Smile Politely

Beware The Fed

“Economics is a challenge to the conceit of those in power”

         — Ludwig von Mises

“It’s too bad money doesn’t come with instructions because we all need to know how to spend it, save it, and borrow it wisely. Why is monetary policy important to you? Come and learn about the Federal Reserve. It is a rare opportunity to explore the current economic environment through the eyes of the nation’s central bank.”

          — Excerpt from The Second Annual Money Smart Week Illinois, a financial-education push by the Federal Reserve Bank of Chicago.

Every morning we awake to learn of laws broken by oligarchs in the corporate and political world.

Crime is up. Suicide is up. Illiteracy is up. The bleak economy happens to be the current fashionable scapegoat.

Cindy Ivanac, employee of the Federal Reserve Bank of Chicago, recently visited the U of I campus and offered an “inside” look at our financial system. Money Smart Week Illinois: Champaign County is the latest brainchild of The Federal Reserve Bank of Chicago. Participants were supplied with brochures featuring Benjamin Franklin’s winking face and promised a new take of the oft misunderstood, “fourth branch of government”.

Unfortunately for us, the have and have-not dialectic remains.

Please contemplate our societal fixation over governmental spending, be it a $700 billion bailout or a particularly egregious earmark in the millions of dollars.

Now throw away everything you thought was historic about those figures. They are minuscule compared to the amounts being pumped into private corporations from the Federal Reserve Bank.

Since January 2009, newly created mechanisms within the Fed have injected $3 trillion to $6 trillion into the hands of private mega-banks in the United States according to The Economist, in its March 2009 issue. Their activities are deliberately sheathed in hard to decipher facilities. For example, the palatable “Asset-Backed-Commercial-Paper-Money-Market-Mutual-Fund-Liquidity-Facility (that’s ABCPMMMFLF for short, kids). Sound complex? It’s supposed to. You see, without dependents the Federal Reserve system would not exist. We’ll call ABCPMMMFLF CASH, or Currency Administered Secretly, sHHHHH.

The exact amounts of dollars are unknown because the Fed has purposefully stopped using transparent devices like repurchase agreements in order to escape observation from the American people. They no longer publish the M0 (zero), or currency in circulation, report. Moreover, they no longer publish the M3, or aggregate of all national monies, report.

By increasing the money supply, the Fed devalues the already hard-earned cash of the lower and middle classes. We will feel the effects of their activities much harder than the ultra-rich and politically connected individuals who receive this cash first. In economics, this is called the Cantillon, or Distribution Effect. Very simply, those who spend the cash last feel the full impact of the debased currency.

The Constitution is very clear about the monetary powers of our federal government. Simply put, they are limited. Congress has a constitutional responsibility to hold the value of the dollar by making only gold and silver legal tender. However, we now have a fiat, or backed by nothing, currency. Historically, paper currencies have always returned to their original value…nothing.

If that sounds scary, just wait.

There’s hope, and it lies with… politicians.

We currently have no legal way to hold the Federal Reserve Banking System accountable.

The Federal Reserve Transparency Act of 2009 (HR 1207) would change everything by allowing Congress to audit the Fed. As of today, it has 92 co-sponsors in the House of Representatives, Democrat and Republican alike (including our own Rep. Tim Johnson).

Cindy Ivanac’s power point presentation was impressive due to it’s complete and total lack of honesty and depth. That is, she continually observed and attempted to enforce the limits of allowable debate by feigning ignorance.

To illustrate, here is a list of the queries that Ms. Ivanac answered with, “I don’t know.”

  1.  “What happens when you, The Fed, don’t turn a profit?”
  2.  “How often does the Federal Open Market Committee meet?”
  3.  “Why is the M3 and M0 information no longer public?” — She actually had the audacity to ask, “Are you sure they aren’t?”
  4.  “Why are private banks sitting on their own financial reserves and not lending to small businesses?”
  5. “So many banks are now invested heavily in the stock market…is that why they lend so little?”
  6. “Why are we no longer on a commodity-based (gold) standard?” —“I don’t know. Because they inhibit growth, probably.”
  7. “If you are data-driven, as you say, then what happens if the economy falls apart while you’re waiting for a report (i.e. hyper-inflation)?”—In truth, this last question she answered with, “I’m not sure. I fear too much that what makes a good story is simply not what is in the data.”

Open discourse was never intended with the public. That would jeopardize our current role in the narrative.

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