I’ve spent a lot of time on this blog reviewing the different aspects of the Federal Reserve – how it was deceptively formed, how it is a private corporation with private shareholders, how it essentially reports to no one, how it is destroying our economy, etc. After doing some reading today, I realized that I haven’t really shown the details behind the Fed’s ownership. This short article by Victor Thorn tells you what you need to know.
It’s probably a shocking revelation to most Americans that the Federal Reserve – the one entity in America that has absolute control over our economy (controlling interest rates and money supply volume) – is majority controlled by banking families of Europe. It’s probably just as shocking for most Americans to learn that JPMorgan-Chase and Citibank control the New York Federal Reserve Bank. Who controls JP Morgan and Citibank? The same people who own the Federal Reserve. It’s an amazing game of smoke and mirrors. On the surface – it seems that the Federal Reserve (by its very name) is government controlled and our largest banking institutions are owned by many different, independent shareholders. The truth is that all of these banking institutions are majority controlled by the same families.
All of the recent banking bailouts make a little more sense (trillions of dollars thrown away into a failing system) when you know the facts behind what is going on. Who benefited from the banking bailouts? The very large banking conglomerates (including Citibank and JPMorgan) were the beneficiaries – while smaller regional banks continue to fail every week. Now we know why. If you’re Citibank and you’re in trouble – why not have the Federal Reserve Bank of New York (which you control) – bail you out. Of course, this truth never ends up in our newspaper headlines.
The fact that our central bank is controlled by private banks – and that ownership/control of the world’s central banking system ultimately resides in Europe – is what really got me looking into the details behind our monetary/economic system. As with any investigation into a crime – a good detective will initially look for an answer to one overriding question – what is the motive behind the crime?
These are the questions that started me on the path to learning the truth:
1. What is the motive behind this system?
2. Why would anyone create a monetary system that requires exponential debt creation/growth?
3. Why would anyone create a monetary system that is unsustainable – that will eventually collapse at some point in the future?
4. What do the people behind this system stand to gain from the failure of the system?
If you want to understand what is happening to the world’s economy – you must be able to answer these questions. If you spend the time to research the answers – like I have – you won’t like what you find. I think that most people – if they were honest with themselves – know something is amiss. The problem is that they don’t want to face the truth – so they never try to find the answers. Unfortunately, in the very near future – ignorance is not going to be bliss.
There are many very intelligent people in the world today trying to explain what is happening to our economy. They fail to arrive at the right conclusions because they only focus on what they’re told – and they ignore the glaring problems right in front of them. They assume that they’re being told the truth by the Fed and our government – and they never search for ulterior motives. As you’ve seen me say before – I don’t see much truth emanating from Washington D.C. these days – so many people are being led astray.
What is truly amazing to me about all of this - is that approximately 2,000 years ago the Apostle John wrote down a Divine Revelation. God inspired John to write the ‘Revelation of Jesus Christ’ on the island of Patmos. In it – God gave us serious warnings about the end of this age. Around 95 A.D. God gives us a description of a ‘beast’ (worldly entity/organization) that would deceptively gain control over the world’s governments and the world’s financial system.
It’s almost as if John has transcended time and handed me the message personally. It’s as though the Lord has handed me the Revelation and said “Interpret this message for My people – warn them about what is to come.” Why do I say this? Because for hundreds of years an evil, deceptive worldly organization has infiltrated the world’s governments and the world’s financial system. The very same people who have infiltrated the world’s political system (including U.S. Presidents, Senators, Congressmen, British Prime Ministers, Heads of State around the world, etc. etc.) – also control the world’s central banking system. This is not a coincidence. Significant prophecies are being fulfilled right before our eyes – and we’re all staring at our blackberries, watching American Idol and playing fantasy football. We have been lulled to sleep – as the beast gains control of the world. I’ll say it again – we have vastly underestimated our spiritual enemy.
There have been countless interpretations of the prophecies of Revelation over the years (some popular and some not) – but there has been no way to confirm many of them until the last 15 years. Now that there are many ways to research who is behind the New World Order and our central banking system (through many people researching independently) – it is becoming clear what is happening and who is behind it.
I have warned people for 4 years about the coming economic collapse – and I don’t think many people have taken the warnings seriously. Even after I have explained the reasons for a collapse from the world’s viewpoint (math doesn’t lie). Maybe after markets collapse and we have nothing – maybe then we will all wake up to reality. We’re going to find out very soon.
jg – September 6, 2009
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Who Controls The Federal Reserve System?
By Victor Thorn
Now that we know the Federal Reserve is a privately owned, for-profit corporation, a natural question would be: who OWNS this company? Peter Kershaw provides the answer in "Economic Solutions" where he lists the ten primary shareholders in the Federal Reserve banking system.
1) The Rothschild Family - London 2) The Rothschild Family - Berlin 3) The Lazard Brothers - Paris 4) Israel Seiff - Italy 5) Kuhn-Loeb Company - Germany 6) The Warburgs - Amsterdam 7) The Warburgs - Hamburg 8) Lehman Brothers - New York 9) Goldman & Sachs - New York 10) The Rockefeller Family - New York
Now I don't know about you, but something is terribly wrong with this situation. Namely, don't we live in AMERICA? If so, why are seven of the top ten stockholders located in FOREIGN countries? That's 70%! To further convey how screwed-up this system is, Jim Marrs provides the following data in his phenomenal book, "Rule By Secrecy." He says that the Federal Reserve Bank of New York, which undeniably controls the other eleven Federal Reserve branches, is essentially controlled by two financial institutions:
1) Chase-Manhattan (controlled by the Rockefellers) - 6,389,445 shares - 32.3%
2) Citbank - 4,051,851 shares - 20.5%
Thus, these two entities control nearly 53% of the New York Federal Reserve Bank. Doesn't that boggle your mind? Now, considering how many trillions of dollars are involved here, and how the bankers are WAY above our "selected" officials in Washington, D.C., do you think the above-listed banks and families have an inordinate amount of say-so in how our country is being run? The answer is blindingly apparent.
Where does the money come from?
We all know that the Federal Reserve CORPORATION prints money - then loans it, at interest, to our government. But wait until you see what a total scam this process is. But before we get to the meat of this issue, let's remember one thing about the very essence of banking - primarily that money should have some type of standard upon which its value is based. In the case of America, we operate on what is called a "gold standard" (i.e. our money is backed by gold).
So, with that in mind, let's look at how money is actually created, and at what cost. If the Federal Reserve wants to print 1,000 one-hundred ($100) bills, their total cost for ink, paper, plates, labor, etc. would be approximately $23.00 (according to Davvy Kidd in "Why A Bankrupt America"). Now, if you do the math, the total cost of 10,000 bills would be $230.00 ($.023 x 10,000). But, and here's the catch - 10,000 $100 bills equals $1,000,000! So, the Federal Reserve can "create" a million dollars, then LEND it to the U.S. Government (with interest) for a total cost of $230.00! That's not a bad deal, huh!
The banking industry calls this process "seignorage." I call it outright THEFT. Why? Well, regardless of the immense profit margin ($1,000,000 for $230), plus the huge interest payments, our government then needs to STEAL the American people's money to payoff their debts via a Mob-like agency called the IRS. So the bankers steal from the government, then the government turns around and steals from the people. I'm no genius, but who do you think is getting screwed in this process? Us - the people at the bottom rung of the ladder.
What's worse is that - now catch your breath - there's NO MORE gold left in Fort Knox! It's all gone. In other words, the GOLD STANDARD that our financial system was based upon is now an illusion. We can't convert our money into gold --- only other currency. The entire underlying basis for our money is now a lie - a sham. The Federal Reserve has become so arrogant that they've become a literal MONEY MAKING MACHINE, creating currency out of thin air! So that's where the Fed gets their money - they literally make it, then lend it to us so they can make even MORE money off of it.
Money As A Religion
The above-detailed process has become so ridiculous that William Grieder, former assistant managing editor of the Washington Post, wrote a book in 1987 entitled, "Secrets of the Temple: How the Federal Reserve Runs the Country" that details how the Controllers have conditioned us to accept this absurd situation.
"To modern minds," he writes, "it seemed bizarre to think of the Federal Reserve as a religious institution. Yet the conspiracy theorists, in their own demented way, were on to something real and significant. The Fed did also function in the realm of religion. Its mysterious powers of money creation, inherited from priestly forebears, shielded a complex bundle of social and psychological meanings. With its own form of secret incantation, the Federal Reserve presided over awesome social ritual, transactions so powerful and frightening they seemed to lie beyond common understanding."
Mr. Grieder continues, "Above all, money was a function of faith. It required implicit and universal social consent that was indeed mysterious. To create money and use it, each one must believe, and everyone must believe. Only then did worthless pieces of paper take on value."
Do you get it? MONEY is an ILLUSION! Why? Because the gold standard upon which our money is supposed to be based has been eliminated. There's no more gold in Fort Knox. It's all GONE! Now, money really IS only paper!!! In the past, money was supposed to represent something of tangible value. Now it's simply paper!
Taken one step further, many of us don't even use paper money any more! Why? Well, here's a scenario. Many places of employment directly deposit their employee's paychecks into the bank. Once the money is there, when bill time comes around, the person in question can write out a stack of checks to pay them. Plus, when they need gasoline they use a credit card; and groceries a debit card. If this person goes out for dinner on Friday night, they can charge the tab on their diner's card. But what about the tip? They simply scribble in the amount at the bottom of the check. So far, the person hasn't spent a single dollar bill. Plus, if you bring electronic banking into the picture, we've virtually eliminated the use for money. And, God forbid, what happens when encoded microchips are implanted into the backs of our hand?
In essence, money has become nothing more than an illusion - an electronic figure or amount on a computer screen. That's it! As time goes on, we have an increasing tendency toward being sucked into this Wizard of Oz vortex of unreality. Think about it. Americans as a whole are carrying more personal debt than in any other time in history. Plus our government keeps going further and further into the hole, with no hope of ever crawling out. But we have less and less actual MONEY! We're being enslaved by the debt of electronic blips on a computer screen! And 70% of the banks that control this debt via the Federal Reserve exist in foreign countries! What in God's name is going on? As author William Bramley says, "The result of this whole system is MASSIVE debt at every level of society."
We're getting screwed in a sickening way, folks, and the people doing it are demented magician-priests that use the ILLUSION of money as their control device. And I hate to say it, but if we allow things to keep going as they are, the situation will only get worse. Our only hope ... ONLY HOPE ... is to immediately take drastic action and remedy this crime.
Showing posts with label Federal Reserve Ownership. Show all posts
Showing posts with label Federal Reserve Ownership. Show all posts
Saturday, September 16, 2006
Friday, September 15, 2006
Fed Generates $46.1 Billion Profit in 2009
You won't see this headline on the top of the front page of your local newspaper. Since the Fed has never been audited - it is impossible for anyone to truly understand how the Fed attained these profits or if these numbers are even accurate. We are usually told something very vague like the article below tells us - [the fed] generated record profits as its holdings of Treasury, mortgage-backed securities and agency debt grew'. Not a whole lot of details - there never have been - and never will be unless something changes.
These articles also deceptively lead us to believe that the Fed contibutes huge sums of money to the Treasury - as if they are net contributors to the taxpayers of America. The opposite is true - the Fed creates our money and then charges us interest on the money they create - leaving the American people with a $12 trillion dollar national debt that continues to grow - and can never be re-paid.
As you can see - this is a very profitable business - it always has been - and will continue to be profitable - unless something changes. This is why our national debt growth has now gone parabolic - climbing the steep incline of an exponential growth curve. As you've seen me say before - when exponential growth ends in our finite world - it's not a smooth landing.
It's also interesting to note that we are never told who owns the Fed. We're told that the Fed gives a significant amount of money back to the Treasury - but what about the other $6 billion? Who just earned $6 billion dollars last year? Would you believe banking families of Europe? The same families who own the European Central Bank, the Bank of England, etc.
Who Owns the Federal Reserve?
If you want to learn some truth about the world we live in - researching the owners (shareholders) of the Fed is a great place to start. You'll get very uncomfortable - but you'll learn some real truth.
John
_______________________________________
I noticed today that Chris Martenson also picked up on the Fed's 'earnings' release. As always, he provides excellent insight into what's really happening behind the smoke and mirrors. I've added his blog post below.
jg - Jan 13, 2010
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Time For An Audit ... Or Some Competition
Wednesday, January 13, 2010, 10:55 am, by cmartenson
At first I thought a recent article in the Washington Post regarding 'earnings' at the Federal Reserve was a joke. But it appeared in the business section and there weren't any "gotcha!" retractions the next day so I assume it was meant to be serious.
For those that understand the very simple idea that the Federal Reserve prints Federal Reserve Notes (or their electronic equivalent) out of thin air, the concept of 'earnings' on those same thin-air money units is intellectually challenging.
Here's the article:
Federal Reserve earned $45 billion in 2009
Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government.
The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.
The numbers are good news for the federal budget and a sign that the Fed has been successful, at least so far, in protecting taxpayers as it intervenes in the economy -- though there remains a risk of significant losses in the future if the Fed sells some of its investments or loses money on its stakes in bailed-out firms.
First of all, the word 'earnings' implies that value was created and/or something was at risk. Neither applies to the Fed. Let's review the process by which they 'earned' money in 2009. We'll simplify this by examining just one of their activities, the purchase of Treasury debt.
Step 1: Using keystrokes, create $300 billion out of thin air.
Step 2: Buy Treasury notes and bonds with the $300 billion.
Step 3: Collect interest from the US government on those notes and bonds.
Step 4: Report record 'earnings.'
Step 5: Wash, rinse, repeat.
What is the meaning of 'earnings' in that series of steps? What value was created? Where was the risk? In this context the word 'earnings' has no meaning or any relevance at all. It's the exact same thing as if the Fed had printed $49 billion dollars put them on the income statement and called them 'earnings.' Or $10 trillion dollars. Or $1 dollar. When you can create any number you wish using a keyboard, the number itself is meaningless.
Further, we might wonder about the comfy relationship where the Fed buys government debt, the government then pays interest on that debt to the Fed, and the Fed then (mostly) returns these interest payments to the government as "excess profits."
In that little circle the Fed reports profits and the government reports revenue from the Fed. They both 'win!' But the entire thing is really just a sleight-of-hand exercise wherein the Fed prints money out of thin air and hands it to the government.
It's a crafty little game with lots of moving pieces but the essence of it is that money was brought into existence without any corresponding goods and services being created, which means that it is not a good thing (as reported) but is actually a bad thing. It is among the most inflationary and dangerous monetary activities that can be performed, at least if the past 800 years of monetary history is any guide. It looks clever and sounds sophisticated, but it really is nothing more than a distributed tax on every outstanding dollar in the system. If the founding fathers despised taxation without representation, they would have truly hated this shell game.
Second of all, I reject the entire premise of the WaPo article in that it promotes the notion that the Federal Reserve operates like any other normal business with a profit & loss (P&L) statement that in some way provides meaningful information.
The simple truth is that the Federal Reserve creates money out of thin air with which it buys debt instruments. That's it. That's its entire business model. Sometimes those debt instruments are US Treasury bills, notes and/or bonds and othe r times (like in 2009 mainly), they are mortgage backed securities, destroyed CDS and CDO paper from Bear Stearns, GSE agency debt, etc. and so forth..
The Fed business model is this; thin-air money is created and exchanged for debt.
If any other company could perform such an operation then it might be useful to compare their relative performances meaning that a P&L analysis could provide some insight. But given that only the Fed has this power, the information is pretty much meaningless and becomes utterly useless without a corresponding audit and 'mark-to-market' accounting rules.
Since we have no idea to what extent the Fed is sitting on massive losses, or even what they are sitting in many cases, the concept of P&L 'earnings' are as completely irrelevant as anything can possibly be. Thus, promotion of the idea of Fed 'earnings' is not just an error, it's misleading.
Here's another gem from the article that captures the essence of my point:
"This shows that central banking is a great business to be in, especially in a crisis," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former Fed official. "You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit."
"The cost of funds is very low." That part made me smile. It's like me saying that the cost of using a calculator to multiply by a higher number vs. a lower number "is very low."
A central bank is not a business, it is a government-enforced cartel with the unique ability to create money out of thin air. This is not a trivial distinction and we would do well to not try and understand a central bank's activities through the same lens that we use to view the rest of the productive world.
Instead, we would be best served by paying close attention to what the most powerful cartel is up to as their private missteps become our collective pain. This is why I completely support the idea of having the Fed audited by an independent third party just like any other public business.
If the Fed continues to refuse to do so then I would support the establishment of a competing entity to the Fed that could also issue its own government backed currency. Then the marketplace (you and I) could decide for ourselves which unit of currency we'd prefer using whatever information and data each would be willing to provide. One thing that nature has taught me is that competition makes for a stronger and more resilient organism.
Without any accountability, and with a complete monopoly, the Fed has grown weak and lazy as evidenced by their horrible serial-bubble blowing performance over the past two decades and the apparent inability to differentiate between asset inflation and wealth. It is either time to enforce complete transparency or, preferably, create some legitimate marketplace competition.
So that's it; let's have an audit with publicly available results, or let's have some competition.
Or maybe even both?
__________________________________________
January 12, 2010, 9:29 AM ET
Fed Generates $46.1 Billion Profit in 2009
By Meena Thiruvengadam
The Federal Reserve had its biggest bottom line ever in 2009, generating record profits as its holdings of Treasury, mortgaged-backed securities and agency debt grew.
The Fed last year generated a net income of $52.1 billion, of which it paid $46.1 billion to the U.S. Treasury, the Fed said Tuesday. The windfall came as the Fed’s balance sheet ballooned to more than $2.2 trillion and the Fed acquired billions in securities through unusual asset-purchase programs aimed at spurring economic growth.
The Fed last year purchased $300 billion in US government debt and is on track to buy $1.25 trillion in mortgage-backed securities plus $175 billion in debt from government-backed mortgage agencies. The larger holdings more than offset the historically low interest rates that bring the Fed its income.
The Fed’s 2009 earnings were up 47% from 2008 when it generated a net income of $35.5 billion and transferred $31.7 billion to the Treasury.
The 2009 earnings reflect an estimated $3.7 billion in losses on holdings the Fed acquired when it helped J.P. Morgan Chase & Co. buy Bear Stearns and when it rescued American International Group.
Of the 2009 earnings, $46.1 billion was generated through open market operations and $5.5 billion was generated by companies it created as part of the Bear Stearns, AIG and other rescue operations. The Fed earned $2.9 billion in 2009 on interest on loans it made to banks and other institutions.
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JANUARY 13, 2010
Fed's Power of the Press
By PETER EAVIS
Wall St. Journal
The Federal Reserve's blowout 2009 profit is no reason to cheer. Rather, it is a reminder of the dangers inherent in the extraordinary policies the central bank has pursued during the credit crunch.
Last year, the Fed earned $52.1 billion, with most of that income coming from interest-payments on bonds that it bought during the year to shore up the economy and credit markets.
Anyone with access to printing presses could have racked up similar gains. But the Fed's purchases leave it exposed. Its assets are 43 times its capital, compared with 15 times at Goldman Sachs. As a result, its equity could be wiped out by just a 2.8% drop in the value of its Treasurys and securities issued by Fannie Mae and Freddie Mac. True, the Fed could hold on to those securities and ride out any losses, and retain earnings to boost capital, but what self-respecting central bank wants to risk a negative net worth?
Even the fact that the Fed is, as usual, paying most of its profit to the Treasury isn't good news. It means the Treasury is paying almost no interest on a large slug of debt purchased by the Fed. That can only chip away further at fiscal discipline.
The Fed's asset purchases did help avert a possible depression. But they've also weakened the dollar, fueled frothy assets markets, and stopped long-overdue adjustments to the economy and financial system. They could also stoke inflation if maintained too long. If these cons start to obviously outweigh the pros, the Fed's policies could quickly be discredited.
And since printing money is the last trick in its bag, its failure would take the central bank into dark, uncharted territory.
Something to think about as Fed cheerleaders compare the central bank's returns with those of Wall Street.
Write to Peter Eavis at peter.eavis@wsj.com
These articles also deceptively lead us to believe that the Fed contibutes huge sums of money to the Treasury - as if they are net contributors to the taxpayers of America. The opposite is true - the Fed creates our money and then charges us interest on the money they create - leaving the American people with a $12 trillion dollar national debt that continues to grow - and can never be re-paid.
As you can see - this is a very profitable business - it always has been - and will continue to be profitable - unless something changes. This is why our national debt growth has now gone parabolic - climbing the steep incline of an exponential growth curve. As you've seen me say before - when exponential growth ends in our finite world - it's not a smooth landing.
It's also interesting to note that we are never told who owns the Fed. We're told that the Fed gives a significant amount of money back to the Treasury - but what about the other $6 billion? Who just earned $6 billion dollars last year? Would you believe banking families of Europe? The same families who own the European Central Bank, the Bank of England, etc.
Who Owns the Federal Reserve?
If you want to learn some truth about the world we live in - researching the owners (shareholders) of the Fed is a great place to start. You'll get very uncomfortable - but you'll learn some real truth.
John
_______________________________________
I noticed today that Chris Martenson also picked up on the Fed's 'earnings' release. As always, he provides excellent insight into what's really happening behind the smoke and mirrors. I've added his blog post below.
jg - Jan 13, 2010
_________________________________________________________
Time For An Audit ... Or Some Competition
Wednesday, January 13, 2010, 10:55 am, by cmartenson
At first I thought a recent article in the Washington Post regarding 'earnings' at the Federal Reserve was a joke. But it appeared in the business section and there weren't any "gotcha!" retractions the next day so I assume it was meant to be serious.
For those that understand the very simple idea that the Federal Reserve prints Federal Reserve Notes (or their electronic equivalent) out of thin air, the concept of 'earnings' on those same thin-air money units is intellectually challenging.
Here's the article:
Federal Reserve earned $45 billion in 2009
Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government.
The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.
The numbers are good news for the federal budget and a sign that the Fed has been successful, at least so far, in protecting taxpayers as it intervenes in the economy -- though there remains a risk of significant losses in the future if the Fed sells some of its investments or loses money on its stakes in bailed-out firms.
First of all, the word 'earnings' implies that value was created and/or something was at risk. Neither applies to the Fed. Let's review the process by which they 'earned' money in 2009. We'll simplify this by examining just one of their activities, the purchase of Treasury debt.
Step 1: Using keystrokes, create $300 billion out of thin air.
Step 2: Buy Treasury notes and bonds with the $300 billion.
Step 3: Collect interest from the US government on those notes and bonds.
Step 4: Report record 'earnings.'
Step 5: Wash, rinse, repeat.
What is the meaning of 'earnings' in that series of steps? What value was created? Where was the risk? In this context the word 'earnings' has no meaning or any relevance at all. It's the exact same thing as if the Fed had printed $49 billion dollars put them on the income statement and called them 'earnings.' Or $10 trillion dollars. Or $1 dollar. When you can create any number you wish using a keyboard, the number itself is meaningless.
Further, we might wonder about the comfy relationship where the Fed buys government debt, the government then pays interest on that debt to the Fed, and the Fed then (mostly) returns these interest payments to the government as "excess profits."
In that little circle the Fed reports profits and the government reports revenue from the Fed. They both 'win!' But the entire thing is really just a sleight-of-hand exercise wherein the Fed prints money out of thin air and hands it to the government.
It's a crafty little game with lots of moving pieces but the essence of it is that money was brought into existence without any corresponding goods and services being created, which means that it is not a good thing (as reported) but is actually a bad thing. It is among the most inflationary and dangerous monetary activities that can be performed, at least if the past 800 years of monetary history is any guide. It looks clever and sounds sophisticated, but it really is nothing more than a distributed tax on every outstanding dollar in the system. If the founding fathers despised taxation without representation, they would have truly hated this shell game.
Second of all, I reject the entire premise of the WaPo article in that it promotes the notion that the Federal Reserve operates like any other normal business with a profit & loss (P&L) statement that in some way provides meaningful information.
The simple truth is that the Federal Reserve creates money out of thin air with which it buys debt instruments. That's it. That's its entire business model. Sometimes those debt instruments are US Treasury bills, notes and/or bonds and othe r times (like in 2009 mainly), they are mortgage backed securities, destroyed CDS and CDO paper from Bear Stearns, GSE agency debt, etc. and so forth..
The Fed business model is this; thin-air money is created and exchanged for debt.
If any other company could perform such an operation then it might be useful to compare their relative performances meaning that a P&L analysis could provide some insight. But given that only the Fed has this power, the information is pretty much meaningless and becomes utterly useless without a corresponding audit and 'mark-to-market' accounting rules.
Since we have no idea to what extent the Fed is sitting on massive losses, or even what they are sitting in many cases, the concept of P&L 'earnings' are as completely irrelevant as anything can possibly be. Thus, promotion of the idea of Fed 'earnings' is not just an error, it's misleading.
Here's another gem from the article that captures the essence of my point:
"This shows that central banking is a great business to be in, especially in a crisis," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former Fed official. "You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit."
"The cost of funds is very low." That part made me smile. It's like me saying that the cost of using a calculator to multiply by a higher number vs. a lower number "is very low."
A central bank is not a business, it is a government-enforced cartel with the unique ability to create money out of thin air. This is not a trivial distinction and we would do well to not try and understand a central bank's activities through the same lens that we use to view the rest of the productive world.
Instead, we would be best served by paying close attention to what the most powerful cartel is up to as their private missteps become our collective pain. This is why I completely support the idea of having the Fed audited by an independent third party just like any other public business.
If the Fed continues to refuse to do so then I would support the establishment of a competing entity to the Fed that could also issue its own government backed currency. Then the marketplace (you and I) could decide for ourselves which unit of currency we'd prefer using whatever information and data each would be willing to provide. One thing that nature has taught me is that competition makes for a stronger and more resilient organism.
Without any accountability, and with a complete monopoly, the Fed has grown weak and lazy as evidenced by their horrible serial-bubble blowing performance over the past two decades and the apparent inability to differentiate between asset inflation and wealth. It is either time to enforce complete transparency or, preferably, create some legitimate marketplace competition.
So that's it; let's have an audit with publicly available results, or let's have some competition.
Or maybe even both?
__________________________________________
January 12, 2010, 9:29 AM ET
Fed Generates $46.1 Billion Profit in 2009
By Meena Thiruvengadam
The Federal Reserve had its biggest bottom line ever in 2009, generating record profits as its holdings of Treasury, mortgaged-backed securities and agency debt grew.
The Fed last year generated a net income of $52.1 billion, of which it paid $46.1 billion to the U.S. Treasury, the Fed said Tuesday. The windfall came as the Fed’s balance sheet ballooned to more than $2.2 trillion and the Fed acquired billions in securities through unusual asset-purchase programs aimed at spurring economic growth.
The Fed last year purchased $300 billion in US government debt and is on track to buy $1.25 trillion in mortgage-backed securities plus $175 billion in debt from government-backed mortgage agencies. The larger holdings more than offset the historically low interest rates that bring the Fed its income.
The Fed’s 2009 earnings were up 47% from 2008 when it generated a net income of $35.5 billion and transferred $31.7 billion to the Treasury.
The 2009 earnings reflect an estimated $3.7 billion in losses on holdings the Fed acquired when it helped J.P. Morgan Chase & Co. buy Bear Stearns and when it rescued American International Group.
Of the 2009 earnings, $46.1 billion was generated through open market operations and $5.5 billion was generated by companies it created as part of the Bear Stearns, AIG and other rescue operations. The Fed earned $2.9 billion in 2009 on interest on loans it made to banks and other institutions.
____________________________________
JANUARY 13, 2010
Fed's Power of the Press
By PETER EAVIS
Wall St. Journal
The Federal Reserve's blowout 2009 profit is no reason to cheer. Rather, it is a reminder of the dangers inherent in the extraordinary policies the central bank has pursued during the credit crunch.
Last year, the Fed earned $52.1 billion, with most of that income coming from interest-payments on bonds that it bought during the year to shore up the economy and credit markets.
Anyone with access to printing presses could have racked up similar gains. But the Fed's purchases leave it exposed. Its assets are 43 times its capital, compared with 15 times at Goldman Sachs. As a result, its equity could be wiped out by just a 2.8% drop in the value of its Treasurys and securities issued by Fannie Mae and Freddie Mac. True, the Fed could hold on to those securities and ride out any losses, and retain earnings to boost capital, but what self-respecting central bank wants to risk a negative net worth?
Even the fact that the Fed is, as usual, paying most of its profit to the Treasury isn't good news. It means the Treasury is paying almost no interest on a large slug of debt purchased by the Fed. That can only chip away further at fiscal discipline.
The Fed's asset purchases did help avert a possible depression. But they've also weakened the dollar, fueled frothy assets markets, and stopped long-overdue adjustments to the economy and financial system. They could also stoke inflation if maintained too long. If these cons start to obviously outweigh the pros, the Fed's policies could quickly be discredited.
And since printing money is the last trick in its bag, its failure would take the central bank into dark, uncharted territory.
Something to think about as Fed cheerleaders compare the central bank's returns with those of Wall Street.
Write to Peter Eavis at peter.eavis@wsj.com
King George 'Decoupling' Revisited
Couldn’t have said it better myself.
jg – May 13, 2010
____________________________________
Guest Post: The King George "Decoupling" Revisited
www.zerohedge.com
Submitted by Tyler Durden on 05/13/2010 08:34 -0500
http://www.zerohedge.com/article/guest-post-king-george-decoupling-revisited
Submitted by Chindit 13
Congress, always wont to congratulate itself for a job barely done, applauded itself for passage of the one-time audit of the Federal Reserve. Once is not enough. That this issue gets so little press owes as much to public misunderstanding as it does the vaunted secrecy the Fed coverts dearly enough to spend taxpayer money lobbying to keep those same taxpayers from having a window into its workings.
In a country that claims to be a democracy, this is a travesty on par with the grievances that prompted our Founding Fathers to seek independence from King George.
Little known to the average taxpayer, the Fed is a public-private entity that not only issues the nation’s currency, but sets interest rate policy and has supervisory authority over the banking system.
Its private owners, who are anything but neutral, number the largest banking and finance institutions in the country, the so-called Too Big to Fail banks.
Along with Treasury, the Fed has been instrumental in what SIGTARP Chief Barofsky has estimated has been $23 trillion of bailouts, loans, backstops and guarantees, since the financial crisis struck two years ago. To put that number in perspective, it represents almost twice the US GDP and 40% of World GDP. It also represents $75,000 for every man, woman, and child in the US.
Although not all of that money has been created or spent, much has, which means the US taxpayer now carries the responsibility for paying it back. Oddly, one might even say immorally, the Fed goes out of its way to prevent even the democratically elected representatives of the people from seeing the inner workings of that entity. The Fed---with help from the Obama White House---has lobbied to block access to information about what the taxpayer has bought, though the taxpayer is still required to pay for it, either directly in taxes or through inflation and a depreciating currency. If this is not the definition of “Taxation without Representation”, I do not know what is.
In the last two years, from what little we can gather, the Fed has lowered interest rates to zero in order to help the banks (who are its private shareholders), thereby rewarding the reckless and profligate and punishing the saver and the prudent. The Fed has increased its balance sheet from a few hundred billion dollars to nearly two and a half trillion dollars over that time, handing out money to bad banks, overpaying for both Treasury issuances and toxic mortgage backed securities, and effectively monitizing the debt of Treasury, which by its charter it is proscribed from doing. The Fed has also provided more than $2 trillion to certain unnamed banks to shore up the balance sheets, that they themselves destroyed (this is the subject of an FOIA request by Bloomberg News which the Fed is currently appealing).
Apparently it was not enough to bail out American banks only. Now the Fed is bailing out both European banks and sovereign states such as Greece via an unlimited foreign exchange swap facility whose primary goal is to further weaken the dollar and promote enough domestic inflation so as to make debt repayment easier for the spendthrifts.
What has America received in return for the Fed’s furtive efforts?
Unemployment stands at 10% and underemployment at 17%. Savers have been punished and encouraged to seek risk rather than security. Major banks have absolutely no incentive whatsoever to lend because they can borrow from the Fed at virtually zero percent, then lend the same money back to Treasury by buying somewhere along the yield curve, where the spread allows them to cover their operating costs with no risk. Banks have also used that 0% Fed money to speculate in the stock market, where a low volume rally has carried prices to levels hardly justified by economic fundamentals. It is no wonder why bank lending is still falling. Why should they bother lending, when they can profit without risk by simply taking free money and playing the yield curve?
In the last week it was reported that three major banks---Goldman Sachs, JPMorgan, and Bank of America---all had 100% winning days in Quarter 1 on their Proprietary Trading Desks or prop desks. Nobody is that good, and such results could not be achieved unless the desks had access to information and funding which is unavailable to mere mortals. The odds of achieving this feat are as great as a baseball player hitting 1.000 for the first two months of the season; it could not be done even if the player was allowed to use his own batting practice pitcher. Prop desks are where the banks use your money to trade for their account. In no way whatsoever do these proprietary activities serve society or the taxpayer. For these banks there is absolutely no risk, while the gains---as evidenced by record Wall Street bonuses in 2009---all accrue to the banks. As we learned in the last two years, if banks happened to lose money, both the Fed and the Treasury will make sure they are made whole again with US Taxpayer funds. For the Too Big to Fail banks, this is not only the best of times, but the financial crisis has proven to be the best thing that ever happened to them. For the rest of America not working on Wall Street and not with an ownership position in the Fed, times are not quite so rosy.
Why is it that a combination of the Fed, Treasury, major banks and the White House have decided that the American people have no right to know all of the things the people are responsible for through the machinations and activities of the Federal Reserve? Is America not a democracy? Have we reverted to colonial times, and instead of being beholden to a foreign monarch, we are now beholden to a domestic monarchy in the form of the Federal Reserve and the Too Big to Fail banks?
Those in Congress and the Administration, as well as the Fed and Wall Street, would do well to remember what happened last time the people had to pay without any say. [emphasis added]
jg – May 13, 2010
____________________________________
Guest Post: The King George "Decoupling" Revisited
www.zerohedge.com
Submitted by Tyler Durden on 05/13/2010 08:34 -0500
http://www.zerohedge.com/article/guest-post-king-george-decoupling-revisited
Submitted by Chindit 13
Congress, always wont to congratulate itself for a job barely done, applauded itself for passage of the one-time audit of the Federal Reserve. Once is not enough. That this issue gets so little press owes as much to public misunderstanding as it does the vaunted secrecy the Fed coverts dearly enough to spend taxpayer money lobbying to keep those same taxpayers from having a window into its workings.
In a country that claims to be a democracy, this is a travesty on par with the grievances that prompted our Founding Fathers to seek independence from King George.
Little known to the average taxpayer, the Fed is a public-private entity that not only issues the nation’s currency, but sets interest rate policy and has supervisory authority over the banking system.
Its private owners, who are anything but neutral, number the largest banking and finance institutions in the country, the so-called Too Big to Fail banks.
Along with Treasury, the Fed has been instrumental in what SIGTARP Chief Barofsky has estimated has been $23 trillion of bailouts, loans, backstops and guarantees, since the financial crisis struck two years ago. To put that number in perspective, it represents almost twice the US GDP and 40% of World GDP. It also represents $75,000 for every man, woman, and child in the US.
Although not all of that money has been created or spent, much has, which means the US taxpayer now carries the responsibility for paying it back. Oddly, one might even say immorally, the Fed goes out of its way to prevent even the democratically elected representatives of the people from seeing the inner workings of that entity. The Fed---with help from the Obama White House---has lobbied to block access to information about what the taxpayer has bought, though the taxpayer is still required to pay for it, either directly in taxes or through inflation and a depreciating currency. If this is not the definition of “Taxation without Representation”, I do not know what is.
In the last two years, from what little we can gather, the Fed has lowered interest rates to zero in order to help the banks (who are its private shareholders), thereby rewarding the reckless and profligate and punishing the saver and the prudent. The Fed has increased its balance sheet from a few hundred billion dollars to nearly two and a half trillion dollars over that time, handing out money to bad banks, overpaying for both Treasury issuances and toxic mortgage backed securities, and effectively monitizing the debt of Treasury, which by its charter it is proscribed from doing. The Fed has also provided more than $2 trillion to certain unnamed banks to shore up the balance sheets, that they themselves destroyed (this is the subject of an FOIA request by Bloomberg News which the Fed is currently appealing).
Apparently it was not enough to bail out American banks only. Now the Fed is bailing out both European banks and sovereign states such as Greece via an unlimited foreign exchange swap facility whose primary goal is to further weaken the dollar and promote enough domestic inflation so as to make debt repayment easier for the spendthrifts.
What has America received in return for the Fed’s furtive efforts?
Unemployment stands at 10% and underemployment at 17%. Savers have been punished and encouraged to seek risk rather than security. Major banks have absolutely no incentive whatsoever to lend because they can borrow from the Fed at virtually zero percent, then lend the same money back to Treasury by buying somewhere along the yield curve, where the spread allows them to cover their operating costs with no risk. Banks have also used that 0% Fed money to speculate in the stock market, where a low volume rally has carried prices to levels hardly justified by economic fundamentals. It is no wonder why bank lending is still falling. Why should they bother lending, when they can profit without risk by simply taking free money and playing the yield curve?
In the last week it was reported that three major banks---Goldman Sachs, JPMorgan, and Bank of America---all had 100% winning days in Quarter 1 on their Proprietary Trading Desks or prop desks. Nobody is that good, and such results could not be achieved unless the desks had access to information and funding which is unavailable to mere mortals. The odds of achieving this feat are as great as a baseball player hitting 1.000 for the first two months of the season; it could not be done even if the player was allowed to use his own batting practice pitcher. Prop desks are where the banks use your money to trade for their account. In no way whatsoever do these proprietary activities serve society or the taxpayer. For these banks there is absolutely no risk, while the gains---as evidenced by record Wall Street bonuses in 2009---all accrue to the banks. As we learned in the last two years, if banks happened to lose money, both the Fed and the Treasury will make sure they are made whole again with US Taxpayer funds. For the Too Big to Fail banks, this is not only the best of times, but the financial crisis has proven to be the best thing that ever happened to them. For the rest of America not working on Wall Street and not with an ownership position in the Fed, times are not quite so rosy.
Why is it that a combination of the Fed, Treasury, major banks and the White House have decided that the American people have no right to know all of the things the people are responsible for through the machinations and activities of the Federal Reserve? Is America not a democracy? Have we reverted to colonial times, and instead of being beholden to a foreign monarch, we are now beholden to a domestic monarchy in the form of the Federal Reserve and the Too Big to Fail banks?
Those in Congress and the Administration, as well as the Fed and Wall Street, would do well to remember what happened last time the people had to pay without any say. [emphasis added]
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