Category Archives: Federal Reserve Bank

‘Economic Circus’

Operating on a fractional reserve basis, the Federal Reserve Bank is empowered to create money on its own credit. Or, out of thin air.

Janet Yellen, the woman in charge of the larder and the laundering, has opted to keep “its interest-rate guidance intact on Wednesday, passing up an opportunity to inch closer to exiting its ultra easy monetary policy,” reported the Wall Street Journal.

“An economic circus,” counters Ron Paul: one person determines the money supply and the interests rates which affect us all in what is a crisis of debt.

Audit the Fed, a Paul initiative, has just passed in Congress, but other than shine some light on the “shenanigans”—the monkeying with the money done by the Fed—any initiative by a corrupt legislature is likely futile in the long run.

Abolish both Fed and Congress.

Stock Exchange A Laughing Stock

Debt, Economy, Federal Reserve Bank, Inflation

“An increase in the price of an item is not the same as an appreciation in its value.” Consequently, it’s hard to understand the happy hyperventilating over the Dow having broken through 17,000 for the first time. Keeping the printing presses roaring, as the Federal Reserve has done, will result in a rise in prices, stocks included. Homes too.

A cleareyed look ahead to “a very serious bond-market crisis” is more appropriate.

Warns David Stockman, author The Great Deformation: The Corruption of Capitalism in America:

If you allow a $17 trillion debt to be financed at $250 billion a year when it really should be $700 billion or $800 billion under normal interest rates, then politicians are gonna take the easy way out. They’re not going to fall on the sword. They’re not going to lay out the real painful choices to the public. They’re not going to vote against the squeaky wheels and the powerful constituents when the Fed is printing the money and doing the job of financing the debt for them.
So I think that’s where the crisis comes. When the Fed finally reaches the point where the entire monetary system is threatened – and I think it would be if it had continued at $85 billion a month – we come to the juncture where the Fed can no longer keep its big fat thumb in the market buying up the monthly and weekly issue of Treasury debt. At that point, we are going to see the rubber meet the road, so to speak. We’re gonna have the day of reckoning, because there isn’t demand out in the real marketplace among real investors for massive amounts of additional Treasury debt at these sub-economic interest rates. And when interest rates normalize, Katy, bar the door, because the carry cost on the federal debt— which will by then be $20 trillion— will soar by half a trillion a year. The politicians will finally panic, but I’m afraid by then it might be too late—- that we’ll be in a very serious bond-market crisis.

Conservatives Adopting Lefty Language About ‘Income Inequality’

Business, Capitalism, Conservatism, Economy, Federal Reserve Bank, Individualism Vs. Collectivism, Private Property, The State

A more meaningful index than “income inequality”—it implies that income equality is the thing to strive for, heaven help us!—would be the correlation between the increasing balance sheets of the central banks of the world and so-called increasing wealth discrepancies.

Conservatives rarely argue the morality of capitalism and individual liberty. If they do debate, it is about the utility of freedom to the common good. The entire impetus of Republican-Party operatives is to keep up with the issues the Democrats introduce to distract from the destructive effects of galloping statism. So if the latter decry “income inequality,” the former affirm that they too worry themselves sick over whatever it is the Democrats are droning on about.

Today, Fox News reported gravely that the “World’s richest 85 people have as much as bottom half the population.” Similarly, this Townhall.com writer assures his readers that “Inequality is a Conservative Issue.”

“The Capitalist Professor” George Reisman is having none of it. He writes “In Defense of Business Fortunes and the Destructive Effects of Imposing Economic Equality,” at www.twitter.com, @GGReisman:

1. A fortune is accumulated by means of earning a high rate of profit on capital and heavily saving and reinvesting it year after year.

2. The high rate of profit is achieved by introducing newer, better products or producing existing products at a lower cost.

3. Sooner or later, competition brings down a high rate of profit to the general level. To go on earning it, further innovation is necessary.

4. For example, to maintain its high rate of profit, Apple has had to repeatedly improve its products and introduce several major new ones.

5. Had Apple stood still, its initially very profitable products, made obsolete by competition, would now be selling at huge losses.

6. The high profits are generally invested in the means of producing the very kind of products in which the innovations take place.

7. For example, Apple’s profits are invested in the expanded and improved production of Apple’s products.

8. Thus, business fortunes under capitalism represent ever better, less expensive products produced with capital constituted by those fortunes.

9. The fortunes originate in profits and are used as capital. Both ways they serve the general buying public. They also pay wages and salaries.

10. The existence of fortunes under capitalism benefits everyone in his capacity both as a buyer of products and seller of labor.

11. Imposing economic equality requires the confiscation of high profits. It would abort the earning of fortunes and stifle economic progress.

12. Advocates of economic equality know nothing about profits, innovation, or capital. They believe that wealth is a pile of consumers’ goods.

13. The capitalists, whom they depict as fat men, allegedly have too much of this pile. Some of it must be given to the starving masses.

14. Thus, imposing economic equality is also a policy of seizing capital in order to consume it—eating the seed corn and being impoverished.

15. Advocates of economic equality are wilfully ignorant of economics. They are fueled by envy and resentment, biting the hands that feed them.

16. Socialism/Communism is their philosophy. Stalin and Mao are their heroes. Famine, slave labor camps, and mass death are their legacy.

UPDATED: Chucky Krauthammer’s Keynesianism (Neocon Chucky: Tinkering Technocrat)

Economy, Federal Reserve Bank, Intellectualism, Neoconservatism, Regulation, Republicans

On Special Report today, Chucky Krauthammer could be heard quickly correcting his characteristic Keynesianism when fellow Fox-News panelist neoconservative George Will made him look, well, silly. As she knows nothing about economics, the blond Kirsten Powers, also empaneled to discuss the economy, was none the wiser. Neither did host Bret Baier notice Chucky stumble and recover.

The Fed had set the price of money at zero, Krauthammer noodled. In his opinion, this served as a positive impetus for steady but slow economic growth. The far cleverer George Will jumped on this, pointing out that quantitative easing was the Democratic equivalent of faux trickle-down economics. In other words, the manufacturing of paper money inflates prices on the stock exchange, enriches a few big players, and leaves the rest of us holding devalued dollars and struggling to survive. (Naturally, this is not verbatim. I paraphrase from memory, since few news outlets bother with the written word any longer.)

Like greased lightening, Krauthammer leaped to finesse his Fed demand-creation Keynesianism.

As mentioned, other than the two men involved, nobody (except a few Austrians like myself) noticed.

UPDATE (1/3): EPJ on Chucky’s Nutty Two Tier Minimum Wage Proposal. Our neocon is such a tinkering technocrat.

This is truly goofy. It would result in businesses hiring teenagers over breadwinners. Since the advocate Charles Krauthammer seems to understand that raising the minimum wage causes unemployment, his proposal has to be classified as pathological altruism.

Here’s Philip Klein on the problems with Krauthammer’s proposal:

On a Fox News panel earlier this week, Charles Krauthammer floated a proposal for a two-tiered minimum wage system in which the rate would be raised for individuals who are the breadwinners of their families and remain the same for others. But this would be an absolutely terrible idea.

MORE.