Tag Archives: federal reserve

Elite Mouthpiece Taunts Ron Paul On Failure Of Fed Campaign

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Added July 21, 2012:

How did I see the confrontation? I thought Paul did as well as anyone could in the time given. Except for a few word slips, he was pretty cogent and effective. Bernanke looked discomfited in the middle, when he was questioned about the transfer of authority from Congress to the Fed and when the issue of secrecy was brought up. Other than that, he was impassive and spoke little.  Paul wasn’t “subdued” at all. I don’t watch all his videos, but I’ve seen him a number of times in debate, and that was fairly straightforward Paul. If there was a white flag, I didn’t see it.

If he wasn’t as combative as some seem to think, it’s most likely because it’s his last such confrontation. He’s retiring, I’m told. Too bad.

I thought it was a fairly effective performance and a good wrap up of his major arguments. I think if you’d known nothing about the Fed until then, you would have got the salient points of the anti-Fed argument: he described Bretton Woods,  exchange-rate and interest-rate manipulation; big government financing through debt; transfer of wealth from the poor and middle-class to the wealthy; malinvestment; money supply expansion versus CPI inflation; the housing bubble; and the need for Congressional oversight.

I wouldn’t call it a knock-out, simply because Bernanke was so impassive through out.

That of course helps the media to reframe the confrontation anyway it suits them. Which is what Dana Milbank promptly did.

Paul Vs. Bernanke video

“Ron Paul Vs. Bernanke: final battle ends on surprising note,” David Grant, Christian Science Monitor, July 18, 2012

“Ron Paul Has The Final Say,” Bob Adelman, New American, July 19, 2012

ORIGINAL POST

“Skull & Bones affiliated establishment journalist Dana Milbank taunts Ron Paul about the end of the “End the Fed” campaign in a piece entitled, “Ron Paul Fed Up With Trying To End The Fed” (Washington Post, July 18, 2012)

Well, I have plenty of problems with the whole Ron Paul movement these days (for a view from a Paul supporter see  this:), but the piece does more than criticize Paul.

What it does is gloat.

Here are some lines from it, with my parsing.:

“He didn’t even make a dent in it.”

[LR: The Fed is unassailable]

“…Paul raised the white flag.”

[LR: The Fed has won…]

“For the fiery Paul, it was a subdued surrender.”

[LR: So now you know how powerful we really are, old man.]

“….treating him with the cautious affection one might use to address a crazy uncle.”

[LR: You didn’t reach the point where we’d have to assassinate you, so we’ll just let people know that you and your supporters can’t be taken seriously.]

“But Paul faded away with surprising deference.”

[LR: Yes. He’s under our thumb. We call the shots. He knows what’s good for him, so he’s fading away.]

“The one substantial challenge to Bernanke — Paul’s “audit the Fed” bill, which the House is expected to approve next week before it dies in the Senate — was easily dispatched by the Fed chairman,”

[LR: Audit the Fed is croaking.]

“The Paul to Bernanke word ratio this time was 12 to 1.”

[LR: He’s just a rambling  old man. Real men don’t talk, they print.]

“There’s no constitutional reason why Congress couldn’t just take over monetary policy,” he said. “But I’m advising you that it wouldn’t be very good from an economic policy point of view.”

[LR: We’re the constitutionalists, not you. Audit the Fed is only about Congress taking over monetary policy, folks. Imagine! They can’t run a post office. How do you think they’re going to do with deep stuff like economics?]

“”At this point, the committee chairman cut him off. Paul’s time had expired.”

[LR: We’ve put up with you long enough, grandpa. Your time’s up. The game is over.]

The framing of the whole piece is quite masterful. There is not one substantial piece of analysis about the actual policies in question. We are not told what is involved in either “End the Fed” or “Audit the Fed.”

We are instead given information about procedure….rules regarding how bills go through the house, and how speakers get to speak. A contrast is set up between the grave, measured proceedings of the state and the law (the constitution) and the self-indulgent rambling of an aging politician.

The roles are reversed.

Paul becomes the political class. Bernanke becomes the embodiment of the constitution and of law.

From beginning to end we’re told how to think about what’s going on.

This is what we’re supposed to think:

Bernanke is sage, powerful and indulgent.

Paul is a crazy old man, who doesn’t know the elements of civility….or the constitution.

He’s an anti-government politician, but he’s for the government control of the money supply.

He cuts into other people’s time. He rambles on. He talks too much.

Paul is just a “supplicant” before the great Fed chairman. The final word is with the Fed.

So, even though he gets his fifteen minutes, it’s clear Paul doesn’t really understand the constitution or money.

And he’s for the government!

Notice how the piece distorts Paul’s position to make it look as if “Audit the Fed” (Paul’s fall-back position from “End the Fed”) is about putting arcane and complex professional matters into the hands of politicians.

Milbank turns Bernanke into the “private” expert and Paul into the bumbling government man.

That is sure to appeal to Americans of every political stripe. The average reader would immediately distrust anyone who intends to subject policies about the country’s money-supply to ignorant legislators driven by partisan bias.

What that does is clear.

It turns the  whole anti-government argument against anti-government activists.

It also turns  the pro-constitution argument against constitutionalists.

This is propaganda of the highest order.

Rick Ackerman: Headlines Misread The Market

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“Trader Rick Ackerman interprets the cheer-leading in the headlines:

“Could the newspapers simply be misinterpreting the signs? It would certainly seem that way. To take the headlines cited above, we see oil’s price surge as having absolutely nothing to do with a pick-up in demand. Rather, the push toward $90 a barrel represents speculative excesses in the futures markets, exacerbated by the reluctance of traders to take short positions.

How could they, when, on any given day, a terrorist with a missile launcher could cause the global price of crude to double instantly by scuttling a tanker in the Strait of Hormuz?

As for “bets on growth” pushing stocks higher, it is not bullish speculation that has been driving up shares for the last 13 months, but rather a vast excess of liquidity in the financial system.

As for the rise in T-Note yields to four percent, we seriously doubt this is being caused by competition from expansion-minded borrowers in the private sector; rather, it comes from the rising fear among lenders that they will be repaid in a currency whose value looks all but certain to fall precipitously in the years ahead.

If the central bankers truly believe that strong economic growth is about to trigger inflation, why do they continue to hold the federal funds rate near zero?“

A Brief History Of The War On Gold

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GATA posts a helpful compilation of links to articles on gold price manipulation and a page on the history of that manipulation at The Privateer.com. And excerpt from that (from the period after 1960):

“The End Of the “Fixed” Dollar

Gold War I – The “London Gold Pool” – 1961 to 1968
By the beginning of the 1960s, the $US 35 = 1 oz. Gold ratio was becoming more and more difficult to sustain. Gold demand was rising and U.S. Gold reserves were falling, both as a result of the ever increasing trade deficits which the U.S. continued to run with the rest of the world. Shortly after President Kennedy was Inaugurated in January 1961, and to combat this situation, newly-appointed Undersecretary of the Treasury Robert Roosa suggested that the U.S. and Europe should pool their Gold resources to prevent the private market price for Gold from exceeding the mandated rate of $US 35 per ounce. Acting on this suggestion, the Central Banks of the U.S., Britain, West Germany, France, Switzerland, Italy, Belgium, the Netherlands, and Luxembourg set up the “London Gold Pool” in early 1961.

The Pool came unstuck when the French, under Charles de Gaulle, reneged and began to send the Dollars earned by exporting to the U.S. back and demanding Gold rather than Treasury debt paper in return. Under the terms of the Bretton Woods Agreement signed in 1944, France was legally entitled to do this. The drain on U.S. Gold became acute, and the London Gold Pool folded in April 1968. But the demand for U.S. Gold did not abate.

By the end of the 1960s, the U.S. faced the stark choice of eliminating their trade deficits or revaluing the Dollar downwards against Gold to reflect the actual situation. President Nixon decided to do neither. Instead, he repudiated the international obligation of the U.S. to redeem its Dollar in Gold just as President Roosevelt had repudiated the domestic obligation in 1933. On August 15, 1971, Mr Nixon closed the “Gold Window”. The last link between Gold and the Dollar was gone. The result was inevitable. In February 1973, the world’s currencies “floated”. By the end of 1974, Gold had soared from $35 to $195 an ounce.

Gold War II – The IMF/U.S. Treasury Gold Auctions – 1975 to 1979
On January 1, 1975, after 42 years, it again became “legal” for individual Americans to own Gold. Anticipating the demand, the U.S. Treasury in particular and many other Central Banks sold large quantities of Gold, taking large paper profits in the process. This had two results. It depressed the price of Gold, which fell to $US 103 in eighteen months. More important by far, it “burned” large numbers of small individual investors.

But this “pre-emptive strike” against the Gold price did not solve the imbalances inherent in the floating currency regime. As the Gold price began to recover from its August 1976 low, the (US-controlled) IMF along with the Treasury itself, began a series of Gold auctions in an attempt to hold down the price through official means. But the problem of yet another free fall in the international value of the Dollar got in the way. Between January and October of 1978, the Dollar lost fully 25% of its value against a basket of the currencies of its major trading partners. By early 1979, due to this precipitous fall, the demand for Gold was overwhelming the amount that the IMF/Treasury dared supply, and the Gold auctions came to an end.

Gold regained its ($195) December 1974 level by July 1978. It then pressed on to new highs, hitting $250 in February 1979 and $300 in July. Also in July, Paul Volcker was appointed as Fed Chairman by a desperate Jimmy Carter. Gold continued to surge, hitting $400 in October. While this was happening, Mr Volcker was attending a conference in Belgrade. There the assessment was made that the global financial system was on the verge of collapse. When Mr Volcker returned to the U.S. from Belgrade, he took a momentous step. He announced that the Fed was switching its policy from controlling interest rates to controlling the money supply.

This new Fed policy took some time to have effect. In the meantime, Gold soared from $381 on Nov. 1, 1979 to $850 on Jan. 21, 1980. The public, who had been burned in 1975, were late on the scene. The great burst of public Gold buying came in the four weeks between Christmas 1979 and the Jan 21, 1980 high. As in 1975, they were “burned” again.

The Paper Era Begins
In early 1980, Mr Volcker’s new Fed policy began to bite. U.S. interest rates began to skyrocket. As they rose, the Dollar first slowed its descent, then stopped falling, and then began to rise. Both the public and the investment community which had stampeded into Gold was lured back into paper by this huge rise in interest rates – and by the prospect of a higher U.S. Dollar. The threat of financial meltdown was averted, but at a cost. The U.S. Prime rate hit 20% in April 1980 and stayed there (with a brief dive in mid-1980) until the end of 1981. There was a rush out of Gold and back to Dollars.

Once interest rates began to come down, in early/mid 1982, the choice of where to put the Dollars faced investors once more. The initial solution was just as it had been in the 1970s. The Dow took off – rising from 776 to almost 1100 between mid August 1982 and late January 1983. Gold started earlier and took off even harder – rising from $296 in late June 1982 to $510 at the end of January 1983.

That’s where the similarity to the 1970s ended. Gold fell $105 in the last four trading days of February 1983. As it fell, the Dow broke above the 1100 point level for the first time. The long bull market in stocks, and the long stagnation of Gold, had begun…..”

Ron Paul On Fed Coverup Of Watergate, Saddam Funding

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Statement of Congressman Ron Paul
United States House of Representatives
Statement for the Record
February 25, 2010

Madame Speaker, I would like to enter into the record the following letter from Professor Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas. This letter provides additional information regarding remarks I made at yesterday’s Financial Services Committee Humphrey-Hawkins hearing, remarks which Federal Reserve Chairman Bernanke categorized as “bizarre.”

I thank Congressman Ron Paul for bringing to the public’s attention the Federal Reserve coverup of the source of the Watergate burglars’ source of funding and the defective audit by the Federal Reserve of the bank that transferred $5.5 billion from the U.S. government to Saddam Hussein in the 1980s. Congressman Paul directed these comments to Federal Reserve Chairman Ben Bernanke at the House Financial Services Hearing February 24, 2010. I question Chairman Bernanke’s dismissive response.

BERNANKE: “Well, Congressman, these specific allegations you’ve made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described.”

The evidence Congressman Ron Paul mentioned is well documented in my recent book, Deception and Abuse at the Fed (University of Texas Press: 2008). The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.

First, consider the Fed’s coverup of the source of the $6300 in hundred dollar bills found on the Watergate burglars when they were arrested at approximately 2:30 A.M. on June 17, 1972 after they had broken into the Watergate offices of the Democratic Party. Five days after the break-in, June 22, 1972, at a board of directors’ meeting of officials at the Philadelphia Fed Bank, it was recorded in the minutes [shown on page 23 of my book] that false or misleading information had been provided to a reporter from the Washington Post about the $6,300. Bob Woodward told me he thought he was the Washington Post reporter who had made the phone inquiry. The reporter “had called to verify a rumor that these bills were stolen from this Bank” according to the Philadelphia Fed minutes. The Philadelphia Fed Bank had informed the Board on June 20 that the notes were “shipped from the Reserve Bank to Girard Trust Company in Philadelphia on April 3, 1972.” The Washington Post was incorrectly informed of “thefts but told they involved old bills that were ready for destruction.”

The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees [letters shown in my book, Chapter 2] and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book.

The second subject brought up by Congressman Ron Paul is the exposure of faulty examinations of the Federal Reserve of a foreign bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam Hussein that a Federal Judge found to be part of United States active support for Iraq in the 1980s.
On November 9, 1993, several federal marshals brought a prisoner, Christopher Drogoul, into my office at the Rayburn House Office Building of the U.S. House of Representatives. The marshals removed the manacles. Drogoul took off his jump suit and changed into a shirt, tie, and business suit. He immediately looked like the manager of the Atlanta agency with domestic headquarters in New York City of Banca Nazionale. Drogoul had come to testify about a “scheme prosecutors said he masterminded that funneled $5.5 billion in loans to Iraq’s Hussein through BNL’s Atlanta operation. Some of the loans allegedly were used to build up Iraq’s military and nuclear arsenals in the years preceding the first Gulf War.”[1]

Drogoul’s “‘off book’ BNL-Atlanta funding to Iraq began in 1986 as financing for products under Department of Agriculture programs.”[2] The loans allegedly had been authorized by the U.S. Department of Agriculture. Since Drogoul told the committee he was merely a tool in an ambitious scheme by the United States, Italy, Britain and Germany to secretly arm Iraq in their 1980-88 war, the testimony was politically contentious and unproven. He was sentenced in November 1993 to 37 months in prison and he had already served 20 months awaiting his sentencing hearing.

U.S. District Judge Ernest Tidwell found that the United States had actively supported Iraq in the 1980s by providing it with government-guaranteed loans even though it wasn’t creditworthy. The judge said such policies “clearly facilitated criminal conduct.”[3]

Gonzalez was drawn to Drogoul’s answer about the Fed examiner who had visited his Atlanta operation. Gonzalez said that:

“At the November 9, 1993 Banking Committee hearing I asked Christopher Drogoul, the convicted official of the Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how the Federal Reserve Bank examiners could miss billions of dollars of illegal loans, most of which ended up in the hands of Hussein.

Mr. Drogoul stated:

“The task of the Fed [bank examiner] was simply to confirm that the State of Georgia audit revealed no major problems. And thus, their audit of BNL usually consisted of a one or two-day review of the state of Georgia’s preliminary results, followed by a cup of espresso in the manager’s office.”

Gonzalez was appalled at the of lack of effective examination of a little storefront bank and also appalled by the gifts exchanged by officers of the New York Federal Reserve and the regulated banks in New York City where the main U.S. office of BNL was located. A description of what followed is in my book.

The Fed voted in 1995 to destroy the source transcripts of its policy making committee that had been sent to National Archives and Records Administration. Chairman Alan Greenspan had the committee vote on this destruction, telling the members: “I am not going to record these votes because we do not have to. There is no legal requirement.” (p. 104 in my book.) Greenspan thus removed any fingerprints on this act of record destruction. Donald Kohn, who is now Vice Chairman of the Board of Governors at the Federal Reserve, answered some questions I had sent to Chairman Greenspan about this destruction. Kohn replied in a letter on November 1, 2001 to me at the University of Texas that they had destroyed the source records for 1994, 1995 and 1996, they did not believe it to be illegal and there was no plan to end this practice. That is one reason why the Federal Reserve audit supported by Congressman Ron Paul is needed. The Fed must stop destroying its records.

[1] Marcy Gordon, “Banker Imprisoned in BNL Case Tells Story to House Committee,” The Associated Press, November 9, 1993.

[2] U.S. Newswire: “Former Executive of Atlanta Agency of Italian-Owned Bank Pleads Guilty to Conspiracy”, from U.S. Department of Justice, Public Affairs, June 2, 1992.

[3] Peter Mantius, “Drogoul given 37 months Judge in BNL case also blasts actions of U.S. prosecutors,” The Atlanta Journal and Constitution, December 10, 1993, Section A, p. 12.

Robert Auerbach is Professor of Public Affairs at the Lyndon Baines Johnson School of Public Affairs, The University of Texas at Austin. He was an economist with the House of Representatives Financial Services Committee during the tenure of four Federal Reserve Chairmen: Arthur Burns, William Miller, Paul Volcker, and Alan Greenspan. Auerbach also served as an economist in the U.S. Treasury’s Office of Domestic Monetary Affairs during the first year of the Ronald Reagan administration and as a financial economist with the U.S. Federal Reserve System. Auerbach has been a professor of economics at the American University in Washington, D.C. (1976-83), and a professor of economics and finance at the University of California-Riverside (1983-93). He has written numerous articles, and two textbooks in banking and financial markets. He received two Masters degrees in economics, one from the University of Chicago and one from Roosevelt University, where he studied under Abba Lerner, and a Ph.D. in economics from the University of Chicago, where he studied under Milton Friedman.

Ron Paul: Fractional Banking Finances War…

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John Rubino on Ron Paul:

*”Paul makes it clear that the Fed isn’t the whole problem. It’s just one part of a system that first went wrong with the introduction of fractional reserve banking centuries ago (banks used to be warehouses, storing depositors’ money for a fee), followed by the spread of European central banks (really just scams to allow a few elite bankers and politicians to expand their own power at the expense of everyone else) and then, finally, the introduction of fiat currency, which freed governments to expand spending and borrowing without regard to, well, anything. The problem, in short, is the whole of modern banking and finance.

*The middle part of the book features transcripts of Congressman Paul grilling Fed chairmen Greenspan and Bernanke. Some of these transcripts date back to the early Reagan era, which means that for going on three decades Paul has been fighting this fight, and slamming into the same brick wall. The Chairmen feel no need to explain themselves to a lowly congressman, and respond with a mixture of lies and obfuscation that apparently fooled most of Washington. The generally-respectful Paul even refers to Greenspan as “pathetic” after one especially dishonest piece of testimony. Less charitable readers will, by the end of this section, want to take a congressional microphone and beat Greenspan and Bernanke senseless.

*Fractional reserve banking and fiat currency make war easier. Back when a ruler needed actual gold to field an army, invading a neighbor required some serious forethought. But once a dictator (or the world’s policeman) could just print a few billion pieces of paper and order some new tanks, “defending the national interest” got a whole lot easier. Hence the bloodbath of the 20th century, and perhaps the mess of the coming decade.

*Paul knows all the major sound money/Austrian economics classics, and he cites them liberally. The “recommended reading” list contains a year’s worth of serious research.

*Though he continues to fight, he’s not optimistic about averting the coming train wreck, which he refers to as the “BIG ONE”.

Bernanke Declares Depression Over…

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That’s it folks. Wrap it up. This here recession…correction…depress…oh whatever..is over. Time to go home. Put away your pens and paper, boys and girls.

Professor Bernanke says there’s going to be no test. Or there’s going to be just a take-home. Or better yet, you just get to write in and ask for whatever grade you want. Bob Rubin and Jamie Dimon get A’s, of course. The rest of you get good B’s…. No one fails. Ain’t life great?

Whew. That depression stuff was so, well, depressing. Glad it’s over.

Wasn’t so bad, after all, seeing as how it was the worse one in half-a-century and the sky was falling and we were all going to live in the Ozarks on canned peas and mackerel until we got raptured up… and really all that happened was some green paper got printed and we had a to listen to a lot of speeches in Barackistani (not quite as strange sounding a dialect as Bushlish but just as daft…) and then, bingo, everything’s back to normal again.

Yessir. The economy is healthy.

Except for jobs. No jobs.

What kind of recovery is that, you ask? It’s the new jobless, rocketing-inflation, trashed-currency, falling-house-price, bankrupt-government, kazillions-in-debt, trade-warring-with-China recovery – that’s what it is.

Glad you asked. Now you know…
Old Ground Hog Ben.

Here’s the news clip:

“Gold futures climbed back above the $1,000-an-ounce mark on Tuesday, after upbeat U.S. economic reports and as Federal Reserve Chairman Ben Bernanke said the recession is likely over.

However, he and other Fed officials reiterated views that unemployment will remain high and economy stay weak well into next year, fueling expectations that the central bank will continue to provide ample liquidity. ”

More at Market Watch.

War Pigs

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War Pigs – Nothing’s Changed
Hat-tip to Brad Spangler

It’s still the bankers making money from debt and war…

While the sheeple swing their woolly heads back and forth, hypnotized –

left-right

black-white

public-private

socialist-capitalist

gay-straight, feminist-patriarchal, Muslim-Christian, East-West, poor-rich, working-class-middle-class, urban-rural, blue-state-red-state…

back-forth…democrat-republican…