Federal Reserve System
- What's So "Open" About the Federal Open Market Committee?
- Do We Really Need the Federal Reserve System?
- What You Absolutely Need to Know About Money (Part 8)
- What You Absolutely Need to Know About Money (Part 7)
- The New Crisis Warning Just Issued to the Federal Reserve
- 5 Things the Federal Reserve Hopes You'll Never Find Out
- Stock Market Today: What's Next After Dow at 15,000
- The Real Reason Government Is Paying Down the National Debt
- Why JPMorgan Wants to See More Americans on Food Stamps
- Do We Really Need the Federal Reserve?
- What You Absolutely Need to Know About Money (Part 4)
- Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?
- How Bernanke Will Keep a Fire Lit Under Stocks Until Year End – And Which Sectors Will Soar
- Federal Reserve Policy Pushes the Dollar Ever Closer to Collapse
- Don't Miss Out on the Global Stock Rally
- As QE2 Looms, Is the Fed Focusing on the Wrong Things?
Don't you just love how some things are named?
Like the Federal Reserve System, for instance. It's a central bank that was conceived in the private study of a private hunting lodge on a private island by a bunch of private bankers who didn't want to use the word "bank" in its name to fool taxpayers who thought it was a "system" to safeguard the public... from the very bankers who conceived it.
I don't know about you, but the feeling of safety I have is just overwhelming... NOT.
Then there's the Federal Open Market Committee (FOMC). That's a committee of top plotters that meets in private to discuss what's going on in "free" markets so they can figure out how to manipulate them.
The Open Market Committee, or the Old Boys Club (they have a woman on the committee, but she's just a token "dove" who plays "Follow the Beard"), meets today and Wednesday to check on how their manipulations have stopped unruly free markets from sinking the banks that secretly run the Fed (you know it's not a secret, but there are a whole lot of taxpayers who don't).
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Abolishing the Federal Reserve System might seem like a drastic idea, but not when you get the full story...
You see, Congress created the U.S. Federal Reserve System to restore public confidence, provide the banking system a source of liquidity that would prevent its collapse and protect the public against inflation.
A century later, the banking system is so big its risks dwarf the Fed's liquidity capacity, and what cost a buck back then now will set you back $21.
That's why we asked Money Morning Chief Investment Strategist Keith Fitz-Gerald to explain how the Federal Reserve System actually helps a country's economy.
Most importantly, we wanted to know if the United States - or any country - even needs the Fed anymore.
Shah Gilani explains how the "extend and pretend" game became an institutionalized national treasure... Read more...
By the start of the 1960s, banking in America was in a state of flux. And as Shah Gilani explains it got ugly fast. Read more...
Before the housing market crash, economists warned that record low-interest and mortgage rates were fueling a housing bubble.
Unfortunately, those fears were both overlooked and underestimated.
Now, an advisory council to the U.S. Federal Reserve is warning the Fed that its record $85 billon-a-month stimulus and ultra-low interest rates are fueling new bubbles in student loans and farmland.
"Recent growth in student-loan debt, to nearly $1 trillion, now exceeds credit-card outstandings and has parallels to the housing crisis," according to minutes of the council's Feb. 8 meeting.
In addition, "agricultural land prices are veering further from what makes sense," the council said. "Members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates."
Most Americans assume the U.S. Federal Reserve is a powerful government institution that seeks only to safeguard the dollar, boost the economy and drive employment higher.
That's what the Fed wants you to think.
The illusion of the Fed as a stabilizing, positive government entity has more or less existed since its creation under dubious circumstances in 1913.
"It not only avoided the word bank, it cleverly implied federal, or government, control over the establishment of a pool of reserves that would backstop the new banking 'system,'" said Money Morning Capital Wave Strategist Shah Gilani.
After record rallies last week took benchmarks to fresh highs, the stock market today took a breather.
Just before noon, the Dow Jones Industrial Average gave back 18.70, or 0.12%, to 14,955.26. The Standard & Poor's 500 Index inched higher by 1.55, or 0.10%, at 1,615.96. The Nasdaq eked out a 0.28%, or 9 -point gain, at 3,388.14.
Stocks surged Friday after the April jobs report handily beat expectations. The Dow broke 15,000 for the first time, and the S&P surpassed and finished above 1,600. For the week, the Dow added 261 points, or 1.8%, at 14,973.96. The S&P tacked on 32 points, or 2%, at 1,614.42. Helped by tech, the Nasdaq gained 99 points, or 3%, at 3,378.63.
"I think investors got a lift in their step from Friday's jobs report," Mark Luschini, chief investment strategist for Janney Montgomery Scott told CNN Money. "[But] this week, we're absent anything newsworthy."
Indeed, the week's economic calendar is quiet, and earning season is winding down. Notable reports this week include The Walt Disney Co. (NYSE: DIS) on Tuesday; Dish Network Corp. (Nasdaq: DISH) and Groupon Inc. (Nasdaq: GRPN) on Wednesday; and Priceline.com Inc. (Nasdaq: PCLN) on Thursday.
While the number of companies that have reported this season nearly doubled from 855 in 2009 to 1,655, the percentage that have beaten estimates remains at the same 59%. Moreover, just 52% have beaten revenue estimates, compared to the average of 60% since the bull market began in 2009, data from Bespoke Investment Group reveals.
That supports the consensus view that the Fed's market-friendly stimulus measures are driving stocks.
But will the gains stick?
For just the sixth time in 30 years, markets were up in January, February, March and April, according to Schaffer Investment Research. May got off to a robust start, but a cache of analysts are warning of a looming pullback.
After six years of non-stop deficit spending that has added $8.2 trillion to the national debt, the U.S. Treasury has announced that it expects to reduce the country's debt by $35 billion this quarter.
Given that national debt growth has rocketed past $16.7 trillion and is on track to exceed $17 trillion at some point in the fall, a $35 billion reduction is laughably tiny. It's just 0.02% of what we as a nation owe.
And in the very same statement, the Treasury admitted that in the following quarter it expects to be back to borrowing as usual - $223 billion worth, more than six times the amount it plans to pay down this quarter.
So why bother?
"I don't believe in coincidences," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Our leaders in Washington on both sides of the aisle are terribly under pressure from the American public right now, and I think this is a very convenient announcement to say, "Hey, we're doing the right thing, keep us all in office for a little while longer.'"
And apart from any political motivations, Fitz-Gerald wonders whether the plan to pay down $35 billion of the national debt can even be considered legitimate, given the way the government borrows money from itself.
"It's like taking blood from the left arm and putting in in the right arm and calling it a transfusion," Fitz-Gerald said.
Every time an American signs up for food stamps in one of 23 states, JPMorgan Chase & Co. (NYSE: JPM) adds to its revenue stream.
That because JPMorgan Chase contracts to operate as the processor of the Electronic Benefits Transfer (EBT) cards in those states. JPMorgan earns a fee for each recipient, ranging from 31 cents to $2.30, depending on the state, every month for the term of the contract.
JPMorgan's seven-year Supplemental Nutrition Assistance Program (SNAP, the official name for the federal food stamp program) contract with New York state, for example, brought in more than $126 million of revenue to the big bank.
Florida has paid JPMorgan more than $90 million since 2007. Pennsylvania's seven-year contract exceeded $112 million.
It brings a whole new meaning to "corporate welfare."
Last week I spent two days speaking to senior government officials and business leaders in Bermuda, which is one of the world’s leading international insurance and reinsurance hubs. The men and women in the room are responsible for hundreds of millions in assets worldwide.
As I was finishing up, I received one of the most provocative questions I’ve gotten in a long time:
"Does any nation really need a 'Fed'?"
Here is my unequivocal answer...
Ever wonder why they call the Federal Reserve “The Creature From Jekyll Island?" Shah Gilani explains…
The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.
After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."
The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.
But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.
Stocks rattled around in 295-point range of the Dow Jones Industrial Average over the past five days like pebbles in a maraca, but ended quietly -- a fraction above flat. The big-cap indexes have now posted six of their past seven closes within half a percent, hemmed in by some sort of spooky gravitational pull.
Earnings came in quite a bit better than expected for most major companies, as the cheap dollar has helped overseas sales for Caterpillar Inc. (NYSE: CAT) and McDonald's Corp (NYSE: MCD). Over in the exciting web content space, Netflix Inc. (Nasdaq: NFLX) wowed the crowd with outstanding third-quarter results, logging a sales increase of 31.0% and adding 1.9 million net new customers. That's a lot of new buyers in an economic environment that is supposed to be so terrible that the Federal Reserve thinks unprecedented medicine is required.
But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says "measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate." Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse.
The Fed's dual mandate, since an amendment in 1977, has been to promote "price stability" and "maximum employment." While often discussed as if both goals are complementary facets of one mandate, they tend to have been at odds during every recession since the Great Depression.