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September 26, 2009
Issue 63  -  Federal Deceptions
I want to start this week with an unbelievable video.  This is a congressional hearing where a key lawyer for the Fed is being questioned by my 2nd favorite congressman (2nd only to Ron Paul), Alan Grayson.  Watch the way the Fed guy squirms and carefully forms his answers. (actually nonanswers for the most part) 
Key points here are where the lawyer (have you ever seen one so nervous?) says "tries to manipulate".  Grayson quickly catches that because his question was, "DO they manipulate", not try.  He then doesn't answer.  Of course the Fed manipulates the markets.  Grayson then gets him to admit that the Fed uses banks to implement their plans.  This leads to his question about naming one bank.  JPChase is the answer.  Goldman Sachs and JPChase are the primary conduits for these manipulations.  Front running is a term used to describe an illegal activity where a firm uses knowledge of an upcoming large trade.  Imagine being able to make trades before the Fed!  That is like printing money because they KNOW that the Feds trades will move the market.  The trades are virtually risk free.  An audit of the Fed is what is needed to solve this.  The bill to audit the Fed has enough votes to pass but notice its not coming to the house floor.  The only way that happens is for a huge public outcry and I just don't see that happening at this time. 
 I was listening to a podcast where two guys were debating whether we were going to have inflation or deflation.  (my life is so exciting)  The inflationist used the term of "impossible promises" and I think it hits right at the heart of the problems the United States faces.  Our government has made promises that can't be kept.  This ties back to the $1.5 million dollars of debt and liabilities per family.  Even with the recent recession, I still don't think very many in this country have ever experienced a hardship.  Oh sure, they may have cut back on eating out, but that's not really a "hardship".   Things have been handed to people in this country for so long that most just "expect" things.  As I see it, these expectations will not be met.  In fact, very hard times still lie ahead. 
Watch this video to get an idea of the problems this country faces:
Now this guy writes a blog and has been on the case of the Fed for years.  When he talks about the scandals of today and that they are irrelevant, he is right.  ACORN is an outrageous abuse but we're talking about $30 million dollars.  Now that is a lot of money to you or me, but to the US Government it's NOTHING.  Oh, did I mention that the money was spread over 10 years!  Obama's budget this year was about $4 trillion dollars, so $3 million dollars a year is not relevant.  It's like 8 cents a year for someone making $100,000 a year.   Do you think that is relevant?  Obama's budget summary can be seen here.
Back to the video.  Here is the main chart:
This chart is scary.  This chart doesn't include liabilities or corporate debt.  The idea that this can continue is laughable.  We must rein things in and SAVE.  The government MUST stop the spending!  We can't afford to keep adding spending.  That's insanity.  The funny thing is that you will NEVER hear about this on the news.  The powers that be won't allow that.  They would rather have you worry about ACORN or American Idol.  This is the PLAN.  Divert your attention while they rob us blind.  Guess what?  Their plan is working.  The average American has no idea what is going on.  NO IDEA!  Too bad the rest of the world is aware:

"HSBC bids farewell to dollar supremacy
The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC.
By Ambrose Evans-Pritchard
"The dollar looks awfully like sterling after the First World War," said David Bloom, the bank's currency chief.

"The whole picture of risk-reward for emerging market currencies has changed. It is not so much that they have risen to our standards, it is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue but the events of the last year have shown that this is no longer the case. Look at the UK – debt is racing up to 100pc of GDP," he said

Crucially, China and rising Asia have reached the point where they can no longer keep holding down their currencies to boost exports because this is causing mayhem to their own economies, stoking asset bubbles. Asia's "mercantilist mindset" of recent decades is about to be broken by the spectre of an inflation spiral.

The policy headache was already becoming clear in the final phase of the global credit boom but the financial crisis temporarily masked the effect. The pressures will return with a vengeance as these countries roar back to life, leaving the US and other laggards of the old world far behind."
The writing is on the wall.  Our standard of living will fall.  The rest of the world's will come up.  There is no other solution.  It's like pouring cold water into hot water.  The temperature will settle in between.  This is what's happening with standards of living.  Unfortunately we're the hot water.  The current bailout is nothing but cover for saving the big banks.  How much have we really spent on "saving the system?"  Here's a snippet from Dave in Denver:
"Back in November, a researcher by the name of James Bianco crunched the numbers adjusted them to inflation and discovered that the government bailout cost more than - are you ready for this? - the Marshall Plan, the Louisiana Purchase, the race to the moon, the S&L crises, the Korean War, The New Deal, the invasion of Iraq, the Vietnam War and NASA combined. The only single American event in history that even comes close to matching the cost of the credit crisis ($4.6 trillion) is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion."
That's amazing huh?  Just to save the bankers.  So how are the bankers doing?  From GATA:

"Friday, September 25, 2009
US large-loan bank losses triple to $53 billion
U.S. regulators said total losses from large loans at banks and other financial institutions nearly tripled to $53 billion in 2009, due to a deteriorating economic environment and continued weak underwriting standards. According to an annual report released by the four federal bank-regulatory agencies on Thursday, credit quality deteriorated to record levels this year.

Here's the question to ask: are these big banks still paying out massive bonuses and paychecks because they avoided taking $100 billon losses (and eventually losses will be in the trillions - trust me on that) OR are they paying massive bonuses because they were smart enough to convince the Government to keep them going with trillions in taxpayer money?"
I vote for "b", they were smart enough to convince the government to bail their arses out.  The banks, in cahoots with the Federal Reserve are basically sticking two fingers into the eyes of the everyday citizen. 
This is being done in broad daylight with very little coverage or outrage.   At the same time the Fed is printing money out of "thin air."

"Federal Reserve Accounts For 50% Of Q2 Treasury Purchases

Submitted by Tyler Durden on 09/20/2009 15:13 -0500

The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases.

This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs: with Households lapping up risky assets it is unlikely they will look at Treasuries absent some dramatic downward move in equities, while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!). Will the US make these purchases much more attractive come October when QE for USTs ends? And if so, what kind of rates are we talking about? One thing is certain: in terms of priorities of the Federal Reserve, keeping the equity market buoyant, is a distant second to ensuring successful auction after auction well into 2010. After all there is near $9 trillion in budget deficits that need financing over the next 10 years…


 The Fed bought $164 billion dollars of treasuries in the third quarter.  This means they ran over to the ole printing press, with today's technology that just means a computer, and conjured up a fresh stack of money.  This newly created "money" was then "paid" to the US Government for the newly created bonds and bills.  NOW, we pay them interest on the "money" they "paid" us.  Simply mind boggling and the press reports it like it would a weather forecast.  This will only continue until the sheeple
wake up and then all hell breaks lose.  At that point the dollar will be toast.  I don't believe that will take much longer as things like this get more and more attention:  (from GATA)
"Fed admits hiding gold swap arrangements

Tuesday, September 22, 2009

The Federal Reserve System has disclosed to GATA that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks.

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments."

A gold swap is where I give you title (legal ownership) of gold and you give me a promise of gold.  The gold can then be sold into the market to increase supply and thereby keep a lid on the price.  The swapper can still maintain that they have possession of the gold.  This is a lie.  Some people claim that there is no manipulation of the gold price.  Look at exhibit A from last Thursday when conveniently, the G8/G20 were meeting in Pittsburgh.  This is not an accident or a normal price movement:  (from GATA, Rob Kirby)
See that near vertical fall of the green line?  That's the price of gold traced out on Thursday.  NO market trades down like that and then just stops.  This is not normal.  It's manipulation, right in your face.  It's more than likely a whole bank of computer programmed trades driving the price where they want.  Of course the powers that be must do things like this when the situation of the American homeowner gets worse and worse:

"U.S. mortgage delinquencies set recordBy Nick Zieminski

NEW YORK (Reuters) - High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc credit bureau showed on Monday.

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.

The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.

The results, which correlate with consumer bankruptcy filings, suggest U.S. homeowners remain under financial stress despite signs of improving sentiment and fundamentals in the U.S. housing market.

August bankruptcy filings were up 32 percent from a year earlier, compared with a 35 percent year-over-year increase in July.

Still, while more Americans were late with mortgage payments, they are keeping up with other bills. The proportion of credit card accounts at least 60 days past due was down in August for the third straight month, while subprime card delinquencies also fell."
Foreclosures, delinquencies and bankruptcies are still rising, but things are getting better?  Maybe I'm not as smart as these reporters and politicians, but that doesn't seem like things are improving.  Gold is the enemy of every central bank and the illusion that paper money is sound and "safe" must be maintained at all costs.  Let's take a look at the actual performance of gold over the last decade versus other "safer" or "better" investments:
Wow, look at that "risky" gold.  I'm glad I didn't listen to the pundits advising against a gold investment.  Now there will come a time when gold should be sold, but we are far from that day.  Meanwhile, even though we're broke, the Congress is planning on starting a health care "reform" that not only won't work as promised, but will COST us more money.  This is in direct contradiction to the proclamations from our politicians.  Remember, I'm not a Democrat or Republican, just a guy who doesn't trust many politicians.  Do you think the politicians care about you?  Check this out:
"Democrats nix putting pre-vote health bill online

(AP) – 3 days ago

WASHINGTON — Senate Finance Committee Democrats have rejected a GOP amendment that would have required a health overhaul bill to be available online for 72 hours before the committee votes.

Republicans argued that transparency is an Obama administration goal. They also noted that their constituents are demanding that they read bills before voting.

Democrats said it was a delay tactic that could have postponed a vote for weeks.

The Democrats noted that unlike other committees, the Finance Committee works off conceptual language that describes policies — instead of legislative language that ultimately becomes law, and which the GOP amendment would have required.

Democrats accepted an alternate amendment to make conceptual language available online before a vote."
I thought this was a new age of transparency in the Congress?  Didn't the Democrats complain when the Republicans were in charge about things like this?  Still think there is a difference between the two parties?  There isn't.  The funniest (not) part about this is that one of the reasons given for not posting the actual bill was that it might confuse people.  These guys (mostly) are the smartest people in the room and you just need to sit down and shut up while they do what's best for you.  Next election vote for a third party.  That's the only way to change this nonsense and get back to a government by and for the people.
For those who haven't been to the site for a long time, I have two favorite pages on the left for charts and videos.  This makes it quick and easy to find things for reference.  Have a great week!