Monday, August 5, 2013
Goodness knows we've written a ton about them, putting them in a justifiably negative light..
The one thing we really haven't been able to do is really summarize in a concise, all-encapsulating way what the Fed does and why they're so dangerous and destructive..
Its really yeomen's work to attempt but we're going to as easy to understand as possible without emotion or extra hyperbole so the reader finishes this post truly understanding the last 5 years...
In Sept. 2008, Lehman Bros was allowed the collapse rather than the government propping it up, and it for the most part scared the bleep out of investors,etc who pulled out their money in a panic.
To try to stabilize the market, then Treasury Sec under Bush, Hank Paulsen asked Congress for $700 billion to go to the banks with no checks or balances as to who got what or whether they really needed it..
The goal was to hide the insolvent banks (bad) from the American public so everyone got money with no expectation to pay it back whether it was needed or not.
Congress realizing how hot potato this whole situation had become and not seeking a repeat, basically voted away their responsibility to handle this crisis to the Federal Reserve in a closed door vote on December 31, 2008.
They also voted themselves a 2.8% raise on that day...
So now the Fed was in charge.. And what did they do?
Around the end of 2008, the Fed lent out $855 billion... this was on top of the $700 billion TARP program that Congress approved.
The Top 5 borrowers being foreign banks-- Credit Suisse, Deutsche Bank, BNP Paribas, RBS and Barclays. Together these five accounted for $593 billion of total borrowings, or 70% of the total.
This is still occurring...
This is a good segue way point before we talk about Quantitative Easing..
Why is the Fed holding onto money it lent out? And whose money is the Fed lending?
We'll answer the latter first-- our money. Every dollar created by the Fed is new debt which ultimately is to be repaid by the government i.e. taxpayer via higher taxes, weakening of pensions and cutbacks in social services.
Now, onto the original question...
The Fed wants banks to have money to recapitalize but doesn't want this money lent out into the populace i.e. mortgages and personal loans, so the Fed acts like a bank for the banks and provides interest on these 'loans' for the banks not to lend out into the general public and weaken the dollar
And by paying banks around the same rate of interest to hold the money it was lending out, the banks essentially pay zero to borrow vast amounts then use those funds to lend to other banks or invest in the stock market.
Staring in March 2009 and continuing into the present the Fed has been involved in Quantitative Easing.. Its really a blanket term; a mumbo jumbo word.
In simple terms, the Fed is buying up everyone's bad, toxic debt and storing it while overpaying intentionally to hold onto the crap...
In the case of banks, its spending billions to buy up mortgage backed securities that are on banks and corporations' balance sheers.
That's how this nation can continue running huge debts and annual deficits without a care in the world while wasting all the money it does on wars and other endeavors.
As long as an indebted nation can find buyers on its debt, it can keep running its nation's finances to the ground.
In America, the Fed gobbles up the Treasuries which are still kept artificially low which allows us to make repayment without having to raise rates to entice new investors..
We hope you're really understanding what's going on and getting a concise picture here...
Even China our supposed enemy needs the US economy to thrive for it to thrive since we buy more stuff from them than any other market.. Its in no one's interest to say the 'Emperor' is clothes-less...
And all those Trillions pissed away so the banks, corporations and Wall Street can survive and profit.. All Americans will have to repay that money and it will take literally decades upon decades of decreased standard of living to do so..
Except us.. We have no agenda and we're not profiting either way..
We're just patiently waiting for a Much needed 'regime change' called a national election and hope & pray one of the two parties can nominate someone who justifiably despises the Fed and actually Knows what they're doing to fix Main Street USA
Posted by Susquehanna at Monday, August 05, 2013