STAFF NEWS & ANALYSIS
Defending the Indefensible: Economist Mag Praises Central Bank ‘Growth’
By Daily Bell Staff - May 20, 2016

Free exchange Murder most foul  When periods of economic growth come to an end, old age is rarely to blame … In June America’s economic expansion will be seven years old. That is practically geriatric: only three previous ones lasted longer. The record boom of the 1990s survived only ten years.  It is tempting to look at that ten-year mark as something like the maximum lifespan of an expansion in America, and to worry, correspondingly, that the current expansion’s days are running short. But are they? – Economist

Here’s another article from the Economist newspaper (magazine, really) defending monopoly central banking by pretending that there may not be a linkage between money printing and economic depression.

On every level, this article is wrong. It’s propaganda. The Economist likes to mimic a “thought” magazine in that it deals with complex topics in an objective and sometimes eloquent way.

But it is only a mimic. It has a series of very specific goals. Every aspect of its editorial presentation is positioned to support and expand its readers’ appreciation of globalism.

When it covers news items it almost invariably does so from the standpoint of government entities and individuals. It is rare for the magazine to cover individual entrepreneurs and their achievements.

When the magazine does cover individual businesspeople it usually reports on financiers. And often those financiers occupy a perch of uneasy mercantilism – making enormous sums of money transforming various government programs into public or quasi-private resources.

More:

Yet after the Depression, governments took on the job of countering pessimism. Bigger welfare states provided bigger “automatic stabilisers”, meaning spending on things like unemployment benefits, which pump more money into an economy as growth weakens.

Central banks began manipulating interest rates more vigorously to keep growth on track, and eventually adopted targets to help instill the expectation of steady growth.

This is the reason, according to the article that a period of economic growth need not end. We learn, for instance, that a Netherlands expansion ending in 2008, lasted nearly 26 years. If Australia keep going, that country’s expansion may move beyond 26 years, as the current one dates back to 1991.

How long can we expect an expansion to last? According to the Economist, at least a decade.

This doesn’t make any sense to us observing Canadian, British and US expansions.

In fact, we have a hard time figuring out what an expansion is at all. We watched central banks boost Western economies after the tech bubble burst around the turn of the century.

Central bankers were successful in boosting economic activity in the early 2000s but in retrospect that sort of monetary expansion led to the crash of 2008-2009.

We look at the rise in the price of gold relative to the dollar and it seems like a bear dollar market started in 2000 and persists today.

The gold cycle that began early in the 2000s persists today as well.

For us, these waves of economic activity are not in any sense normal. They are the result of price distortions.

The Economist tells us that vigorous manipulation interest rates by central keeps growth on track.

This is a ridiculous statement from our point of view. What is “growth” when it is being boosted by monetary debasement?

It’s some sort of trick. And then we are told that central banks “adopted targets that helped instill the expectation of steady growth.”

What planet are these anonymous writers living on? There hasn’t been any growth at all in Western economies since 2008. And we’d make a case that the economic activity of the entire 2000s was nothing but perfervid monetary debasement.

What this article is desperately trying to do is delink central bank money printing from cyclical recessions and depressions.

But our own experience and our own eyes tell us that printing money does not create prosperity, only a facsimile of it.

We haven’t had prosperity in the West since modern central banking began.

Keynesian money printing doesn’t work. It creates enormous debt bubbles and misaligned economic priorities.

An economy run via central banking is either in the throes of a series of asset bubbles or their collapse.

And over time, the collapses grown more prominent and destructive.

Central banking does indeed create economic collapses.

The “growth” from low-priced “money” is a sham.

And it’s even worse because the people running monopoly central banks know the system is a sham.

They are just pretending that it’s not.

And they are trying to pretend that this system somehow was put in place for our benefit.

But it was not. It was put in place to fail.

They just don’t want to admit it. Because if they admit then the argument about doing away with monopoly central banking begins.

And if central banks are erased, then internationalism loses its main trigger, its main tool.

There will be no New World Order without central banking causing the endless catastrophes generating ever widening, international consolidation.

You cannot get to a world government without monopoly central banking and their artificially created monetary chaos.

But we’re not supposed to understand that.

We’re supposed to believe that these manipulative central bankers and those that stand behind them have our best interests at heart.

Conclusion: They do not. The chaos and depression of monopoly central banking is getting worse as monetary debasement gets worse. The only way that real prosperity will return is if money is privatized and competition is reasserted. Until then, try to stay outside of the system. One method: buying gold and silver and taking delivery.

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  • straight shooter

    Of course The Economist defends central banking–it’s owned by the Rothschild family and serves as a cornerstone of their propaganda division.

  • esqualido

    “Defending the Indefensible: Economist Mag Praises Central Bank ‘Growth’” Well, what did you expect- they are practically the house organ of the Bank of England. And thoroughly opposed to the English people’s maintaining any vestiges of sovereignty. It is ironic that a favorite national song ends “Britons never never never will be slaves,” when beween the banks asnd the E.U., they are becoming indentured servants.

  • Three pillars of sand our economic system is built on:

    1.Federal Reserve Bank
    2.Fiat Currency
    3.Fractional Reserve Banking

    The Federal Reserve tries to regulate the economy. Their mandates are maximum employment, stable prices, and moderate long-term interest rates.

    The Federal Reserve creates money and or makes money inexpensive by manipulating interest rates lower. Rarely manipulating rates higher. This is inflation. Prices go up and real wages go down.

    The Federal Reserve creates bubbles and crashes by pushing interest rates too low or too high for too short or too long of time.

    Who regulates the regulators at the Federal Reserve to keep the people safe from it and its mistakes? The only real regulator possible is the free market.

    With the Federal Reserve in place the market becomes the judge of the Federal Reserve decisions, rather than the regulator.

    The Federal Reserve in essence aids debtors and punishes savers. A depreciating dollar aids debtors and harms savers. An appreciating dollar aids savers and harms debtors.

    If you start giving an economy fish (easing Federal Reserve monetary policy, excessive federal government spending; deficit, national debt), the economy starts fishing less and starts dining more. Temporary misallocated (Keynesian stimulated) employment increases and sustainable production employment decreases.

    Abolish the Federal Reserve, the FDIC and all bank regulations except one; require full disclosure on full or fractional reserve backing of deposits. Treat gold, silver and cryptocurrencies as legal tender (not as an asset) for tax purposes.

    If you are concerned about the growing income inequality gap, if you are against war, against the military–industrial complex, against mega-mergers of companies and against invisible taxation, then you are against the Federal Reserve.

    • Nexusfast123

      Factional reserve banking does not exist as banks can create money/debt ex nihilo. They can print as much as they like – investments in bad assets, leveraged finance destroys good companies, creation of bubble after bubble, etc.

  • Wheezwiz

    The Economist used to be a good rag as a supporter of free trade. Having lost that battle, it became run-of-the-mill socialist, even supporting such stupidity as global warming and CO2 as a pollutant. Sad really.
    Now, making excuses for the failure of central banks, especially over the last 30 years, makes it even more irrelevant.

    • Nexusfast123

      What are you babbling on about. The Economist is as far removed from ‘socialism’ you can get. In the US you should grow some balls and use the correct term to describe the emerging system in the US. The word you should be using is Fascism rather then trying to pretend its some kind of left wing plot. Read what Mussolini wrote.

      http://www.worldfuturefund.org/wffmaster/Reading/Germany/mussolini.htm

      • mary

        why don’t you use some balls and drop the soft-peddling phrase “the emerging system in the US.” It ain’t emerging, it’s been full blown since the 40s.

        And it is a form of socialism, hence the nationalist SOCIALIST party.

        Cranky, aren’t we? 😉

      • Rich Faussette

        I looked at your link.

        “Fascism… sees not only the individual but the nation and the country; individuals and generations bound together by a moral law, with common traditions…”

        That’s a good description of the USA but it doesn’t explain why fascism develops and even intensifies.

        Neither you nor Mary have read Kevin MacDonald’s Culture of Critique which posits that nations and peoples become reactively cohesive when attacked by a cohesive enemy. If Hitler came to power in the wake of the Weimar Republic when Jewish communists were causing anarchy in Germany and now Donald Trump is coming to power in the wake of the progressives dropping the borders of the USA it is because both populations were reacting to the assault by progressive liberals (aka communists), it is not something intrinsic to “fascist white people.”

        You can recognize reactive fascism when the people embracing it are also vilified in the mainstream media. You can also recognize it when the supposedly “fascist” population is having its morals and common traditions intellectually/ disingenuously deconstructed. The most inherently fascist people in the world are the people of the book who run the banks. It is their machinations against cohesive populations with morals and traditions that causes what you call “fascism” but what is merely and appropriately self defense.

        Here’s a link for you where you can read about this very phenomenon:

        https://www.academia.edu/7658814/Niche_Theory_Population_Transfer_and_the_Origin_of_the_Anti-Semitic_Cycle

  • Doski

    Nobody paid any attention when the central banks were just piddling around the edges. Now it’s too late to stop the Avalanche which shall certainly Fiscally Destroy tens or hundreds of Millions Retirees and Pensioners when the magnitude of their current interferences comes to light.
    On the ‘Silver Lining Side’ the welfare class will also be blessed with ‘Sharing the Pain’.

  • rahrog

    Economics is the study of the allocation of resources. The Economist mag is a study in propaganda.

  • NAPpy
  • olde reb

    That the ECONOMIST is a Rothschild publication is a paramount observation made by straight shooter.

    And what was the Rothschild role in the creating the Federal Reserve ?

    Why, they sent Paul Warburg with a virtually unlimited budget as an “architect” to the furtive Jekyll Island conference to write the proposed legislation. Since it was accepted that any central bank proposal made by the bankers would be dead on arrival, it was essential to conceal any ownership by bankers. It is safe to assume Rothschild had a profit motive to recoup the money from their investment.

    But how could they make money from the venture ? Well, they would demand that a government security (bill, bond, or note) be received for the value which would be credited to a government account. It could be touted as a loan but the bankers would not put up any value in creating a book entry credit on a government account. PRESTO !! The government could spend the credit
    and the bankers had the security.

    But the government was never going to redeem the security. If they did that, they would have to gather by taxation all the money they had spent and there would be no increase in the national debt. They would just let the bankers hold the security and default.

    But the bankers had a different solution. They would sell the security. Anybody would buy a bond that was guaranteed to be paid by the government. And so they do and the bankers can then spend the money as profit from the venture.

    The bankers could establish a franchisee (such as FRBNY) to sell the securities. Exclusive control of money transferred from relevant accounts could be handled by the FRBNY Ref. 31 CFR 375.3. Administrative and regulatory control could be vested in a Board of Governors. The BOG could be incorporated as a privately held corporation which would not be required by the SEC to publish any public records. The FRBNY franchise could then transfer the funds from deficit security sales to the unidentified owners of the BOG. Audits, conducted in accordance with guidelines established by the BOG, would put the accounts off-limits.

    And we can rest assured the Rothschild family gets their share.

    And all of the “economic recovery” of the recent seven years has been to protect their investment and make sure the banking industry does not totally collapse. But some people see the operation as a Ponzi scheme wherein collapse is inevitable.

  • Praetor

    It sure looks like, currency debasement is the reason for centralized banking. Benefit, ‘We the People’, Right. The only ones to benefit from this unproductive extravaganza are the sovereign’s, they use-to-be called Kings, Monarch’s and Lord’s. Now we call them, CEO’s, Owner’s and down right Criminals. Those of this criminal class are the biggest wasters of earths resources, and should be punished accordingly.

    Economically, the King and Queen of this world is, ‘Gold and Silver’ and their Teutonic Knights are the other commodities this earth produces to sustain life on earth. it is not to be wasted!!!

    • Rich Faussette

      Centralization has always been the modus operandi for impoverishing the local population. We first see it in Genesis. The knowledge of a coming famine was kept from Egypt’s farmers by Joseph who was the pharaoh’s counselor. In the wake of Joseph’s engineered collapse the free land owning Egyptians lose their property and became slaves. The pharaoh was warned and stockpiled grain (akin to gold? – it is coming around again isn’t it).

      “Shepherds subsist on their flocks and their flocks subsist on the available pasture, their numbers subject to the carrying capacity of the land. True shepherds do not accumulate the agricultural surplus of nation-states. The agricultural surplus that finances armies and wages war with professional classes of warriors and priests is made possible by farmers. Shepherds are always bumping up against the carrying capacity of the land, and they learn to recognize it so that before carrying capacity is reached, shepherds look for greener pastures. The signs that a system has reached carrying capacity are hidden from farmers in a state economy by the insulating nature of their own agricultural surplus. Agricultural states (particularly high maintenance hydraulic systems) are, by their very nature, subject to centralization until their entire output is in the control of very few hands free to manipulate (via the surplus) the carrying capacity of the land.”

      From:

      https://www.academia.edu/3257519/The_Book_of_Genesis_from_a_Darwinian_Perspective

  • Bruce C.

    The more articles that support central banking that keep coming out, and the more analyses like this one that criticize central banks and predict the coming monetary chaos, the less likely the people will allow a doubling down again, and definitely not on a global scale.

    The internet is recording the ongoing debate so there will be no way to claim that “nobody knew any better.”

    • olde reb

      Just to comprehend the scope of the operation, at the present rate of deficit spending, the Fed is embezzling roughly $6 billion (that is BILLION) DAILY that lawfully belong to the government, 7/52.

      And the ECB is undoubtedly modeled after the highly successful Federal Reserve.

      Bernie Madoff must feel lonely.

      • Bruce C.

        Just to comprehend, what do you mean?

        Government deficit spending doesn’t necessarily mean the Fed is monetizing it. Unless you’re talking about “off the books” accounting (in which only insiders would know about) the Fed’s balance sheet is not increasing at present which means deficit spending is being funded by “regular” investors who are buying US Treasury bonds.

        I’m not saying the Fed is benign, but it’s main influence now is in maintaining interest rates at such low levels for so long which is enabling borrowing for all kinds of things that would otherwise be uneconomic, and is inflating asset prices because the cost of capital is so cheap.

        • olde reb

          Bruce, you do not comprehend how the Federal Reserve could be embezzling $6 billion daily ?

          There is only one way deficit spending is handled (we are not addressing QE).

          Deficit spending involves the US Treasury issuing a security (bill, bond, or note) to the FRBNY. The bank then credits a government account for the amount of the
          security. Government spends the money in the account. If no security arrives at the bank and the account has no credit, the government ceases operation and closes down as we recently witnessed.

          [The acquisition of funds from the Fed is touted as a “loan” by the above sequence. The act of government borrowing from that which the government has created is
          absurd. There is no entity that has that much value to lend, nor is any lender identified. If the value had existed before the act, there would be no increase in value in the economy (inflation). Houdini has a more rational explanation of how his stagehand is sawed in half and
          then rejoined than the Fed has in claiming a loan. A favorite writer for a Federal Reserve Bank recently penned such a farce.]

          Everybody sees the government spending money but nobody follows the deficit security.

          The deficit spending security is earmarked as a small percentage (about 8-10 percent) of roll-over securities auctioned by the FRBNY. The Treasury has a cameo part in selling small securities but disbursements are controlled by the FRBNY. Ref. 31 CFR 375.3. The deficit component and the roll-over part are handled in two different methods.

          Roll-over funds are credited to a government account. The FRBNY pays the Primary Dealers from the government account for their task of collecting and redeeming
          maturing securities. There is no increase in money in circulation nor is there any increase in the national debt from these operations.

          If the deficit spending funds were credited to the government, they would have to be—by law– used to
          purchase securities. But that would be purchasing the securities that were issued to obtain the funds. That would result in no increase in money in circulation (inflation) and no increase in the national debt. Clearly, the funds cannot be credited to the government.

          What other possible destination for the deficit spending funds is feasible ?

          Consider that central banks have been very profitable for centuries, and that Paul Warburg was sent from Europe in 1912 as architect for the legislation of the U.S. central
          bank in great secrecy, a profit motive cannot be overlooked. Bankers in centuries past had been deseized, physically abused, and exiled when economic chaos caused by their operations led to a revolt in various nations. Hidden ownership would appear to be greatly
          desirable.

          This objective could be achieved with a closely held private corporation which is not required by the SEC to
          reveal corporate records. The Board of Governors lends itself to a corporate structure better than the marquee name Federal Reserve. [The twelve Federal Reserve Banks are publicly incorporated with a nine member board of directors.] The banks are each a franchise of the FR system with the BOG having administrative and regulatory
          authority. The BOG can fire any board member of a bank without cause and without recourse.

          The FRBNY distributes funds for the roll-over securities to the Primary Dealers for their work in redeeming securities. It is an easy step to convey money from deficit spending securities to the (hidden) owners of the Board of
          Governors which are cloistered among the primary dealers.

          At the current rate of one trillion dollars deficit spending in six months, that figures out to roughly $6 billion daily (7/52) for the owners of the Board of Governors.
          Not a bad days income, considering they put nothing of value (consideration) into the daily scheme and took no risk.

          [In this writer’s view, the BOG is operating as a government contractor (without immunity) as defined by
          the Supreme Court and not as a government agency. Government agencies are established to serve the public. An entity created for a private profit, with intent to conceal profit that according to its charter of creation belongs to the government, cannot be properly identified as a government agency.]

          Bruce, if there is some obvious flaw in
          this analysis, I am sure you will bring it to my attention.

          • Bruce C.

            The main flaw is “much ado about nothing.” Central banks (e.g., the Fed, or the “FRBNY” which I assume you mean the Federal Reserve Bank of New York) don’t need to embezzle anything since they are the creators of the currency. (It’s like asking someone who owns a high quality counterfeiting machine if he/she wants a loan or a job – it’s a joke.)

            Furthermore, none of the (12) Federal Reserve banks normally have anything to do with the US Treasury bond auctions offered by the primary dealer banks, except in cases of QE in which the Fed acts as buyer of the Treasury securities created by the primary banks (i.e., “front running of the Fed”) and the proceeds placed back to the Fed as “Federal Reserve bank reserves”.

            The bottom line is it isn’t that mysterious. The US national debt rises in direct proportion to the extant US Treasury securities (and US government mortgage backed securities as of 2009) at any given time, whether owned by foreign governments, foreign central banks, foreign investors, domestic investors, hedge funds, pension funds, mutual fund companies, retail investors, or the Fed (which is NOT part of the US government, btw.)

  • robt

    And the Fabianists created the London School of Economics which begat the staff of the Economist. I used to read it when I was a kid, but it entered its terminal state many moons ago. I’m sure all the ex-apparatchiks running the EU love it.

  • Danny B

    Socialism is un-earned gains for the poor and fascism is un-earned gains for the rich. As everything becomes increasingly automated, both the rich and the poor are trying to hook into some kind of income stream. The average CEO now “earns” 330 timers what a laborer earns. That may sound fine on paper but, too few people have a sufficient income to keep the economy moving at anything above a subsistence level. Labor rates and goods prices are set at the global level. QE can’t move from the financial system (upper loop) to the consumption system (lower loop) while wages are crashing.
    As the manufacturing sector sees falling consumption, they cut overhead to be more competitive. Wages are cut and more automation is brought online.

    The trade agreements are just an attempt to compensate for falling purchasing power of the wanna-be consumer.

    It’s a negative-feedback loop. The bubble in assets is an attempt to create a wealth effect and keep people spending. The 2000 crash resulted in a 36% drop. The 2008 crash resulted in a 48% drop. The current unfolding should result in an even bigger drop because the dive starts from a higher point. Spending will come to a crashing stop with fallout in both assets and bonds.

    “With global growth stalling, the International Monetary Fund has repeatedly revised down its forecasts and is now calling for more assertive policy action to boost demand” There must be some kind of force-field around all those ivory towers that blocks awareness of all those unemployed people.

    http://www.pbs.org/newshour/making-sense/the-world-economy-is-running-on-monetary-fumes/

    Torsten Sløk, Deutsche Bank’s chief international economist, wrote in a note out Thursday.”
    “But the longer the market ignores the Fed, including the fact that the economy is soon at full employment and therefore closer to a broad-based uptrend in wages and inflation,”
    What are these people smoking?
    If their chief economist is that deluded, Deutsche bank doesn’t have a prayer of surviving

  • olde reb

    You state: “the (12) Federal Reserve banks normally have (nothing) to do with the US Treasury bond auctions …”

    That is a completely erroneous statement. Not only have you failed to read the citation offered but you overlook the obvious operation of the auctions.

    Regulations governing the redemption of marketable securities are detailed in 31 CFR 375. Specifically, section 375.3 outlines the broad power the FRBNY has in their exclusive handing of disbursements from the auction accounts.

    § 375.3 is pasted below from Cornell Law

    ( https://www.law.cornell.edu/cfr/text/31/chapter-II/subchapter-B
    ):

    What is the role of the Federal Reserve Bank of New York in this process?

    As fiscal agent of the United States, the Federal Reserve Bank of New York performs various activities necessary to conduct a redemption operation under this part. These activities may include but are NOT LIMITED TO (emphasis added):

    (a) Accepting and reviewing tenders;

    (b) Calculating redemption operation result

    (c) Issuing notices of redemption;

    (d) Accepting deliveries of Treasury securities at settlement; and

    (e) PROCESSING THE TREASURY PAYMENT FOR SECURITIES DELIVERED AT SETTLEMENT (emphasis added).

    End paste

    I believe the FRBNY has complete
    control of the auction accounts and the U.S. Treasury role is a cameo role. The BOG contends these accounts are not subject to audit.

    • Bruce C.

      I don’t know every detail of how the auctions work, and there is a difference between how they used to work and now.

      For example, it is my understanding that it is still true that when China buys US Treasuries they don’t have to pay the sales commissions to the primary dealers. Similarly, when the Fed buys Treasuries as per QE it doesn’t pay the p. dealers’s commissions either, so in both cases “the Fed” (which reserve bank(s) I don’t claim to know) is involved in some unprecedented way.

      Look, I don’t claim to be an expert on the nitty gritty details at this level so I can’t argue with you about them. I do believe, however, that “the Fed” doesn’t need to embezzle anything. They create the currency, so their concern is maintaining confidence in the fiat monetary and banking system. They could “forgive”/write-off all the Treasury and MBS securities they own and it wouldn’t cost them a dime – literally – in the practical sense of the word, because they used counterfeit currency to buy them. THEIR problem is that doing so would reveal the racket and they’d lose credibility and control, not cost them money.

      • olde reb

        Bruce, you make several statements to diverse actions that should be addressed. One is: “when China buys
        US Treasuries they don’t have to pay the sales commissions to the primary dealers.” Bids may be submitted for the auctions by any buyers, such as pension funds, insurance companies, states, individuals, etc., if they meet the threshold value. They do not have to go through a Primary Dealers. Primary Dealers are required
        to submit bids for the auctions. They are also tasked with
        collecting securities that are being redeemed or called. It is the FRBNY that determines which bids are accepted and what securities are called.

        You also state: “when the Fed buys Treasuries as per QE…” This is an operation by the FOMC. It is not an auction action. The purchases were made as a loan by the Fed to inject instant cash to protect the banks and stabilize the economy. The funds were created in a similar fashion as the commercial banks use the fractional reserve scheme to create credit—without any reserve requirement. If the QE recipients repurchase the securities initially purchased by the QE, the loan is repaid and no money has been permanently created. It is not an action connected with auctioning of deficit spending securities.

        While the Fed helps the government create the book entry money, they do not “print” the money—okay, Federal Reserve Notes. The printing is done by the U.S. Treasury and is sold to the Fed for the cost of printing. A Washington costs about 4 cents each and a Franklin costs about 15 cents each (quantity discount ?). They are sold to commercial banks upon request at face value. That is quite a markup.

        You have quite an interest in the operation of the Fed. It is regrettable that you do not follow the flow of funds as initially detailed to see how Wall Street is embezzling the $6 billion daily. No alternate flow of the deficit spending funds has been found, and the accounts have never been
        audited. It is the element of purchasing power (profit) that is shifted to the bankers that is obscured.

        As you point out, the entire operation must maintain the confidence of the people and conceal the inherent
        bankruptcy of the Ponzi scheme from the masses. The exponential increase in the national debt is becoming obvious even to the casual observer. The embezzled money has been theorized to fund additional
        nefarious acts by Wall Street. Ref. http://farmwars.info/?p=12078 Funding the New World Order.

        • Bruce C.

          Okay, I’ll look into the flow of funds you’re talking about.

          However, my understanding of the Fed’s operation for QE differs from your description in that the Fed did/does purposely purchase the Treasuries and MBS “on the open market” (i.e., as any other auction buyer) for the express purpose of “putting a bid” under them to raise their prices and thus lower the 10-year rates more directly than otherwise. Commissions to the primary dealers are not paid on whatever the Fed bought as an agreement reached (to make QE more politically palatable) so the banks would not profit from the Fed’s “emergency” and open-ended actions. (Presumably, if the public learned that the banks were getting a windfall in commission earnings from the Fed buying nearly $4 trillion worth of securities they wouldn’t have liked it.)

          The China deal is also a not well known agreement to encourage China to keep buying the treasuries (basically giving them a 1-2% discount.)

          Lastly, my larger point is that the exact details of the Fed’s machinations are missing the point. Clearly the Fed does all kinds of things but no one can know for sure just what because certain things can’t be audited. My point is that the whole damn thing shouldn’t even exist based on the simple fact that the Fed is basically unconstitutional (having control of the currency) and it engages in price fixing of the cost of money. Even the most conventional economist would agree that price fixing is “not good”, and so the fixing of interest rates is problematic. It’s really as simple as that regardless of all the details.

          • olde reb

            I believe you will conclude the auctions (where
            PDs are required to submit bids) of new securities (either to roll-over redeemed Treasury securities or to sell original deficit spending securities) conducted by the FRBNY and their QE operations (which are purchase of assets in the market directly from banks to convey instant assets and keep the banks solvent) are two completely separate programs.

            If the public (including China) cannot be persuaded to purchase Treasury securities, the entire house of cards collapses. A higher interest rate would make the auctions more palatable, but we recently saw the market upheaval when the Fed merely mentioned that option. The Fed is damned if it raises interest rates and is damned if it does not.

            The point of the original writing is that the Fed operation is concealing a $6 billion profit daily from the Treasury auction accounts that are exclusively controlled by the FRBNY. The money legally (by the legislated statutes) belongs to the government.

            The accounts have never been audited.

  • Nicholas Samuel

    How can people who have invested so much in learning orthodox economics accept that much of what they learned has become passe because of sneakily evolving events underfoot i.e, the demise of the free markets and their replacement with plutocratic pseudo markets that are nothing like what markets are supposed to be — see http://www.unendingrecovery.com

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