Has the Fed Gone Too Far? (Part II)

16 Jul

Has the Fed Gone Too Far? (Part II)

“Money is gold, nothing else.” – JP Morgan

In our last post we called your attention to a PBS Frontline documentary called “The Power of the Fed” that premiered on Tuesday, 7/13/2021.  

We had no expectation that the program would provide a satisfactory critique of the Federal Reserve’s destructive activities.  For example, we did not hear a word about the Fed’s destruction of the dollar’s purchasing power.  Nor a word about gold, the money system upon which our free Republic was founded, the monetary system that would have precluded the Fed’s follies in the first place.

So great are these oversights in the context of an examination of the Fed’s power, that we thought we may have missed something.  So, we pulled up the transcript and searched. 

We had missed nothing.  

The program’s focus was limited to the Fed’s tender affection for Wall Street and its undisguisable cronyism, run quite out of control with quantitative easing.

Still, as we expressed in Part 1 of this commentary, we had no expectation of a thorough indictment of the Fed.  We thought instead that the program’s significance was that the Fed’s mal performance should be addressed at all on government television (remember that the Corporation for Public Broadcasting is a creature of Washington and survives on your tax dollars).

So near are we to a reckoning for the Fed’s wanton money-printing and cronyism, that this show and other developments have us wondering whether “some of [the Fed’s] usual supporters may be scurrying away to avoid blame for the coming calamity.”

With that said, HERE is a link for you to view the entire program.

Before we leave the topic, we thought it would be valuable to provide you with a Viewers’ Guide to “The Power of the Fed,” by briefly identifying two of the commentators you will see in the film.  

Neel Kashkari is the President and CEO of the Minneapolis Fed and is the Fed’s primary defender, Chairman Powell apparently being unwilling to appear.

Kashkari misses the mark badly.  He is truly an idiot and we do not say that not lightly, but on good evidence.  He is incapable of seeing any link between the Fed’s interest rate manipulations that allow companies to borrow money for what amounts to not much more than a rounding error, and the explosion of corporate stock buybacks that the documentary finds so damning.

Kashkari, working for Treasury secretary Hank Paulson, both from Goldman Sachs, oversaw the $700 billion Bush bailouts.  How did he arrive at that figure, $700 billion?  Kashkari pulled it out of the air.  He did the math right on his BlackBerry. “We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number.”

A nice round number?  And that is what passes for intellectual rigor at the Fed.

No wonder people are scurrying away from the Fed.

Kashkari does not mind at all that Fed policies are driving a wealth gap heretofore unseen.  If the One Percent, the very richest, are getting richer, says Kashkari, it is only a side effect of the Fed’s being so attentive to everybody else and their jobs.

Right.

But consider:  The Fed does not create any real wealth itself.  It does not bake any pies.  So, if Wall Streeters and banksters are getting richer, getting greater and greater slices of the wealth pie, it means that the rest are left with a smaller slice of the pie, a smaller share of real wealth. 

And indeed, this is true.  The economic pie isn’t getting bigger at the rate it did before the Fed became today’s economic leviathan.  The more interventionist the Fed since leaving the gold standard, the more US GDP growth shrinks, decade after decade.

Certainly, the wisest voice in the program is that of legendary investor Jeremy Grantham who sums up cronyism and distortion the Fed has wreaked on the economy this way:

“In my career in America, the percentage of GDP that goes to finance has gone from 3 1/2 to 8 ½.  We’re—in a way we’re like a giant bloodsucker and we have more than doubled in size and sucking more than twice the blood out of the rest of the economy. And we do not generate any widgets. We do not generate any real increase in income. We are just a cost….

“They [the Fed] have the housing market, the stock market, and the bond market all overpriced at the same time, and they will not be able to prevent, sooner or later, the asset prices coming back down. So, we are playing with fire because we have the three great asset classes moving into bubble territory simultaneously.

All in all, it appears that we are awfully close to a meltdown from the Fed’s frenzied money-printing.  There is no bailout waiting in the wings for you when this happens.  You must take steps to protect yourself from a nuclear-scale monetary event.  Speak with a Republic Monetary Exchange gold and silver specialist about a protection portfolio for your wealth.

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