Monthly Archives: July 2013

And that, Ladies and Gentlemen, is how it works (one of the aspects of Fed ‘liquidity funneling’ to the Primary Dealers)…

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When the Fed auctions off various financial securities each month (to raise funds to cover monthly deficits), each of those securities is identified by a specific Identification number.  This unique number is called a “CUSIP.” This acronym stands for the “Committee on Uniform Securities Identification Procedures.”

Note this more complete definition:  Committee on Uniform Securities Identification Procedures  –  A board that assigns a nine-digit number to every stock and registered bond that trades in the United States. CUSIP is owned by the American Bankers Association and is operated by S&P. A CUSIP number facilitates trade and settlement by making each security unique from every other of the same class. CUSIP numbers are recorded in each trade. 

Well… on February 14, 2013, the Fed auctioned off some 30-year Bonds (note the CUSIP – “912810QZ4”):

TREASURY AUCTION RESULTS                                                                              

Term and Type of Security 30-Year Bond                                                            

CUSIP Number 912810QZ4                                                                                      

Series Bonds of February 2043

The auction bidders typically include the Primary Dealers, the direct (non-Primary Dealer) bidders and the Indirect Bidders (Central Banks).

The Primary Dealers enjoy a practically conjugal relationship with the Fed, and they are obligated, in accordance with that special to ‘take’ or ‘buy’ whatever portion of the debt auction not bid/purchased by the other bidders.  And that is generally substantial.  According the Federal Reserve Bank of New York, the “primary dealers alone account for 70.9 percent of Treasu8ry securities sold to the public, on average. “

Immediately following the Valentine’s Day auction this year (5 days later, on February 19, 2013), the Fed ‘bought back’ the majority of that very same 2-14-13 CUSIP ($39 billion worth – see below) from the Primary Dealers (who were unable to ‘move’ that paper to their clients and did not wish, themselves, to ‘sit on it’).

The Fed repurchases this ‘paper’ in Permanent Open Market Operations (POMOs) and the paper then ‘sits’ in the Fed’s System Open Market Account (SOMA).   The Government then ‘pays interest to itself on money that it borrowed from itself.”

And, guess who gets paid a healthy commission to ‘take’ the paper, and then shuffle it back to the Fed…?

That’s right —  the Primary Dealers (see who they are here).

This would be the equivalent of making a purchase at a Wal-mart, then then returning the product, and being paid a commission to boot.  Here is the 2-19-13 POMO summary (note the same CUSIP “912810QZ4” for $39 billion):

And… the Fed ‘funnels’ a lot of money through the Primary Dealers. Note the blue line (2009-2013) on this chart – courtesy of The Wall Street Examiner:

Fed Cash to Primary Dealers 7/17/13 - Click to enlarge

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The Fed’s ‘liquidity funneling’ maneuvers have been weakening the Dollar (vs hard assets) over the past 4 years (inflation).  And very little of the ‘liquidity’ benefits are reaching American families.

It is time for a change.

 The Leviticus 25 Plan.

Federal Reserve, Part 2: “Infinite fiat” – promoting the concentration of wealth in the coffers of big banks, power brokers and the super-wealthy…

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An inside look at the Fed – continued.
 
Charles Hugh-Smith of OfTwoMinds blog,
Courtesy of ZeroHedge 7-11-13 / Excerpts:
The Fed has infinite fiat, though they try to disguise that fact. It takes no more effort for them to loan a trillion dollars than a million dollars. They will never run out of zeros in their computer system. The zero keys on their keyboards will always function. No matter how much they can print, they always have available an infinitely greater amount of fiat that they can still print. Printing money requires nearly zero effort and zero cost on their part. They don’t get worn out from printing money.
This whole concept of infinite fiat is hard for people to grasp; it is something outside of their experience. People’s lifelong experience with money is that it is a limited resource. It is hard to conceive of a group of people who have unlimited, infinite money. Yet the Federal Reserve has just that. The Fed is not like a doctor who prescribes a short-term stimulus for a patient who is feeling run down. The Fed is not like a parent who temporarily puts training wheels on a bike until the kid learns how to ride it. These metaphors make people think that the Fed’s fiat printing is temporary and limited. It is not.
Its money printing abilities are permanent and unlimited. The Fed also puts on a show about agonizing over the decision of whether to print money. That make it seem like they are agonizing over whether to pull a sum of carefully saved cash out of their vault. But when they lend to Uncle Sam, they do not pull cash out of a vault that has a finite amount of cash in it. They instead get it from a computer that has the capability of printing unlimited zeros.
Summary: The Fed has infinite fiat. It is not limited by any conceivable shortage, or because of Keynesian stimulus theory, or because the Fed has the role of a doctor, or because the Fed’s role is to put training wheels on the economy from time to time, or because it is hard for it to print fiat and there are only so many hours in a day. They have infinite fiat. Their printing is limited only by how much they think they can get away with and their calculations of how they will benefit from it.
So that brings up the final question I shall deal with today. That is, “How does printing money benefit the Fed? Is it better from their point of view to print or not to print?”
The first point in response to this is that they want the government hooked on their printing. They want to be indispensable to the government. A government that balances it budget or reduces the national debt to zero (as the Jackson administration did) is the opposite of what they want.
The Fed’s power over government is similar to the power a drug pusher has over a junkie. As long as the junkie is doing what the pusher wants, the supply of drugs is uninterrupted. If the junkie does not pay, the supply is cut off. If the pusher wants to jack up the price at any time, he can do so. If the junkie objects, his supply is cut off. So here we see it is in the Fed’s interest usually to maintain the supply, but the supply may also be cut off from time to time in order to ratchet up its power over its victim.”
 
The big banks always benefit from more printing. They profit from it. To the extent that they are cut off from it, they lose money. So from the standpoint of the big banks, the bias is always to print. Note that the Fed can maintain its supply to the banks while cutting off the government. The Fed’s owners must always be served; the government is instead to be manipulated, enslaved and controlled under the guise of serving.
Any active defiance of the Fed is a danger signal for investors. The Fed can cut off the government at any time, thus precipitating economic chaos so as to quash rebellion. At present I do not see any serious defiance of the Fed anywhere.
http://www.oftwominds.com/photos2013/Fed-assets6-13.png
 
The Fed’s main goal is to increase the profits of the big banks. That goal is consistent with increased profits for all firms and prosperity in general, so long as the banks and the elites grab the largest share of the profits.
But that goal is also served in the long run by boom-and-bust cycles that have a ratcheting effect of concentrating wealth in the hands of the wealthy. The clued-in super-wealthy can profit both as bulls and as bears, and can purchase prized assets cheaply at the bottom of the cycle (on easy credit from their friends at the Fed).
It is a Clausewitzian principle that individuals, organizations and nations will expand their power until some superior or equal power effectively opposes them and stops them. Because the Fed’s power has no equal, we can expect the Fed’s power to continue to increase indefinitely.
 
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That “superior power,” to halt the grinding advance of debt enslavement in America, is American people.  And the plan for change is currently available – with direct credit extensions for American citizens.
The Leviticus 25 Plan.

The Federal Reserve, Part 1: Promoting ‘debt enslavement’ for America…

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Excerpts from Charles Hugh-Smith of OfTwoMinds blog,
Courtesy of ZeroHedge 7-11-13                                                                                                          
“…The essence of the Fed and … why the financial Status Quo is doomed.
People are confused about the Fed, and I think it would be better if everybody had a clear understanding of what the Federal Reserve is and what it is not.
First of all, the Federal government thinks of the Federal Reserve as a service bureau, whose function it is to print money that the government can spend. As long as the Federal Reserve performs that function–reliably printing, let’s say, a trillion or more each year to top off the Federal budget–then Congress will be happy with the Federal Reserve (their rainmaker) and will follow its advice and try to keep it happy.
http://www.oftwominds.com/photos2013/federal-debt1-13.png
It should be emphasized here that the whole Keynesian smokescreen and sideshow has very little to do with the reality of the relationship here. The Federal Reserve’s job is not just to lend Uncle Sam some money during a recession so as to provide temporary stimulus. The Fed is a milk cow for Uncle Sam. Its job is to give milk all the time.
So to summarize this first point, the Fed is a service bureau for the Federal government whose job it is to provide the government with freshly printed fiat every year [in the form of selling ‘Treasury bonds to fund Federal deficits, but it does not “print money” in the sense of adding money to the nation’s money supply. It borrows money by selling newly issued U.S. Treasury bonds.’].
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The Fed is also a service bureau to the big banks that own it. Its job is to give unfair advantage to those banks, either by granting them low-interest loans that can be rolled over into infinity, or by buying their bad debts and disposing of them properly, or by doing any number of other special favors for them that increase their profits and executive bonuses. The Fed is not independent in the sense that it is self-governing. It must provide service to the banks who own it and to the Federal government, which controls its legal environment. Big banks have owned and controlled the Fed since its inception in 1913.
Summary: The Fed is also a service bureau to the big banks. It is not as independent as it proclaims itself to be; it provides services for its owners. Its owners have a profit motive.
 
The Fed also has its own institutional agenda. It wants to expand and increase its own power. It wants to operate in a safe and predictable environment. It wants to eliminate threats. The Fed advances its own agenda by printing or withholding money. As time goes on, the Fed has asserted more and more control over government. The Federal government is now addicted to freshly printed debt-money. This gives the Fed enormous power over the government.
The big banks who own the Fed also dominate Congress and the Obama administration due to the massive bribes they deliver each year. Thus over time the Federal Reserve has become more and more the master: what it wants it gets, what it doesn’t want doesn’t happen.
Summary: The Fed is also a selfish, power-seeking institution.
Some people think the Fed prints money, but when you ask Ben B. about it, he says, “The Fed does not print money. We lend money.” Printing money is easy to visualize and understand. Lending money is also easy to understand; it’s what banks do. But what the Fed does is somewhat more difficult to understand. To put it into one phrase, “they print debt-money.” They print money, but each dollar they print has the chains of debt attached to it. Each dollar they print represents a debt that somebody owes.
A Federal Reserve note is an IOU from the Fed that says “we owe you one dollar.” There does exist in the world paper money that is not debt-money, but the Fed does not traffic in that. As the Fed prints more debt-money, they tighten the chains of debt enslaving the government and the people.
A national debt of $1 trillion is manageable. It might be paid off in a few years. But a debt of $17 trillion is permanently enslaving (unless it is defaulted upon).  Ben’s printing press, then, is also an enslaving press. If Americans were to try to default on $17 trillion of debt, The Powers That Be would unleash their full wrath on the American people.
Summary: Ben B. runs a printing press that is also a debt-enslaving press. We are wrong to focus just on the inflationary effects of his money printing. We should also be alarmed by the enslaving effects.
Full article:  ZeroHedge 7-11-13
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Note:  As bad as the debt numbers are, the real U.S. debt / deficit numbers are not even referenced.  The U.S. Net Present Value (NPV) of unfunded liabilities puts the total debt up in the range of $80-100 trillion. 
The U.S. has averaged over $5 trillion in annual deficits for each of the past 5 years (on an NPV basis). As economist/statistician John Williams notes:  At $5 trillion per year, you could take all of the money earned by all Americans, and you’d still have a deficit.
The debt is “beyond containment.”
America needs to change course.
The Leviticus 25 Plan.