Federal Reserve System is at it again.

[GALTGULCH8]

In my endeavor to keep my fellow Objectivists informed on the goings on at the Federal Reserve System I offer up the following. I encourage each of you to ask your librarian to obtain for you a copy of G.Edward Griffin's excellent expose about the secret creation of the Fed by a group called together in 1910 by J.P. Morgan to do so: The Creature From Jekyll Island. It also reviews in detail the history of central banking in America.

This article appeared on the Campaign For Liberty website:

<<<"Is The Federal Reserve Out Of Control? Markets Across The Globe Brace For Impact As The Federal Reserve Powers Up The Printing Presses

The Economic Collapse


Sept 29, 2010

What in the world is going on over at the Federal Reserve? Has it gotten to the point where the Federal Reserve is completely and totally out of control?

There is increasing speculation in the financial community that the Federal Reserve is on the verge of unleashing another round of quantitative easing.

In fact, at their September meeting, Federal Reserve officials hinted very strongly that quantitative easing is very much on their minds when they stated that the Federal Open Market Committee "is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." You might want to reread that quote a couple of times just to let it sink in. Do you see what the Fed is saying there?

The Fed is actually saying that it has a mandate to maintain a certain level of inflation. Not that this is a secret to anyone who has seriously studied the Federal Reserve. Since 1913, inflation has constantly gone up, U.S. government debt has increased exponentially and the U.S. dollar has lost over 96 percent of its value. But for Federal Reserve officials to openly state that a certain amount of inflation is part of their mandate is absolutely stunning.

Even though the U.S. economy is still in pretty decent shape at this point (for the moment at least), the Federal Reserve still seems obsessed with trying to stimulate it.

In the past, the Federal Reserve would just cut interest rates whenever the economy needed a bit of a boost, but at this point the Fed has cut rates to nearly zero. There just isn't any more room to cut rates.

So what else can the Federal Reserve do?

Well, it can create money out of thin air and use it to buy U.S. Treasuries, mortgage-backed securities and other assets. This is known as quantitative easing, and many analysts fear that it is quickly becoming more than just an emergency measure.

Back in March 2009, the Federal Reserve announced that it would purchase $1.7 trillion worth of U.S. Treasuries and mortgage-backed securities over the next 6 to 9 months. That was the first round of quantitative easing and Fed officials believe that it helped the U.S. economy avoid an even worse downturn.

But now Federal Reserve officials are talking about making quantitative easing a regular thing. An article in the Wall Street Journal recently described the current thinking inside the Fed....

Rather than announce massive bond purchases with a finite end, as they did in 2009 to shock the U.S. financial system back to life, Fed officials are weighing a more open-ended, smaller-scale program that they could adjust as the recovery unfolds.

Quantitative easing that is open-ended?

What kind of insanity is this?

Is quantitative easing going to become a permanent part of our financial system?

And what does "smaller-scale" actually mean?

Well, according to James Bullard, the president of the St. Louis Federal Reserve Bank, "small-scale" is actually pretty darn large. According to the Wall Street Journal, a "small-scale" quantitative easing program would be somewhere in the neighborhood of $100 billion a month....

Under a small-scale approach, Mr. Bullard says, the Fed might announce some still-undecided target for bond buying-say $100 billion or less per month. It would then make a judgment at each meeting whether continued action was needed.

If the Fed injected $100 billion a month into the economy through quantitative easing, that would mean that by the end of the year over 1 trillion dollars would have been created.

That does not sound like "small-scale" to me.

In fact, if the Federal Reserve purchased $1 trillion in U.S. Treasuries next year that would be an amount nearly equal to the total amount of new debt that the U.S. government plans to issue during the year.

Can anyone say Ponzi scheme?

When we get to the point where the Federal Reserve is "buying" a large percentage of new U.S. debt with money that is created out of thin air there is simply no denying the fact that the Fed is running a massive Ponzi scheme.

But the truth is that the U.S. government is in so much debt and the U.S. economy is in so much trouble that something must be done. It is really tempting to "inflate away" the debt and to pump up GDP figures with a flood of paper money, and Helicopter Ben Bernanke has certainly shown that he is not shy about pulling the trigger.

Of course more debt, more paper money and more inflation will only make our long-term economic problems even worse.

But right now Federal Reserve officials appear to be absolutely obsessed with the short-term.

And without a doubt world financial markets are certainly expecting a new round of quantitative easing to begin soon.

CNBC recently polled 67 economists, strategists and fund managers about what they think is going to happen. The following is a summary of what CNBC found....

The Federal Reserve will boost its balance sheet by about half a trillion dollars over a six-month period beginning in November and keep it inflated for up to a year, according to a survey of leading markets participants by CNBC.

But many analysts believe that the Fed will take even more substantial action than that. According to the Wall Street Journal, economists at Goldman Sachs are projecting that the Federal Reserve will end up buying at least another $1 trillion in assets during this next round of quantitative easing.

Stephen Stanley of Pierpont Securities in convinced that it will be even worse than that. Stanley believes that the Fed will add another $3 trillion to its balance sheet by next August. The following is what he recently told CNBC....

"If the Fed pulls the trigger, they will go big."

In an interview with the Economic Times of India, Marc Faber painted an even bleaker picture....

"I believe that if the S&P in the US drops 15-20% to around 900-950, the Fed would come out not with this quantitative easing No. 2, but with quantitative easing No. 2, 3, 4, 5, 6, 7, 8, 9, 10 until the asset markets go up again. They are going to print and print and print."

It seems like almost everyone is anticipating that the Federal Reserve is going to fire up the printing presses.

Now, even some of the Federal Reserve's staunchest defenders are now abandoning them.

Ambrose Evans-Pritchard, perhaps the most respected financial columnist in the U.K., recently penned an article entitled "Shut Down the Fed (Part II)" in which he absolutely lambasted Bernanke and other Federal Reserve officials for considering another round of quantitative easing....

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

In fact, Ambrose Evans-Pritchard is now openly accusing the Federal Reserve of being out of control....

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

On behalf of those who believe that the Federal Reserve is "a hyperinflating establishment cabal", I accept Ambrose Evans-Pritchard's apology.

The truth is that the Federal Reserve is out of control.

The Federal Reserve system was designed to get the U.S. government into a perpetually expanding spiral of debt. Wealth is slowly but surely transferred from the American people to the U.S. government (when we pay taxes) and ultimately into the hands of those who own U.S. government debt.

As long as the Federal Reserve system exists, U.S. government debt will keep going up, the value of the U.S. dollar will keep going down and wealth will be slowly transferred into the hands of the ultra-wealthy.

And why in the world would the American people allow an unelected, privately-owned central bank to run the U.S. economy, control the money supply, set interest rates and print all U.S. currency?

It simply does not make any sense.

The Federal Reserve has not been shy about declaring that it is "not an agency" of the U.S. government and not directly accountable to the American people.

So why do the American people put up with this kind of nonsense?

The truth is that the Federal Reserve has become far too powerful. U.S. Representative Ron Paul recently told MSNBC that he believes that the Federal Reserve is actually more powerful than Congress.....

"The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don't even have any transparency of this. They're more powerful than the Congress."

The truth is that the U.S. economy will never be fundamentally "fixed" simply by electing another "Bush" or another "Obama". Something needs to be done about the Federal Reserve system, but right now our politicians in Washington can't even muster enough support to pass a bill to audit the Fed.

">>>

www.campaignforliberty.com www.YALiberty.org www.fff.org www.atlassociety.org www.cafehayek.com www.silverbearcafe.com

Edited October 1, 2010 by gulch8

[Peter]

J.P. Morgan CEO Jamie Dimon is very happy about the economy, But, what about that "Quantitative easing reversal?" What strange species of bear is this? Peter

CNBC Hugh Son 11 hrs ago

https://www.msn.com/en-us/money/markets/the-market-is-dealing-with-something-it’s-never-seen-before-and-that-has-jamie-dimon-worried/ar-BBLhwFt?ocid=spartandhp

J. P. Morgan chief executive officer and chairman Jamie Dimon is bullish on the U.S. economy, which is in the latter stages of one of the longest expansions in history. But when asked Monday what the single biggest risk to the economy is on CNBC's "Closing Bell, Dimon had two answers. First, the U.S. trade dispute with China, if it escalates into a full-blown war, would erase much of the progress the administration has made, he said.

And then there's the unwinding of unprecedented efforts by central banks around the world a decade after the 2008 financial crisis. Dubbed "quantitative easing," the Federal Reserve and other central banks purchased trillions of dollars of government bonds and other securities to help nurse the economy back to health. They are now starting to reverse course. Dimon told CNBC he is concerned about what happens when that support is pulled back.

"I don't want to scare the public, but we've never had QE," Dimon said. "We've never had the reversal. Regulations are different. Monetary transmission is different. Governments have borrowed too much debt, and people can panic when things change. "

Dimon, 62, has also previously warned of the possibility that the Fed will have to hike interest rates faster than expected, slamming the brakes on growth. The recurring theme: Policymakers are in uncharted waters. Adding to the risk is the fact that the administration is looking at imposing another round of tariffs on $200 billion in Chinese goods. Dimon said Monday that he told the administration that he and other business leaders disagreed on the tactics, but that President Donald Trump "obviously doesn't agree with us."

Dimon is the longest-tenured of CEOs leading a major U.S. bank. Once his friend, Goldman Sachs' Lloyd Blankfein, steps down in October, he will also be the only bank CEO still working to have steered his firm through the financial crisis. Given Dimon's record, investors and analysts often track his every word, from media appearances to conferences to his annual investor letter.

Dimon said Monday that he and J.P. Morgan's board believes there are several executives who could eventually replace him as CEO in about five years.

Apart from the trade dispute and QE unwind, Dimon has been consistently optimistic about the strength of the U.S. economy and the prospects for banks. During a conference call with analysts this month after posting record second-quarter profit of $8.32 billion, he said there weren't a lot of things out there that could derail growth, which has been accelerating.

"Finally, people are going back to the workforce," Dimon said. "The consumer balance sheet is in good shape. Capital expenditures are going up. Household formation is going up. Homebuilding is in short supply. The banking system is very, very healthy compared to the past." end quote