The FED Stole My Lunch Money

1. They FED has stolen untold amounts of money from the people through inflation. As the U.S. Dollar becomes devalued, each dollar is worth less. Inflation is not rising prices, but currency devaluation. Rising prices is merely a symptom of inflation, not inflation itself. The elimination of the Gold Standard, in combination with FED policies, picks your pocket.

2. The FED blows…bubbles, and conned you into buying overpriced stocks and houses. Alan Greenspan, former Fed Chairman and notorious bubble blower, blew both the technology bubble in the 1990’s, and the housing bubble. The Austrian Theory of the Business Cycle explains how central bank (aka, the FED) manipulation of interest rates sends false signals about the true costs of borrowing money, as well as what projects to invest in. If you ever wondered how technology companies with no business plans and no profits became stock market darlings, or how house flipping grew so popular that there were television shows dedicated to it, the Austrian Theory of the Business Cycle will provide the answer to the question. When these bubbles burst, as they always do, you pay the price. Whether it is your IRA, 401K, the value of your home, etc. you pay a very real price for the FED’s artificial manipulation of interest rates.

3. The FED stole your economic freedom. Don’t take my word for it. The Bubble-Blower-In-Chief, Alan Greenspan, in his essay, Gold and Economic Freedom, wrote:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

Sound familiar. Bueller? Bueller?

4. The FED stole power that wasn’t theirs and broke the law. From The Market Ticker:

I'll settle for a Fed that simply follows the law.

As I have repeatedly pointed out The Fed is not empowered to purchase instruments that do not carry the full faith and credit of the US Federal Government (except for some very limited exceptions in which maturity does not exceed six months.)

But that's all been forgotten in the name of "expedience".  Fannie, Freddie, Bear Stearns, AIG - all have involved The Fed buying debt - not loaning against an obligation in a fully-collateralized fashion, or to use banker's parlance, "discounting a note."

There are all sorts of rumblings coming from China and other parts of the world.

There should be.

Our "regulatory institutions", including the OTS, FDIC and The Fed itself, have been derelict in their duties - at minimum - for years.  The OTS has, according to the OIG monitoring it, actually encouraging what amounts to bank fraud in some of the institutions it oversees!  The FDIC has ignored "prompt corrective action" to the tune of losing some $50 billion taxpayer dollars over the last year and change, and then The Fed is buying hundreds of billions of Fannie and Freddie paper for which they have no legal authority to acquire, say much less operating three LLCs that they can't legally own.

This sort of lawlessness along with Congressional failure to hold The Fed to account set forth a great example for The Obama Administration when it decided to decree "ex-cathedra" that creditor priority in bankruptcy is no longer the statutory law of The United States.

If one agency can decide on its own initiative that the law is in fact a "polite suggestion" why not two, three or four more?

5. The FED is stealing the future of our country. What the FED doesn’t blow, it implodes. More from The Market Ticker:

This week we will be treated to the US Government attempting to sell $100 billion in new Treasuries to finance its profligate spending habits.

Bernanke, for his part, is on the cusp of losing control of the long end of the bond curve. If it gets away from him he will have only two choices: pull liquidity and allow the curve to spike higher, repeating almost exactly what happened in the 1930s, or ramp up his "monetization campaign" to meet the issuance, risking an immediate tender of the entire outstanding float, resulting in an even worse outcome - a choice between collapse of the government or an Argentina-style currency implosion followed by that same collapse.

My bet is that is if push comes to shove Bernanke will back off and swallow The Depression that inevitably must follow, because the alternative is that he may literally swing from a lamppost - if not at the hands of angry citizens once the government and rule of law have fallen then from Congress, who, if he goes "all in" ramping up the monetization and loses, will find themselves unable to fund the government's operations.

Apparently, treasury yields are creeping up, despite the FED’s efforts to manipulate the market, bringing us a step closer to implosion – Argentina-style:

Stocks turned lower Wednesday afternoon, sending major indexes down about 1 percent, after trading mixed earlier. Prices for the benchmark 10-year Treasury note slumped, driving its yield up to 3.66 percent from 3.55 percent late Tuesday.

The drop in bond prices came after a Treasury auction of $35 billion in five-year notes, part of the $101 billion in debt the government is issuing this week.

Traders said that while the auction itself was strong, investors are speculating that demand could weaken as the government issues massive amounts of debt to fund its financial and economic rescue programs.

In addition to raising borrowing costs for the government, rising yields on Treasury debt could hamper an economic recovery since they are used as benchmarks for certain consumer loans such as home mortgages. Higher rates on those kinds of loans could prolong a recovery in the battered housing market.

So, what can we do, if not to get all that the FED has stolen from us back, at least to get a little justice?

1. Support HR 1207 to audit the FED’s books and bring transparency to its operations.

2. Join Downsize DC and start to take small, simple steps to influence our elected representatives.

3. Join the Campaign for Liberty and support their mission…

…to promote and defend the great American principles of individual liberty, constitutional government, sound money, free markets, and a noninterventionist foreign policy, by means of educational and political activity.

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