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When it comes to the Federal Reserve, it's not a matter of what you see is what you get. It's more a matter of what you don't see is what you'll end up getting.
Getting, as in up the you-know-what!
I'm talking about getting socialism shoved up our capitalist backsides, for one thing.
It's simple: We are about to go over the so-called fiscal cliff. Why? Because Congress can't figure out how to stop spending money it doesn't have.
Forget the whole revenue side of the equation. It's only part of the mix of fixes, and the only fix that matters ain't fixed.
Stop spending money you don't have and you don't have to tax people more to pay for a bunch of crap they don't need, don't want, and don't even know they're getting.
Oh, that would be because on top of what we are getting there's even more that we're not getting.
Congress' paymasters are getting pork and beans for whatever they want because that's how our Congress gets elected, by greasing the wheels of insiders to get taxpayer money for their private purses, enough to plentifully pay for campaigns.
But that's only the "private" side of spending.
The spending scheme has mushroomed by expanding (and paying sickeningly outrageous wages and benefits) an ever-growing number of government workers.
And by expanding entitlements beyond what we are entitled to. And by expanding welfare and "social programs."
Yes, I am including 99 weeks of unemployment, and accompanying food stamps, and free money for unwed mothers to have more kids so they can collect more free money, and free day care, and all the other free stuff that ain't free if someone (that's you and me) is paying for it.
All that spending creates a class of people, a voting class. And, guess what they vote for?
Duh, that would be more free stuff.
So what's this got to do with the Fed?
I'm glad you asked…
Just Like Magic
Because Congress wants to glad-hand out these freebies, the private ones and the public ones, to get votes and all the personal wealth that comes with their political positions.
And they do not want to take away anything with the other hand (that would be raise taxes to pay for their spending), so they wink at the Federal Reserve, and lo and behold the Fed prints the money to pay for it all.
It's just like magic. No, it is magic.
Congress spends and doesn't have the money to pay up. So it borrows. It borrows from the Fed, people!
If there was no Fed to print money and give it to Congress, the crooks on the Hill wouldn't get away with what they take for granted as their political right, which is to spend money they don't have to pay us to keep them in office.
Yesterday, the Fed stripped off its cloak of invisibility and said they were going to keep easing (how low can rates go?). In fact, they are going to step up their Treasury bond buying spree.
Our government doesn't have any money, but needs billions everyday, so the Fed simply winks at them, they issue debt in the form of bonds, and the Fed buys them all up.
Revenue problem solved!
So under what authority does the Fed operate? How do they have the right to print money and pay for stuff that Congress didn't get permission from the public for (because they didn't come to us and ask if they could raise taxes on us to spend money on what they think is good for themselves)?
Oh, that right was given to them… by Congress.
Back in 1977 Congress gave the Fed a "dual mandate." They said, besides your job to "maintain price stability and preserve the currency as a store of value," we now want you to "promote effectively the goal of maximum employment."
And just like that (it actually started back in 1946, but that's another story for another time) the Fourth Branch of Government was officially sanctified.
Screw the Public, Feed the Banks
The Fed says we're going to keep the printing presses running to fund Congress' schemes (what fiscal cliff?) until unemployment is 6.5%, or inflation is above 2.5%, or until all the banks in America that control us and Congress tell us to stop because they have enough profits to buy more politicians and relax more rules and fund their next gigantic scam.
What the Fed calls more "transparency" in articulating their new monetary policy guidance schemes is nothing more than tearing off one cloak of invisibility only to find another underneath.
Which unemployment measure are they going to look at? How are they going to interpret U6, or how many people are counted or not counted in the ranks of people in the job market? Does the birth/death model need to be looked at, or ignored?
Targeting unemployment is their way of saying there's not going to be enough money for banks to get really fat again if spending is cut back, or if taxes rise, so we're going to do what we do, which is screw the public and feed the banks.
About that inflation in our future, we'll worry about it when we get there. About that preserving the currency thing, we'll worry about it when we get there.
The Fed only cares that its puppet masters (that would be the big banks and maybe all the banks) have enough money to lend (to the government) to collect their interest to enslave the population into paying them back by socializing America to keep them fat.
You see, in capitalism, the banks would be allowed to fail. And fail they would. But in a socialist world, failure is not an option.
Starting to get it?
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.
Do you agree with Martin Hutchinson & abolish the FDIC at the same time?
If yes; what do you say to those people with money deposited in those failed banks? How would some or several major bank failures affect the "cash-less society"?
If no; what do you accomplish beyond hosing the stock holders in those banks? Hostess shows us that the BOD & the executives are going to get theirs first.
Mr. Gilani, what are the practical ramifications of your suggestions?
The Federal Reserve can buy bond because the Treasury print and place the dollars in the Federal Reserve. How is debasing the dollar going to save the economy?
What can I say. YOU said it all!
BREAk the economy down, go to starvation and maybe in time we can start over with whoever is left over. Maybe we can get back to basics again.
Shah, not only do I love what you have to say, I love the way you say it!! I follow what you and Peter Schiff (among others) have to say and one thing that is different is the "way" things are being said. I can sense the frustration in your voices and sometimes I think Peter is downright angry! I've been swearing at what's happening for a while now……what took you guys so long? I admire the stamina! Merry Christmas to you, Shah!
More free stuff? You mean like how Hank Paulson was able to avoid paying $50 million of capital gains tax when he sold his $485 million of Goldman Sachs stock when he became Sec'y of the Treasury thanks to President Bush Sr's actions?
How about eliminating the Federal Reserve which gives us currency dollar for dollar for debt which means there is NO currency in existence to pay the interest?
Your explanation is right on. You've covered all the basics of where we are and how we got here. BUT how do we get back to where we are supposed to be? With fiscal cliff about 2 weeks away, will the banks shut down? Will Social Security checks stop? Will the rampant Fed confiscate whatever private assets it deems necessary… in violation of the Constitution, I might add? These issues remain unclear in all warnings from the "Money Men" on the internet. Or don't you guys know either?
Let the very wealthy get even super wealthier doesn't work for anyone but the million and billionaires. Buffet and Gates will tell you that. Off shoring American jobs and deferred corporate taxes are destroying America just as much as your creeping socialism. Do you want to live like the Brazilian wealthy and have to spend a small fortune to protect what you have??? I just don't understand why people don't understand where unbridled greed leads. All you have to do is open your eyes and see! The world that is being created will be just as hostile to the wealthy as it is to the shrinking middle class.
Mr. Shah Gilani's article, saying that "The Federal Reserve's Magic Act is Destroying America" IS PURE AND SIMPLY A REPUBLICAN MESSAGE THAT WILL BE WELL RECEIVED BY THE RICH AND THOSE WHO HOPE TO TAKE HOSTAGE THE AMERICAN ECONOMY. HIS SPIN IS JUST THAT; I WONDER WHO ELSE PAYS MR. GILANI BESIDES 'MORNING MONEY' TO SKEW THE TRUTH. For me, a mere reader of such Republican garbage, sees this article as sending only negatives out to those who also want to keep things STILL from economically happen within the economy. Scare tactics is the Republican ploy to gain people's attention and to STOP them from doing what they 'think' is correct (which usually is). Also, what about TARP that went to those banks that were TOO BIG TO FAIL; all that money that those banks received SHOULD HAVE GONE to small home owners to save their homes, but the banks were so big, big enough to turn the government's attention to have the government give to them TARP. Mr. Gilani, what a negative Republican ploy to send out to those who control their own money and want their nation to surive YOUR Republican Party's hope for taking over our nation. Shame on YOU.
I agree with Rhonda. The wealthy do not want their income to be affected in any perceived negative way. Just keep sticking it to the middle class. They're what hold this country together. It also occurred to me that Americans are living longer due to improvements in health care. This is supposed to be a good thing. But, now the government wants to decrease their ability to live out their lives comfortably, and I don't mean in the lap of luxury. Those of us who have worked most of our lives have paid into these "social entitlement" programs. Are we now not to take advantage of them? Are we to feel guilty? Not everyone who receives Medicare and Social Security is "too lazy to work" as I have seen repeatedly posted on other sites. We worked for them and ARE Entitled to use them. That's why they're there. I am 70 yrs old. I was a registered nurse and worked for over 47 years. I retired from nursing this year. Finding a non nursing job that pays what I would need has proved unsuccessful so far but I keep trying. Employers want to pay as little as possible; there are no benefits; the hours are restricted; and you must be able to do the work of at least 2 people to get hired. My last potential employer wanted to pay me $3.50/hr. I declined.
Went for the low-hanging fruit, there Shah. Technically right about survival rations for the poor (unemployment and welfare, etc.) How about the corporate welfare? How about the War budget (not the "Defense budget"). Blowing up everyone who disagrees with us, having military bases and interfering in places even educated people would be hard-pressed to find on a map? Interfering in places in ways that, if it were done HERE, people would be screaming bloody murder? I dare a small-government Constitutionalist to find the term "World Policeman" anywhere in the Constitution or Bill of Rights. Lest you think I'm just a dovish liberal, I'm a fan of Ron Paul, at least on the topic of Foreign Policy. How about Corporate Welfare? Honeywell, for example, who makes a LOT of money on Govt. Contracts, fired thousands of employees (profit-creators, actually), and paid it's CEO a very fair salary, paid a -14.4% tax rate (that "-" isn't a typo…that's NEGATIVE 14.4%.) And they whine about raising corporate taxes. There's PLENTY of blame to go around.
Amen, Shah!
As usual, the people are kept in the dark, lied to, and then end up paying the bill, anyway.
I think Rubio said in a speech recently that the role of government should not be to make rich people poorer…but to make poor people richer. A novel idea. But just not realistic with a government, let alone a Fed, with a totally socialist agenda.
Your description of the Fed as the banks would be allowed to fail under capitalism, but failure is not an option under socialism sums it all up very well.
It has been said you can't get something out of nothing, but that is the mantra of the Fed.
I'm 76 and have watched this for decades. The down fall of America can be laid at the door step of the Jewish community and their evil way that are spelled out in the Talmud. I have over thirty years of research. Study Amchel Rothchild and you will see what I talking about.
WhenCcloumbus scheduled his historic voyage he could not get his ships into the port. Why? Spain was deporting all the Jews!!
All those programs like food stamps, unemployment insurance, and payment to have more babies have a purpose. The purpose is create ever more consumption so that those who profit from consumption can make more money and have more cheap labor to help them produce it.
The reported fact that Wal-Mart is subsidized to the tune of $1000 per employee through various goverment programs is a good example of a taxpayer subsidized business plan. The fact is that any business which pays employees so little that they are eligible for government assistance is being subsidized by the taxpayers.
Is that capitalistic socialism?
The only way to live through the next few years is to have the financial monies to obtain the housing, food, water, etc. necessary. One way is to stay healthy and strong and help others to do the same. Watch this short video, then email me. Let's fight together, not separately.
Come and join me in making America healthier and us individuals wealthier.
Everyone keeps saying THE FED, THE FED, THE FED as if it's OUR FEDERAL GOVERNMENT doing things for the people——-IT'S NOT! THE FED is a group comprised of a handful of the richest people on earth. THE BILLIONAIRE BOYS CLUB that lend the money to our government and make monetary policy. So why do you keep saying it as though the FED is doing things that are in the best interest of the people or trying to help the people.
THEY ONLY DO THINGS THAT ARE IN THEIR BEST INTEREST!!!! And as far as our government, it's not a presidential election, IT IS AN AUCTION!! IT'S big business buying who they want in office for their benefit.
how about stopping ALL foreign aid in money why should we borrow from china to give to other countries interest free? also cut our spending in the united nations from 16% to the same 8% as other countries pay or better yet, drop out of the united nations as any one country regardless of how small can veto any legislation as we are not the most popular country in the world so we don't need the untied nations any more for our sake.
I think you should not state that the Fed Prints $$$$. That is misleading. They create $$$ out of thin air but DO NOT actually print anything, other that spin bull shit. Most american's have NO idea who or what the Fed is anyway.
One smart fellow this Shah Gilani guy—–just like Ron Paul who has been teaching us the same facts and lesson for, at least, the past 33 years that I've been following him. Eventually the Am sheeeple will wake up to the facts and the truth and decide to resist the Keynesian Establishment combined DeeemonCrap-Repugnant Liberal Socialist Big Govt Party [combined] in Washington, District of Criminals
Another excellent commentary, thank you. The Creature from Jekyll Island was an eye-opener. I now understand why President Jackson was so opposed to a central bank, and nearly gave his life after he ended the charter.
My only beef with the article was that you didn't specifically mention defense contractors. It's these guys that are bleeding us dry by consuming nearly half of all revenues. A B1 bomber cost $283 million and we've got 100 of them. Why? I'd rather see some of the homeless people here in downtown LA not go hungry. I am more interested in keep people alive and productive than killing them. Please don't forget to call the defense industry out when you talk about creating a "class of people", and well paid ones at that!
Thanks and keep up the great work.
SEASON'S GREETINGS PATRONS OF MONEY MORNING ET AT:
The backbone of OUR Nations' economic policy has been broken; when it was resolved by OUR Socialist government to abandon OUR US Constitution; most especially Article 1; Section 10 calling for specie gold and silver coins only. This atmosphere has culminated in what Doug Casey has been tellin us for decades: "The US Constitution & OUR Bill Of Rights have been turned into dead letters!" Isn't it obvious by now that the American people will not be driven to gold voluntarily by OUR US Constitutional mandatea but involuntarily merely by price mechanism appreciation only? This is ass backwards people; ass backwards in deed. It's too late to turn it around now isn't it and put OUR Constitution back in power above the heads of all Democrates, Republicans, Independants, Green Peace, Socialists, Libertarians, Tea Party etc. politicians and so now we're all stuck in the involuntary co-operation mode of paying for their socialistic prowess be it government spending or the Fed. backstopping the banks etc. huh? We are the mice caught in the socialist maze who can't learn in over 99 years how to get out and prosper on OUR own. We do a lot of talking/contemplating while we pay all their bills ad ininitum. Our personal FREEDON & PROSPERITY, along with Constitutionally mandated gold as OUR money instead of their fiat substitute US paper $, are their enenies. OUR place in their socialist game here is payee forever, as long as we worship them as loosers.
RUSS SMITH, CALIFORNIA (One Of The Broke States Going More Broke Daily)
This text smells teenager with acne problems – it is soo nuanced :)
By printing more and more money, Federal Reserves enables welfare payment to be paid by anybody who hold us dollars, including non-american who never get benefit from the welfare benefit.
The basel committee seems to be tired of our not reining in our money addicted junkie bankers also. Hopefully the spanking they are giving come Jan. 1st will help wise them up
Just HOW are we to stop our "Congress" (see a group of Monkeys) from killing the US of A?? My God, where did we go wrong? Now, more than ever, we need to have God Bless the USA, and give us some people with cahones! STOP THE UNNECESSARY SPENDING AND FREEBIES!!!
The Dollar is being destroyed deliberately, as are many other fiat currencies. A One World Monetary System is close at hand. The One World Monetary System will be herald as the economic "savior". For the many, the New World Order will be more serfdom and more misery, so it too will fail.
This is absolutely correct and sad fact but most Americans simply don't have a clue that this is factual. Nor do they have the faculties to absorb it. But what really pisses me off is that the mainstream media doesn't have the balls to run stories like this at all. Ever.
No, it is the dumbing down of Americans that takes place each night in this country. And even if it did have a spot on mainstream TV for example, I feel very strongly that most Americans would flip the channel. It is really maddening to me that the average I.Q. in this country is in the double digit range.
People would rather see Keeping up with the Kardashian's or one of the many idiotic reality shows.
That speaks volumes.
So in my view all that your story speaks to is again, correct. But it would be less of a problem if Americans weren't so brainwashed and limited with intellect. Because then we would have outrage.
And until that happens, honestly….we don't stand a chance in America.
Since I lost my government job I no longer have money to donate to those I think are trying to wake up America, but now I do have time! So, what exactly can we who know what is going on and have the time do? I know there are many Americans who know what is really going on but are so busy earning a living they can't do anything. Where are others like my husband and myself that can join together and maybe get big enough to have a voice against our corrupt government.
What can you tell me about the supposed acquisition of Mexicans and Chinese Bonds by the FED?
Shah,
I generally enjoy your contributions but of late you seem to have lost your objective streak. First, when socialize losses and privatize profits, I'd hardly say that's stuffing socialism up our capitalist backside. Second, corporate tax revenues as a percentage of both GDP and total tax revenues have been on a steady decline since early 1950's. To me, that seems to be stuffing capitalism up our populist backsides. Third, don't go after the "low hanging fruit", namely, "entitlements". After a lifetime of paying into social security and having it reallocated to elitist neoconservative globalist causes, the more erudite among us are not quite up to being lectured about having socialism crammed up our capitalist backsides. Our defense budget is larger than the defense budget of the next top ten nations; we have a military presence in over 120 countries and you're harping on having "socialism" stuffed up our "capitalist" backsides?! What capitalists? The 45 million that are on food stamps or the 75 million that have not been able to afford health care or have had to postpone it? The ones struggling daily and busting a hump for ever lower total compensation that's being blamed on globalism? If so, you need to start addressing in depth the antithetical nature of supply side economics and globalism when it comes to national and communal best interests. Now as to the Fed, their policies are not working for the average person but then again are they supposed to? If you think so you're kidding yourself. Professor Butler D. Shaffer of Southwestern Law School said it best: "Institutions exist for their own narrow interests, and will perpetuate themselves by whatever means they can get away with. Institutions never exist for our own sakes; but the success of institutions is dependent upon our believing that they exist for our own benefit … When you ask "cui bono" you should quickly be able to see how, in our "trickle down" system, there are upstream hogs getting more out of the system than you are, and that their priorities — at your expense –are dependent upon you believing that the trough is there for your benefit and, further, that you control its flow" ….. Now that's worth ruminating!!!
The Federal Reserve is spending a total of $85 billion per month of your money and there is nothing you can do about it ! They are spending $40 billion per month buying toxic assets ( bad investments ) from the BANKSTERS . This is nothing more then another bailout but the banks do not have to pay anything back ! The other $45 billion is play money to keep interest rates close to 0%.
200+ years ago the rallying cry was; " No taxation without representation" today it should be: "No representation without taxation" I know no other oranizatioin or club that allows its non paying (dues etc.) members to vote themselves benefits.
Some of the policies of the Federal Reserve are actually necessary to restore the economy back to what it was. First off, the Federal Reserve's policy of maintaining a two percent increase in inflation is actually GOOD! Small, controlled inflation actually devalues the value of debt since wages will rise in small increments as a result of a slightly larger monetary base, which would also offset the effects of small increases in prices. Second, the Federal Reserve's policy of maintaining interst rates near zero are also necessary, as they stimulate consumer spending, which leads to growth in more "high-tech" industries such as the housing market, the automobile industry, and the development of small busniesses who can now afford to take loans without risk of being curshed by interest rates. Many blame the federal reserve for the collapse of the housing market in 2008, but all the federal reserve did was stimulate an increase in consumer demand, it was the unregulated banks who ultimatley made the irresponsible loans to people who couldn't afford them, thus forming the bubble. Yes, you are dead on about the federal reserve's practices as a privatley owned banking cartel and thier practices of printing money out of thin air and selling it to the U.S with interest through the exchange of Treasury Bonds, but how about we nationalize the Fed instead of abolishing it and returning to the barbaric relic that is the gold standard or having our money supply managed by the inflexible Taylor Rule. A nationalized federal reserve and banking system would allow us simply forgive all debts owed to the Fed, abolish interest rates to stimulate maximum consumer spending, return the power to coin money back to Congress as stated by Article 1 Section 8 of the Constitution, maintain and increase of current level of government spending according to fundamental keneysian economics by taking advantage of the U.S dollar's status as the world's reserve currency and the infinite demand that comes with it, meaning hyper-inflation is a near impossibility, and give the U.S Treasury Department the ultimate flexibility in managing the money supply in relation to the current economic condition. By the way, Article 1 Section 10 of the consitution does not specifically say that money can only be coined in gold and silver. Furthermore, entitlement programs are not a form of socialism at all, rather a feature of the welfare state. Socialism, in it's purest form, is the public ownership of the means of production through the means of direct democracy while products are produced for direct consumption in a centralized, planned economy. Only two of these states have existed; the Paris Commune in 1871 and Anarchial Catalonia in 1936.