous rapier said...

Poor Greeny made hundreds of billions for the Wall Street Pigmen while he was getting his puny Government paycheck. He didn't have a pot to piss in before his days a Chairman either. The day they knocked on his door to take over it's reported his consultancy had zero clients.

So lay off the guy. He'd gone from maestro half way to infamy and in a couple of years he'll be all the way there. He'll be rememberd as the devil just about the time he goes to meet real deal.

7/17/2008 6:21 PM  
Anonymous goldhorder said...

Wow...who is this David guy? He's pretty darn smart.

7/17/2008 7:16 PM  
Blogger Mr. Hedley Bowes said...

I concur. I read recently that the original charter of the Fed dictates that the U.S. Government can repurchase the Fed for something south of $50 Million.

Of course, that leaves the problem of what to do with the current NBR deficit and what mechanism of fiscal regulation takes on the role of the Fed (I believe the Fed works as a regulator/relief valve for the banking system).

Conversely, putting control of the banking and money supply in the hands of the current government seems like a surefire recipe for disaster.

But hey, U.S. assets sure are cheap on the world market.

7/17/2008 9:08 PM  
Anonymous Thomas Daulton said...

I suspect that a return to the gold standard (as David and Goldhorder more or less suggest) would be a far more difficult nut to crack than even the switch away from petroleum, which currently appears impossible despite the advantages that the public approves of it and it is also the morally, economic, and strategically (security) correct choice.

Switching to a "real" currency from our "virtual" currency today would throw more and even more powerful people out of work, than would switching from petroleum. And those rich, powerful people will use their influence and toil night and day to prevent this from happening. (They'll work hand-in-hand with the petroleum lobby, in those cases where the people involved don't happen to be the same people!!, because as TCR has explained, oil and our currency are so closely intertwined.)

If any of you libertarian types have concrete suggestions or strategies for overcoming this institutional resistance, I'd love to hear them, because I would then adapt those strategies towards fighting the petroleum lobby. It'd be an easier target.

That being said, I disagree with David, in that I think TCR provides a valuable service with articles like these. We all know that the virtual bankers (and the petroleum lobby) are merely the largest players in the effort to turn the United States into the equivalent of a backwater banana republic: a tiny rich elite lording its privileges over millions of serfs. We all know that their effort is currently succeeding: the U.S. becomes more like a third-world country pretty much every day. But when explaining this to incredulous friends, it's always hard to put your finger on real, concrete steps where you can see and measure this process happening.

With this article TCR once again provides firm, concrete, quotable evidence of this process, which we can share with our friends. Because the MSM certainly is not going to cover this, but all it takes is a few mouse-clicks for our incredulous friends to confirm it for themselves.

7/18/2008 1:23 PM  
Blogger David said...

Thomas, I apologize if it sounded like I was criticising TCR... I was just opining that any "reform" of the Fed, or reflexing to some other political substitute for Fed management of "what money is" remains in the realm of useless proposals.

I know we all want to debate what should or shouldn't "be done" about the current situation (whatever it may be), but the truth is that no man or group of men is smart or knowledgeble enough to steer the best path into the future.

Debating "what should be done," while sometimes academically interesting, is quite useless. If anyone on the planet knew what to do, he or she would be starting the next organization that makes its owners fabulously wealthy and rich (think Gates/Microsoft). How many people have tried something and succeeded like that? Very few, because the winners are chosen by trial and error (mostly error).

I don't know what the best monetary system would look like, whether it's gold-based, or some sort of competitively priced commodity-basket standard, or electronic, or what-have-you. The only way to find out is to discover what emerges when, in an environment of freedom, self-interested people try a host of different approaches, most of them failing (and probably bankrupting their purveyors) while one or a couple emerge as dominant because they best serve the interests of customers (people who want to exchange and who need a monetary standard they can trust as both exchange medium and store of value).

That said, none of this matters. The Fed's not going away any time soon, and if it did, as others have noted, some other centrally-planned (and thus inefficient or destructive) monopoly would take over.
[Here's a nice, slightly dated but pertinent overview of who owns the Fed system: ]

As individuals we have to deal with the world as it is, with all its flaws. Today, to me, this means recognizing that the world faces the collapse of a dollar-based credit bubble, and that the real risk is of a deflationary collapse (think 1930-1932, only bigger).

Actions that seem(ed) wise to undertake include(d):
1) get totally out of debt.
2) minimize exposure to the U.S. banking system.
3) place most savings in (ugh!) U.S. treasury bills directly via
(I know, it makes me sick to underwrite Uncle Sammy's little shop of horrors, but it's the safest place to park money in the U.S. at the moment...although that will certainly chance at some point.)

In the light of hindsight I'd have bought some gold when Bob Bishop stopped issuing his Gold Stock newsletter and when Newmont Mining was so convinced that gold's price was going down that it was selling forward its own production. That was a great time to get in, when even gold miners hated gold. That's how you define a market price low. Would-a, could-a, should-a.

By the way, do you know what a barrel of oil cost in December 1998? About $10.50 or so. Who was sending you unsolicited promotions recommending you buy it then?

No one. Food for thought.

7/18/2008 4:54 PM  
Anonymous goldhorder said...

saturday humor

7/19/2008 12:13 PM  
Anonymous Anonymous said...

is it true that the next stimulus package includes a trademarked Fed Discount Window Visa card for each American household?

7/19/2008 2:47 PM  
Blogger David said...

A Visa card? Wow, what will they think of next? I was stuck in the past, expecting to receive a cardboard cutout photo of a chicken in every pot.

7/20/2008 12:38 PM  
Anonymous Thomas Daulton said...

Hey, loved Goldhorder's link there about "Women and children last". Great comic and interesting commentary.

David [and Goldhorder], my main point in commenting was not to ask for a solution, but rather to ask for concrete ways to fight the NON-solution... I think the established, entrenched institutions are ready, willing, and able to squelch whatever organically-bred solutions might arise. I'm not sure I'm ready to advocate armed insurrection just yet, but it seems clear that Step 1 has to be analyzing and then fighting the bad practices and institutions, before any solution can arise. Whether that fight is through conventional means, going through the system... or non-conventional: amplifying the role of barter in society, for example, being a nonviolent nonconventional solution.

I'm certainly more Leftist than either of you guys seem to be, I do believe there is a strong role for central planning in human society, although I'm quite convinced that most of the central planning going on today in the U.S. [as well as many foreign countries] serves the cause of, well, to use a convenient shorthand, Eeeeevil. As a good Leftist, I tend to see that as the fault of the corrupt and fallible planners, not the fault of the concept of planning.

One of my big problems with the extremely individualist, free-market, libertarian type philosophy... is that whether or not they're moral, large powerful institutions do exist and exert a huge influence on society, and therefore it seems like much of the individual innovation ends up going towards joining and exploiting the large institutions, rather than coming up with new solutions. Competition all too often breeds conformity rather than innovation -- startups are always at a disadvantage.

With such a huge population and the majority sucking up to the System, there could well come a time when the oppressive System is simply too powerful to be overcome by ANY individual innovation. Libertarians believe that this is the threat of organized governments, such as Socialism... I happen to believe that large financial institutions have an equal potential to fulfill that threat; "a banker's wingtips stomping on a human face forever," to misquote Orwell. Certainly more comfortable than a boot, but no less oppressive. Have we already reached that point?

7/21/2008 12:33 PM  
Anonymous goldhorder said...

I do believe there is a strong role for central planning in human society've got to be kidding me! LOL. Ummmmm...Things happen because they have to happen. Bears crap in the woods, Fish swim in the sea, and empires extend their reach so far they can't possibly hold things together any longer. It is not a matter of if the empire is going to is only a matter of when. You know...the sun never sets on the British empire. The collapse of the Soviet Union will never happen, Mao's china will starve themselves before apadpting to capitaltism, etc. I agree with most of what you say but you are crazy to think you can do anything about it. As far as your belief in central planning I'm shocked at your faith. As far as being a pure individualist...I have no problem with people coming together as a group and making decisions collectively. That is not what a centralized powerful government does. If you can't walk up to the door of the political leaders with the most power and spit in their face...then you have no power and they have no reason to pay any attention to you or your concerns. We have no power over the federal government at all. We have very little over state governments. We have some over local governments but they have the least resources and the least power. Our government is backwards. In Ron Paul's new book he suggests honest people take over their local governments and begin making decisions outside of the state and federal governments. Build from the ground up...maybe you could eventually take over the state government that way and rearrange things so that the state became subservient to local governments. I have little faith in this tactic myself but at least he understands the problem. When this things collapses we will probably go the other route ...even more authoritarian. If I had to guess. After all...for not believing in "Gold" as money anymore our leaders have been sure not to sell the feds stockpile off!!! They will have an awfully nice starting point...they just need to supply a fresh set of faces to "show us the new way".

If I were to model a government myself I would try to model the Swiss government. The problem with copying the Swiss government is that their political elites preside over a country of only 8 million. They realize that there is no way they could police the world and the only way they could possilby stay in power(and not get overtaken by another power) is to make their countrymen believe in their leadership as much as possible. They actually educate their children also. That helps, rather than giving them lessons in obedience and state worship. The single thing that gives me no hope at all (that we could turn this thing around) is the corruption of our educational system. When the majority of your children are educated by a system designed by your wealthy have little chance of an overthrow ever occuring. I've posted John Taylor Gatto's work several times here. If you have kids and you ever take any advice of his book. He sites his sources. A good deal comes from Carnegie's own writing.

"....The next step came in 1890, when Andrew Carnegie wrote eleven essays, called The Gospel of Wealth. In it he said that capitalism (free enterprise) was stone cold dead in the United States. It had been killed by its own success. That men like himself, Mr. Morgan, and Mr. Rockefeller now owned everything. They owned the government. Competition was impossible unless they allowed it. Which, human nature being what it is, was a problematical thing.

Carnegie said that this was a very dangerous situation, because eventually young people will become aware of this and form clandestine organizations to work against it. Ultimately they'll bring down this edifice. You've got to read all eleven essays, sometimes several times, and only then the majesty of the design emerges. Carnegie proposed that men of wealth re-establish a synthetic free enterprise system (since the real one was no longer possible) based on cradle-to-grave schooling. The people who advanced most successfully in the schooling that was available to everyone would be given licenses to lead profitable lives, they would be given jobs and promotions and that a large part of the economy had to be tied directly to schooling."

So what is the only way you can fight? Homeschool, buy gold, buy guns and learn to shoot(only shoot them if they come after you), become involved in local politics with like minded people and ignore the state and federal branches of government when doing so.

These "big institutions" you keep talking about...they only exist because of consolidated political power. If it wasn't for gaming the system they would wilt and die. MHO
I've been told I'm very cynical though.

7/21/2008 5:42 PM  
Anonymous Anonymous said...

I noticed the bit in Bens report about "actual" inflation:

"Moreover, the currently high level of inflation, if sustained, might lead the public to revise up its expectations for longer-term inflation. If that were to occur, and those revised expectations were to become embedded in the domestic wage- and price-setting process, we could see an unwelcome rise in actual inflation over the longer term. A critical responsibility of monetary policy makers is to prevent that process from taking hold."

Translate: If we elites don't snuff out the inflation news the massess might start expecting some inflation benefits too and we can't allow that!

7/22/2008 10:22 AM  
Anonymous Forex View Blog said...

Don't the ECB and the Fed keep saying this from the beginning of the year???

7/28/2008 3:01 PM  
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