The Insolvency of the Fed

The Insolvency of the Fed

Since the crisis broke out, the Fed has continuously weakened the quality of the dollar by weakening its balance sheet. In fact, the assets the Federal Reserve holds have deteriorated tremendously. These assets back the liability side of the balance sheet, which mainly represents the monetary base of the dollar. The assets of the Fed, thereby, hold up the value of the dollar. At the end of the day, it is these assets that the Fed can use to defend the dollar's value externally and internally.

the quality of the balance sheet of the Fed is deteriorating

central banks and bubbles

Monetary Lessons from America's Past

printing inflation

Zimbabwe to print first $100 trillion note:

The new 100 trillion dollar bill would be worth about $300 in U.S. currency. A loaf of bread in Zimbabwe now costs about 300 billion Zimbabwean dollars -- and like most commodities, the price increases every day.

Hosing money on the economy

"Taiwan government presents consumption vouchers" (Taiwan News):

Under a government plan to boost the economy by encouraging domestic spending, about 23 million Taiwanese citizens and foreign spouses will each receive NT$3,600 worth of vouchers beginning Jan. 18, just one week ahead of the Chinese Lunar New Year holiday.

constant lying

This is what 'monetary management' really amounts to. In practice it's merely a high-sounding euphemism for continuous currency debasement. It consists in constant lying in order to support constant swindling. Instead of automatic currencies based on gold, people are forced to take 'managed' currencies based on guile. Instead of precious metal they hold paper promises whose value falls for every bureaucratic win. And they are suavely asured that only antiquated minds dream of returning to truth, and honesty, and solvency, in gold.

Henry hazlitt

The Austrians Were Right

"The Austrians Were Right" by Ron Paul:

Over and above this are those who understand that political power is controlled by those who control the money supply. Liberals and conservatives, Republicans and Democrats came to believe, as they were taught in our universities, that deficits don’t matter and that Federal Reserve accommodation by monetizing debt is legitimate and never harmful. The truth is otherwise. Central economic planning is always harmful. Inflating the money supply and purposely devaluing the dollar is always painful and dangerous.

The basic problem is that proponents of big government require a central bank in order to surreptitiously pay bills without direct taxation. Printing needed money delays the payment. Raising taxes would reveal the true cost of big government, and the people would revolt. But the piper will be paid, and that’s what this crisis is all about.

the origins of the financial crisis

IMD Professor Arturo Bris explains the origins of the financial crisis in a video presentation

Ron Paul on the G20 Meeting

Bob Murphy: Ron Paul on the G20 Meeting: Bretton Woods II or III?

Ron Paul is probably the best person in the world to comment on this stuff, because he understands the economics better than 95% of professional economists, and he of course understands politicians better than 100% of professional economists.

Here, Ron Paul on Neil Cavuto.

Is Fractional Reserve Banking Fraudulent?

"Is Fractional Reserve Banking Fraudulent?" by Walter Block:

Consider this: A deposits 10 ounces of gold in B's bank; B gives A a demand deposit for these 10 ounces. B turns around and lends C 9 of these ounces, giving C a demand deposit for these 9 ounces. Thus, A and C both own full rights to these 9 ounces.

.... there CANNOT be a conflict in rights. Any seeming conflict is due to a misspecification or one or the other right. Yet, here, with frb, we have a GENUINE conflict in rights.

"Is Fractional Reserve Banking Fraudulent?" by Walter Block:

Yes, I buy 10 widgets from you for delivery today, in consideration for my promise to pay you $10, tomorrow. A day passes, and I am unable to carry out my part of the bargain. But, it is not a LOGICAL CONTRADICTION to suppose I am unable to do so, as in the case of frb. There is all the difference in the world between being unable to fulfill a contract due to contingent circumstances, as in the widget example, and it being IMPOSSIBLE to do so, as in the case of frb. It is not merely "intervening events" that make it a violation of the laws of logic for B, the Bank, to uphold contracts with lender A and borrower C. It is IMPOSSIBLE for B to do so, given frb.

Progressives Should Audit the Fed

"Progressives Should Audit the Fed" by Joe Schembrie:

.... the Fed is a cartel of commercial banks consisting of the very crony-capitalist interests that Progressives normally oppose ....

With the ten-trillion dollar-plus money supply inflating prices at five percent annually, the Fed creates at least five hundred billion dollars a year in new money. The value diluted by those billions belongs to citizens but goes to cronies. There ought to be Progressive outrage. Where is it?

Peter Schiff Was Right

Peter Schiff Was Right

Gene Callahan:

Here we see a series of “esteemed” commentators, including Arthur Laffer and Ben Stein, basically laughing in Peter Schiff’s face even while he calls the coming downturn very accurately. The best moment may be Ben Stein insisting that Merrill Lynch was being “given away” at $76. (The stock today is at $14.)

What You Should Know About Inflation

"What You Should Know About Inflation" by Henry Hazlitt:

Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because it depreciates the value of the monetary unit, raises everybody's cost of living, imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest, wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.

Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.

.... inflation must always end in a crisis and a slump, and that worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of "capitalism."

Keynes’ wet dream coming true

Stiglitz calls for Global Currency

Professor Joseph Stiglitz says that a "global reserve currency" taking the place of the dollar would ease the financial crisis.

something far worse

Helicopter Ben Earns His Wings by Peter Schiff (21 de Setembro de 2007):

Those who believe the Fed should reduce interest rates to ward off a recession or stabilize home prices simply do not understand the situation. More credit is not the solution: it is part of the problem. Our economy is on the brink of disaster because irresponsible Fed policy encouraged Americans to borrow and spend too much and created an unprecedented national real estate bubble. The last thing the Fed should do is entice Americans to borrow more money they cannot repay, buy more imported products they cannot afford, and attempt to blow more air into the deflating real estate bubble.

Bernanke’s attempt to circumvent the free market forces that are bringing on a long overdo recession (which is necessary to purge our economy of unsustainable imbalances) will lead to an even greater disaster. Make no mistake about it; had the Fed done nothing, or raised rates as I would have preferred, the economy would have clearly tipped toward a severe recession. However, by “coming to the rescue” with rate cuts, the Fed assures us that we will experience something far worse.

Newstopia explains the Reserve Bank

"Shaun Micallef" (Shaun Micallef) and "Tony Froth" (Nicholas Bell) explain the role of the Reserve Bank of Australia and how to control inflation.

Lack of bank note paper threatens Zimbabwe economy

"It has come to this: Zimbabwe is about to run out of the paper to print money on."