Ebeling: Insolvency at the Fed | Baker: Parasitic FIRE Economy
We bet you've been waiting for a crackin' explanation of how the [metaphorically insolvent...haha no GAAP for you, Bernanke] Fed will go bust, taking down the DXY with it (reserve currency status: now optional [at least according to S&P, one subpoena ago, status quo ante]). Getting back to the main point, we discussed this and other matters with Austrian economist, Richard Ebeling, at 2:48 in:
- At 3:10, we discus QE and the effects of inflating money supply
- At 4:37, Professor Ebeling draws an interesting parallel to our dire situation in 1945
- Are interest rates are prices? You bet! At 4:50 the Fed mandate is disclosed as nothing more than another price control, not allowing savings and investments to balance
- At 6:00, we discuss the next economic crisis and the artificial myopic-ness of econometrics.
- Guess what? Ebeling spent time with both Hayek and Rothbard. The former is discussed at 7:37 and the self-deprecating latter at 9:15. The road to serfdom never looked better paved.
- We finally get to the Fed's [potential, on a GAAP basis...haha, will never happen] insolvency at 10:15. Yes, the Fed may have to print money to keep the big bank's QE money parked at the Fed. Just think about that.
- How did the Fed justify this? Turn to page A-11 of the Fed accounting manual. Yes, those legal opinions, allegedly required by the so-called auditor, Deloitte, are from 1922. Why does this matter? See below.
We also get into monetary base expansion, false sterilization and the Fed's so-called exit strategy (spoiler alert: it does not exist).
Dean Baker, co-founder, Center for Economic and Policy Research begins this episode by criticizing the FIRE economy at 2:55 in:
- 4:50 Are derivatives simply political theater
- 5:35: CDO's...whats up with them?
- 6:00 Greenspan's false [prophet] conciliatory speech to Con-gress
- 7:20 Bernanke's admission of his flaccid econometric prognostications
- 7:45 Breaking up too-big-to-fail and ... dare we say Glass Steagall
- 8:35 Too-interconnected-too-fail and a derivatives limit Mr. Baker can live with: $200 billion (okay)
- 10:00 Why Fed monetary policy is gamed by the structure of the FOMC itself (12 banks, 5 votes?)
- 11:07 Summers v. Yellen? Yes, we went there.
- 12:55 The Kabuki / theatrics of the debt ceiling.
Getting back to the whole Fed accounting fraud thing, whereby a quasi-government agency is legally sanctioned to skim "profits" vis a vis Treasury and MBS interest coupons, pay the helicopter fuel bills, then remit any so-called profits to the US Treasury, but only after paying the big banks their IOER dues, we submit the following, upon which we will be following quite soon. Question: Did Fed General Councel, Scott Alvarez, forge the signature of the office of the US Attorney General (Eric Holder, you there)? Just asking.
The issue is: if the Fed can pay JP Morgan 6% dividends, then it can pay interest on excess reserves, even if the Fed goes cash flow negative. It's a backdoor bailout of the big banks during a "tightening cycle" (make that foreign banks, since they have the most excess reserves). Congratulations, Fed.
Bob (Twitter: EnglishPI)