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The Federal Reserve Is Getting Desperate
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In a sign that the Federal Reserve is growing increasingly desperate to jump-start the economy, the Fed’s Secondary Market Credit Facility has begun purchasing individual corporate bonds. The Secondary Market Credit Facility was created by Congress as part of a coronavirus stimulus bill to purchase as much as 750 billion dollars of corporate credit. Until last week, the Secondary Market Credit Facility had limited its purchases to exchange-traded funds, which are bundled groups of stocks or bonds.

The bond purchasing initiative, like all Fed initiatives, will fail to produce long-term prosperity. These purchases distort the economy by increasing the money supply and thus lowering interest rates, which are the price of money. In this case, the Fed’s purchase of individual corporate bonds enables select corporations to pursue projects for which they could not otherwise have obtained funding. This distorts signals sent by the market, making these companies seem like better investments than they actually are and thus allowing these companies to attract more private investment. This will cause these companies to experience a Fed-created bubble. Like all Fed-created bubbles, the corporate bond bubble will eventually burst, causing businesses to collapse, investors to lose their money (unless they receive a government bailout), and workers to lose their jobs.

Under the law creating the lending facilities, the Fed does not have to reveal the purchases made by the new facilities. Instead of allowing the Fed to hide this information, Congress should immediately pass the Audit the Fed bill so people can know whether a company is flush with cash because private investors determined it is a sound investment or because the Fed chose to “invest” in its bonds.

The Fed could, and likely will, use this bond buying program to advance political goals. The Fed could fulfill Chairman Jerome Powell’s stated desire to do something about climate change by supporting “green energy” companies. The Fed could also use its power to reward businesses that, for example, support politically correct causes, refuse to sell guns, require their employees and customers to wear masks, or promote unquestioning obedience to the warfare state.

Another of the new lending facilities is charged with purchasing the bonds of cash-strapped state and local governments. This could allow the Fed to influence the policies of these governments. It is not wise to reward spendthrift politicians with a federal bailout — whether through Congress or through the Fed.

With lending facilities providing to the Federal Reserve the ability to give money directly to businesses and governments, the Fed is now just one step away from implementing Ben Bernanke’s infamous suggestion that, if all else fails, the Fed can drop money from a helicopter. These interventions will not save the economy. Instead, they will make the inevitable crash more painful. The next crash can bring about the end of the fiat monetary system. The question is not if the current monetary system ends, but when. The only way Congress can avoid the Fed causing another great depression is to begin transitioning to a free-market monetary system by auditing, then ending, the Fed.

(Republished from The Ron Paul Institute by permission of author or representative)
 
• Category: Economics, Ideology • Tags: Federal Reserve 
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  1. onebornfree says: • Website

    “The only way Congress can avoid the Fed causing another great depression is to begin transitioning to a free-market monetary system by auditing, then ending, the Fed.”

    Auditing it is a complete waste of time. It would be just another scam process that revealed nothing except that the auditors had been paid off to achieve certain results, guaranteed. Anyone looking for/expecting honest auditing of _any_ government protected institution is living in la la land. Just get rid of it, along with every other entirely unconstitutional part of the federal government, end of story.

    Regards, onebornfree

    • Replies: @ben sampson
  2. Nothing screams ‘Banana Republic’ more than the Central Bank disbursing trillions of dollars without any oversight to ‘Stabilize’ financial markets,TRILLIONS of dollars which they pull out of their hat. Nothing screams ‘Banana Republic’ more than this entity which adamantly refuses to get audited. Nothing Nothing screams ‘Banana Republic’ more than the elected representatives meekly acquiescing to such outrageous behaviour by this entity.

  3. “It is not wise to reward spendthrift politicians with a federal bailout — whether through Congress or through the Fed.”
    What a typical Republican assertion. States & municipalities have had their tax bases gutted, but all Ron can say is “spendthrift politicians”. What an arsehole. Republicans like Ron are the best argument for succession around. Who needs Federalism with such shit attitudes ?

    • Disagree: Bro43rd
    • Troll: Achmed E. Newman
  4. There was a recent legal matter where the Fed Reserve was asked to show Congress its books (from memory).

    The matter was resolved in the courts showing that the Fed Res did NOT have to, as it wasn’t an agency of the US Government.

    Although an instrument of the US Government, the Fed Res System considers itself “an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the Executive or Congress & it does not receive funding appropriated from USG Consolidated Revenue.

    Eustace Mullins has shown that many of these banks are owned by about a dozen European banking organizations, mostly from the UK, and most notably the Rothschild banking dynasty.

    In addition, there’s a revolving door between the US Dept of Treasury, Wall St & the Fed, IOW, its the government agency, Treasury, thats suffered regulatory capture – which is even better than ol’ fashioned corruption – as it can guarantee outcomes for vested interests – not the national interest.

    With no disrespect, Ron has been banging on about this at least since 2012, so it would be interesting to discover what obstacles he’s come up against.

    See: Ron Paul Is Hosting A Hearing On Ending The Federal Reserve Right Now Wyler G, 8 May 2012, Business Insider.

    As the French say, ‘the more things change , the more they stay the same’.
    Business Insider Inc.

    • Replies: @Patagonia Man
  5. @Patagonia Man

    Because, of course, you so all realize that this could well be communism by the backdoor, if the Fed is enabled to continually loan/grant funds to private institutions – and as part of the loan/grant the Fed takes a % stake in such corporations, e.g., in Sept, 2008, the Fed Res authorized an $85 billion loan to international insurance giant American International Group (AIG) to stave off the bankruptcy.

    • LOL: animalogic
  6. The people running the Fed are intimately familiar with the Israeli bank stock collapse of the 1980’s, and how they forced America to bail them out.

    They’re not stupid, they have a plan to come out of this keeping Israeli finances intact.

    Israel came out of that crisis with an umbilical cord linked to the US Treasury, siphoning over $10 million a day. As Nancy Pelosi said, even if the US economy completely tanked, the US slaves would continue to pay their tax to Israel.

    The US has no rich benefactor to turn to. The only option will be for Americans to take a lower standard of living to maintain the quality of life in the Israeli ethno-state.

    • Replies: @botazefa
  7. You can easily find audits of the Federal Reserve System online as public documents. I don’t know why Dr. Paul keeps insisting that these audits never happen or don’t exist. For example:

    https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2019.pdf

  8. Dr. Paul also assumes that an audit of the Federal Reserve would find evidence of criminal activity. What if, instead, an audit finds that the Fed has generally complied with the law?

  9. botazefa says:
    @Beavertales

    The US has no rich benefactor to turn to. The only option will be for Americans to take a lower standard of living to maintain the quality of life in the Israeli ethno-state.

    That is not our only option, not by a long shot. As debtors, we have considerable power over our creditors.

    Recall that the dollar is backed only by “full faith and confidence of the American People.”

    • Replies: @d dan
  10. d dan says:
    @botazefa

    “That is not our only option, not by a long shot. As debtors, we have considerable power over our creditors.”

    This is true only if dollar is still being accepted by foreigners. In case you don’t know, China, Russia and others are working hard to promote the uses of non-dollar in trades. The days of reserve currency status and petrol-dollar are ending… I suspect it will be less than 10 years.

    “Recall that the dollar is backed only by “full faith and confidence of the American People.””

    Exactly the problem. The “full faith and confidence of American people” (and government) means nothing to the world these days – and you are still talking as if it is a positive thing!

  11. botazefa says:

    Exactly the problem. The “full faith and confidence of American people” (and government) means nothing to the world these days – and you are still talking as if it is a positive thing!

    I was responding to someone who said our only option is to accept a lower standard of living. I was offering another option. A debt jubilee of sorts. Let the chips fall where they may.

    If the American people lose faith in the dollar, doesn’t that reset us to a level playing field? I don’t know. I haven’t thought it through.

  12. The feral deserve have their hand in the cookie jar again

    The stock markets now perform like a 737max on steroids

  13. @onebornfree

    audit the Fed after there has been a power change and truth in audit is guaranteed. then take the rrsults wherever they go..i.e arrest and charge people on the evidence, trial, then loose them in prison by max legislated penalties when found guilty

  14. The Federal Reserve and the banking cartel is an organized crime ring that finances international terrorism, human trafficking, drug trafficking, assassinations, sex trafficking, political puppets, and it is outrageous that they have gotten away with this evil predation, aided and abetted by the military, FBI, CIA, Police, Congress, the Department of Justice, and the Paid Scpeech Media.

    Millions of Americans are in jails and prisons, while the most wretched, evil, scumbags are treated like royalty. They belong in prison!

    JP Morgan leased a ship, not once, but twice from a Dutch shipping company that has been repeatedly busted for narco-trafficking. Of course they arrest the crew members, and not the executives running the shipping company, or JP Morgan for using them twice, caught with massive amounts of narcotics by the DEA. Hong Kong Shanghai Bank Corporation aka HSBC, has also repeatedly been involved in narco-trafficking, and so have Wachovia and Wells Fargo.

    I object to their “business model” that destroys the lives of Americans, as well as people in other countries, and has also destroyed the entire country.

    I also object to every person that works for the government in Congress, the Executive Branch, the DoJ, the DoD, and the State Department!

    They are literally killing Americans right before everyone’s eyes, virtually in broad day light and the only thing that the government psychos are upset about is the fucking statues! So nevermind 9/11, covid hoax, holocaustic lockdown, Nazi Eugenics vax and testing, etc! Worry about the God damned fucking statues, and then turn to stone, after gazing at your contrived pseudoflections in the Paid Speech Media, and falling in love with the cotrived images of who you actually are !

  15. Anon[180] • Disclaimer says:

    “The bond purchasing initiative, like all Fed initiatives, will fail to produce long-term prosperity. These purchases distort the economy by increasing the money supply…”

    You bet they do. The thing is, nobody who has lived in America in the last century knows what an undistorted money supply looks like. What happens in a gold standard economy? Exports have to balance imports, or you run out of gold – hence there is negligible trade deficit.

    What happens when the Fed is creating a trillion or so dollars each year? Suddenly exports don’t have to balance imports, since the country can export this free money in lieu of tangible goods. Instead of exports paying for imports, the Fed pays for imports. Which means there is a much lower demand for domestic labor.

    Tariffs won’t solve it. A trade war won’t solve it. The poor bastards in the Rust Belt think it is the Chinese workers that replaced them when really it is their own central bank. Read all about it here: https://www.twilightpatriot.com/2019/09/nobody-will-win-trade-war.html

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