The Ray Rice video for the financial sector has arrived.

1) The Fed created the economic catastrophe. I'd explain, but you have always been oblivious when we discuss this.

2) In what world don't we have inflation? And in what world is the dollar stronger than anything -- unless you are looking in terms of days and not years? You don't need to actually have any understanding of anything. How much were your household expenses 10 years ago? 20 years ago? 30 years ago? What do basic things cost relative to where they were 10 years ago?

Their latest bullshit involves this "2 percent inflation" objective? Please answer this? Why is 2 percent inflation good? Why wouldn't deflation be a a GREAT thing? Who doesn't go out shopping every weekend looking for deflation? Why 2 percent inflation? Why not 1 percent or 3 percent to create "price stability"?

Which miss the point, anyhow. Inflation, by definition, is expansion of the money supply. We have run a printing press intermittently for decades, and NONSTOP for the past 6 years. Seriously?

Two percent inflation a year takes your $50,000 and makes it worth $30,000 in 25 years. Why is that a good thing exactly? It's not even benign. It's malignant.

But what is particularly worrisome is you could post that we don't have inflation? Even using their rigged measure of prices (as the proxy for inflation), they have managed to take what SHOULD be a blissful deflationary environment the last 40 or 50 years and turn it into skyrocketing prices.

The Fed's primary mandate, in fact, is "price stability." Since the Fed's creation, the value of a dollar has declined by 99 percent (not exagerated, btw). When you hear your dad talking about how "I used to be able to buy that for a nickel," that is the Federal Reserve at work.

We went through the 1800s, before the Fed, with VERY stable prices. In fact, prices declined in the late 1800s, and our economy benefited. It's natural. The industrial revolution and automation created huge productivity gains. You could produce more for less. And prices decline when that happens.

We SHOULD be going through a similar period. Since the advent of the microprocessor, prices SHOULD be coming down. Remember when early desktop computers cost $2,500? You now get something way more powerful for $500? And with all of the productivity gains computerization has enabled, it should have filtered through to create falling prices across our economy. And people should be BENEFITING from that.

Instead, we have a money-printing machine that exists to create inflation -- we run up government debt, and they try to inflate it away to enable more debt. It drives up prices. And instead of the dramatically falling prices we SHOULD have seen, their money printing has made the cost of living for everyone just keeping rising. In what world do you think that your expenses aren't rising year by year, decade by decade because of the Federal Reserve?

3) Our economy is shit. We are 6 years past a collapse, in which we never got a recovery. There has been no breakout momentum, WITH the extreme measures. Personally, I'd rather stop trying to win a "least ugly contest" that is focused on the short-term (and it doesn't even have short-term benefit -- it is grasping at straws), while we create a bigger and bigger long-term mess.

What you don't seem to get is that the Fed is painted into a corner now. It can't rig rates any lower. Zero is the lower bound, And it has a massive balance sheet that is now an albatross around its neck. The FED is now the systematic "too big to fail" problem. Who bails it out?

It has no way to unwind its balance sheet. It drove up prices in a market by buying everything in sight. It has to just sit and pray that a miracle happens. The problem is that it has created a very unstable world through its actions, so chances are something is going to go bad a la 2008 (a mess created by the Fed rigging interest rates and pushing people into risk in the first place!). Except next time, what does it do, and how bad will things get? I'm not like you. I don't want unaccountable people, flying by the seat of their pants, doing random things with such huge consequences. I'd rather determine my own future, rather than some corrupt central-planning authority doing it, and rigging the world against me in the process.

 

Yes, the tapes are likely going to spell that out.

This is all related to Carmen Segara, the whistleblower who sued the Fed when she was fired. In short, the tapes are going to show her trying to get the central bank to downgrade Goldman's regulatory rating over conflicts of interest, and her bosses telling her to back off.

This thing has been brewing for more than a year -- nobody paid attention (well, not quite true -- Zero Hedge had a field day with it, for example: http://www.zerohedge.com/news/2013-10-10/goldman-whistleblower-sues-ny-fed-wrongful-termination). Now Michael Lewis steps into an old story again and creates a headline. But it will have no lasting impact. The lawsuit didn't go anywhere. A judge whose wife does a lot of work for Goldman dismissed it.

 

As I said originally, it's all a farce. You can't create a central bank that is designed to work intimately with the largest private banks (to those banks advantage) to rig our markets, and then turn around and say it is its "regulator." The fact that anyone ever bought this nonsense is what is kind of unbelievable. But the Fed was created to ensure that people have no clue what it is or how it works -- it was created by JP Morgan, Nelson Rockefeller, etc. Rockefeller's father in law was Nelson Aldrich, the senator who actually got the law through.

People don't understand this. Those private banks, including Goldman, own the Federal Reserve. Not figuratively. Literally.

Each of the 12 Fed banks is a corporation whose shares are owned by the commercial banks operating in its district. The New York Fed is obviously the most powerful because of the commercial banks in NY. Those commercial banks choose the majority of the directors for each Fed bank -- it is how it was designed. The idea of the Federal Reserve also somehow being a "regulatory body" of the companies that control it and choose its board of directors, is so dumb as to be nonsensical. Except most people don't understand what the Fed is or how it came into existence in the first place.

 

I know you didn't randomly decide to underline it, but after cutting and pasting the statutory objective and bolding it, what part of "stable prices" don't you understand about the dual mandate?

For what it is worth, the Federal Reserve has, in effect, done neither parts of its dual mandate over its history. It has no more power to do either than I do to turn water into wine. What it has done is create unnecessary instability that has created unemployment for long periods as a result of it overheating the economy by rigging the interest rate market, and rising prices over its entire existence, as a consequence of it running a printing press to debase the dollar.

 

1) The silly "mandate" created by the 1979 act -- what you cut and paste -- does not specify 2 percent inflation as some magic number. That is just made up bullshit. Why not 1 percent? Why not 3 percent. I don't see how it creates price stability. 2 percent inflation a year turns $50,000 into $30,000 worth of purchasing power in just 25 years. What's more, we have not had price stability BECAUSE of what the Fed has done. Bringing it down the simplest level, for example, in 1913, when the Fed was created bread cost an average of 5.6 percents per pound. Today it is $1.50. Milk, 35 cents a gallon. Today, $3.50. Eggs, 37 cents per dozen. Today, $1.95 a dozen. And son on.

2) I understood the Fed's "mandate" includes maximum employment, whatever that is. I never posted anything about it. Certainly not a "no," post claiming it isn't the case. For what it is worth, unemployment after the Fed-created disaster in 2008 hit double digits -- using it's own rigged numbers. Today, it puts out a ridiculous number that doesn't count most of the unemployed people, and it is still more than 6 percent. The real number, when you include underemployed people stuck working in part-time jobs, and the millions of people who have given up on looking for work (who don't get counted for some reason) is sure in double digits. Apparently, "maximum employment" means whatever you want it to mean.