Interesting website: http://www.solari.com/ Catherine Austin Fitts has
some great insights into what happened and what we can do about it as
a grassroots effort. Her main theories are, the central government
has succeeded in a coup d'etat, and one way to foil the results is for
the common folk to decentralize (a la Russell Means and the gold and
silver private bank, for instance).
Marcy
Starchild:
You asked: "If the money is just being printed, how come inflation
isn't seriously kicking in?"
It's a rather complicated answer, but the total amount of "money" in
the system can actually decrease even if the central bank is running
the printing presses overtime. This effect is most often seen in a
deleveraging environment like we have now. Inflation can also be put
off (temporarily) if the velocity of money decreases - like it almost
surely has now.
This wikipedia articles I link to below explains it best.
http://en.wikipedia.org/wiki/Money_creation
http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation
http://en.wikipedia.org/wiki/Velocity_of_money
If you have questions about any of it that the articles don't explain
I can answer them for you.
-Derek
> What do people think about this? If the money is just being printed,
> how come inflation isn't seriously kicking in? If it's not just being
> printed, where is it coming from? Could it just somehow be a big
> shell game with electronic money being moved around, so that like
> musical chairs, as long as the assets are kept moving, the system
> stays afloat even if there are way more "people" (in this case,
> demands on money) than chairs (actual money)? It doesn't seem like it
> ought to be sustainable, but I'm wondering what would actually
> precipitate a "rush for chairs," and what that would look like.
>
> Love & Liberty,
> ((( starchild )))
>
> U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit (Update2)
> http://www.bloomberg.com/apps/news?
> pid=20601109&sid=aDqw8_eMzrhU&refer=home
> By Mark Pittman and Bob Ivry
>
>
>
>
> Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide
more than
> $7.76 trillion on behalf of American taxpayers after guaranteeing $306
> billion of Citigroup Inc. debt yesterday. The pledges, amounting
to half the
> value of everything produced in the nation last year, are intended
to rescue
> the financial system after the credit markets seized up 15 months ago.
>
> The unprecedented pledge of funds includes $3.18 trillion already
tapped by
> financial institutions in the biggest response to an economic
emergency
> since the New Deal of the 1930s, according to data compiled by
Bloomberg.
> The commitment dwarfs the plan approved by lawmakers, the Treasury
> Department's $700 billion Troubled Asset Relief Program. Federal
Reserve
> lending last week was 1,900 times the weekly average for the three
years
> before the crisis.
>
> When Congress approved the TARP on Oct. 3, Fed Chairman Ben S.
Bernanke and
> Treasury Secretary Henry Paulson acknowledged the need for
transparency and
> oversight. Now, as regulators commit far more money while refusing to
> disclose loan recipients or reveal the collateral they are taking
in return,
> some Congress members are calling for the Fed to be reined in.
>
> "Whether it's lending or spending, it's tax dollars that are going
out the
> window and we end up holding collateral we don't know anything
about," said
> Congressman Scott Garrett, a New Jersey Republican who serves on
the House
> Financial Services Committee. "The time has come that we consider
what sort
> of limitations we should be placing on the Fed so that authority
returns to
> elected officials as opposed to appointed ones."
>
> Too Big to Fail
>
> Bloomberg News tabulated data from the Fed, Treasury and Federal
Deposit
> Insurance Corp. and interviewed regulatory officials, economists and
> academic researchers to gauge the full extent of the government's
rescue
> effort.
>
> The bailout includes a Fed program to buy as much as $2.4 trillion in
> short-term notes, called commercial paper, that companies use to
pay bills,
> begun Oct. 27, and $1.4 trillion from the FDIC to guarantee
bank-to-bank
> loans, started Oct. 14.
>
> William Poole, former president of the Federal Reserve Bank of St.
Louis,
> said the two programs are unlikely to lose money. The bigger risk
comes from
> rescuing companies perceived as "too big to fail," he said.
>
> 'Credit Risk'
>
> The government committed $29 billion to help engineer the takeover
in March
> of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8
> billion in addition to TARP allocations to bail out New York-based
American
> International Group Inc., once the world's largest insurer.
>
> Citigroup received $306 billion of government guarantees for troubled
> mortgages and toxic assets. The Treasury Department also will
inject $20
> billion into the bank after its stock fell 60 percent last week.
>
> "No question there is some credit risk there," Poole said.
>
> Congressman Darrell Issa, a California Republican on the Oversight and
> Government Reform Committee, said risk is lurking in the programs
that Poole
> thinks are safe.
>
> "The thing that people don't understand is it's not how likely
that the
> exposure becomes a reality, but what if it does?" Issa said.
"There's no
> transparency to it so who's to say they're right?"
>
> The worst financial crisis in two generations has erased $23
trillion, or 38
> percent, of the value of the world's companies and brought down
three of the
> biggest Wall Street firms.
>
> Markets Down
>
> The Dow Jones Industrial Average through Friday is down 38 percent
since the
> beginning of the year and 43 percent from its peak on Oct. 9,
2007. The S&P
> 500 fell 45 percent from the beginning of the year through Friday
and 49
> percent from its peak on Oct. 9, 2007. The Nikkei 225 Index has
fallen 46
> percent from the beginning of the year through Friday and 57
percent from
> its most recent peak of 18,261.98 on July 9, 2007. Goldman Sachs
Group Inc.
> is down 78 percent, to $53.31, on Friday from its peak of $247.92
on Oct.
> 31, 2007, and 75 percent this year.
>
> Regulators hope the rescue will contain the damage and keep banks
providing
> the credit that is the lifeblood of the U.S. economy.
>
> Most of the spending programs are run out of the New York Fed, whose
> president, Timothy Geithner, is said to be President- elect Barack
Obama's
> choice to be Treasury Secretary.
>
> 'They Got Snookered'
>
> The money that's been pledged is equivalent to $24,000 for every
man, woman
> and child in the country. It's nine times what the U.S. has spent
so far on
> wars in Iraq and Afghanistan, according to Congressional Budget Office
> figures. It could pay off more than half the country's mortgages.
>
> "It's unprecedented," said Bob Eisenbeis, chief monetary economist at
> Vineland, New Jersey-based Cumberland Advisors Inc. and an
economist for the
> Atlanta Fed for 10 years until January. "The backlash has begun
already.
> Congress is taking a lot of hits from their constituents because
they got
> snookered on the TARP big time. There's a lot of supposedly smart
people who
> look to be totally incompetent and it's all going to fall on the
taxpayer."
>
> President Franklin D. Roosevelt's New Deal of the 1930s, when
almost 10,000
> banks failed and there was no mechanism to bolster them with cash,
is the
> only rival to the government's current response. The savings and loan
> bailout of the 1990s cost $209.5 billion in inflation-adjusted
numbers, of
> which $173 billion came from taxpayers, according to a July 1996
report by
> the U.S. General Accounting Office, now called the Government
Accountability
> Office.
>
> 'Worst Crisis'
>
> The 1979 U.S. government bailout of Chrysler consisted of bond
guarantees,
> adjusted for inflation, of $4.2 billion, according to a Heritage
Foundation
> report.
>
> The commitment of public money is appropriate to the peril, said Ethan
> Harris, co-head of U.S. economic research at Barclays Capital Inc.
and a
> former economist at the New York Fed. U.S. financial firms have taken
> writedowns and losses of $666.1 billion since the beginning of 2007,
> according to Bloomberg data.
>
> "This is the worst capital markets crisis in modern history,"
Harris said.
> "So you have the biggest intervention in modern history."
>
> Bloomberg has requested details of Fed lending under the U.S.
Freedom of
> Information Act and filed a federal lawsuit against the central
bank Nov. 7
> seeking to force disclosure of borrower banks and their collateral.
>
> Collateral is an asset pledged to a lender in the event a loan
payment isn't
> made.
>
> 'That's Counterproductive'
>
> "Some have asked us to reveal the names of the banks that are
borrowing, how
> much they are borrowing, what collateral they are posting,"
Bernanke said
> Nov. 18 to the House Financial Services Committee. "We think that's
> counterproductive."
>
> The Fed should account for the collateral it takes in exchange for
loans to
> banks, said Paul Kasriel, chief economist at Chicago-based
Northern Trust
> Corp. and a former research economist at the Federal Reserve Bank of
> Chicago.
>
> "There is a lack of transparency here and, given that the Fed is
taking on a
> huge amount of credit risk now, it would seem to me as a taxpayer
there
> should be more transparency," Kasriel said.
>
> Bernanke's Fed is responsible for $4.74 trillion of pledges, or 61
percent
> of the total commitment of $7.76 trillion, based on data compiled by
> Bloomberg concerning U.S. bailout steps started a year ago.
>
> "Too often the public is focused on the wrong piece of that
number, the $700
> billion that Congress approved," said J.D. Foster, a former staff
member of
> the Council of Economic Advisers who is now a senior fellow at the
Heritage
> Foundation in Washington. "The other areas are quite a bit larger."
>
> Fed Rescue Efforts
>
> The Fed's rescue attempts began last December with the creation of
the Term
> Auction Facility to allow lending to dealers for collateral. After
Bear
> Stearns's collapse in March, the central bank started making
direct loans to
> securities firms at the same discount rate it charges commercial
banks,
> which take customer deposits.
>
> In the three years before the crisis, such average weekly
borrowing by banks
> was $48 million, according to the central bank. Last week it was $91.5
> billion.
>
> The failure of a second securities firm, Lehman Brothers Holdings
Inc., in
> September, led to the creation of the Commercial Paper Funding
Facility and
> the Money Market Investor Funding Facility, or MMIFF. The two
programs,
> which have pledged $2.3 trillion, are designed to restore calm in
the money
> markets, which deal in certificates of deposit, commercial paper and
> Treasury bills.
>
> Lehman Failure
>
> "Money markets seized up after Lehman failed," said Neal Soss, chief
> economist at Credit Suisse Group in New York and a former aide to
Fed chief
> Paul Volcker. "Lehman failing made a lot of subsequent actions
necessary."
>
> The FDIC, chaired by Sheila Bair, is contributing 20 percent of
total rescue
> commitments. The FDIC's $1.4 trillion in guarantees will amount to
a bank
> subsidy of as much as $54 billion over three years, or $18 billion
a year,
> because borrowers will pay a lower interest rate than they would
on the open
> market, according to Raghu Sundurum and Viral Acharya of New York
University
> and the London Business School.
>
> Congress and the Treasury have ponied up $892 billion in TARP and
other
> funding, or 11.5 percent.
>
> The Federal Housing Administration, overseen by Department of
Housing and
> Urban Development Secretary Steven Preston, was given the authority to
> guarantee $300 billion of mortgages, or about 4 percent of the total
> commitment, with its Hope for Homeowners program, designed to keep
> distressed borrowers from foreclosure.
>
> Federal Guarantees
>
> Most of the federal guarantees reduce interest rates on loans to
banks and
> securities firms, which would create a subsidy of at least $6.6
billion
> annually for the financial industry, according to data compiled by
Bloomberg
> comparing rates charged by the Fed against market interest
currently paid by
> banks.
>
> Not included in the calculation of pledged funds is an FDIC
proposal to
> prevent foreclosures by guaranteeing modifications on $444 billion in
> mortgages at an expected cost of $24.4 billion to be paid from the
TARP,
> according to FDIC spokesman David Barr. The Treasury Department hasn't
> approved the program.
>
> Bernanke and Paulson, former chief executive officer of Goldman
Sachs, have
> also promised as much as $200 billion to shore up nationalized
mortgage
> finance companies Fannie Mae and Freddie Mac, a pledge that hasn't
been
> allocated to any agency. The FDIC arranged for $139 billion in loan
> guarantees for General Electric Co.'s finance unit.
>
> Automakers Struggle
>
> The tally doesn't include money to General Motors Corp., Ford
Motor Co. and
> Chrysler LLC. Obama has said he favors financial assistance to
keep them
> from collapse.
>
> Paulson told the House Financial Services Committee Nov. 18 that
the $250
> billion already allocated to banks through the TARP is an
investment, not an
> expenditure.
>
> "I think it would be extraordinarily unusual if the government did
not get
> that money back and more," Paulson said.
>
> In his Nov. 18 testimony, Bernanke told the House Financial Services
> Committee that the central bank wouldn't lose money.
>
> "We take collateral, we haircut it, it is a short-term loan, it is
very
> safe, we have never lost a penny in these various lending
programs," he
> said.
>
> A haircut refers to the practice of lending less money than the
collateral's
> current market value.
>
> Requiring the Fed to disclose loan recipients might set off panic,
said
> David Tobin, principal of New York-based loan-sale consultants and
> investment bank Mission Capital Advisors LLC.
>
> 'Mark to Market'
>
> "If you mark to market today, the banking system is bankrupt,"
Tobin said.
> "So what do you do? You try to keep it going as best you can."
>
> "Mark to market" means adjusting the value of an asset, such as a
> mortgage-backed security, to reflect current prices.
>
> Some of the bailout assistance could come from tax breaks in the
future. The
> Treasury Department changed the tax code on Sept. 30 to allow banks to
> expand the deductions on the losses banks they were buying,
according to
> Robert Willens, a former Lehman Brothers tax and accounting
analyst who
> teaches at Columbia University Business School in New York.
>
> Wells Fargo & Co., which is buying Charlotte, North Carolina-based
Wachovia
> Corp., will be able to deduct $22 billion, Willens said. Adding in
other
> banks, the code change will cost $29 billion, he said.
>
> "The rule is now popularly known among tax lawyers as the 'Wells Fargo
> Notice,'" Willens said.
>
> The regulation was changed to make it easier for healthy banks to buy
> troubled ones, said Treasury Department spokesman Andrew DeSouza.
>
> House Financial Services Committee Chairman Barney Frank said he
was angry
> that banks used the money for acquisitions.
>
> "The only purpose for this money is to lend," said Frank, a
Massachusetts
> Democrat. "It's not for dividends, it's not for purchases of new
banks, it's
> not for bonuses. There better be a showing of increased lending
roughly in
> the amount of the capital infusions" or Congress may not approve
the second