Thursday, January 20, 2011

Kremlinology? Call It Fed-Res-ology: Reading the Tea Leaves of the Federal Reserve Board

Time was, no one gave a shit about the Federal Reserve’s board. Who the drones were? What they did? Who cared!

No, not the Kremlin:
The Eccles Building.
But ever since the Fed started to expand its balance sheet in the fall of 2008, what the Fed does has mattered—and now with Quantitative Easing 2 and the effective monetizing of 50% of the Federal government’s deficit, it matters more than ever. 

Next week, on January 25, the Federal Reserve’s Open Market Committee (FOMC) will meet. This meeting is important, because the composition of the board will change—and therefore, possibly the direction of the board. 

So like Kremlinologists of old, we have to start paying attention to what the FOMC looks like, if we want to divine what will happen.

What will happen not merely with monetary policy, but with the American economy itself. 

The Composition of the FOMC—Past & Future

From the Beast itself—the Fed’s own web page—we get the following description
The Federal Reserve controls the three tools of monetary policy—open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
So like the Beast says: Insofar as the extraordinary measures the Fed has taken over the last two years or so, what matters is the Fed’s Open Market Committee (FOMC). The Board of Governors plus four of the regional Federal Reserve presidents serve on the FOMC, the four regional Fed presidents serving on a rotating basis. As the website says, the FOMC is “responsible for open market operations”—and that covers the original Quantitative Easing (QE), QE-lite, and QE-2. 

So who makes up the FOMC is crucial. The following is a list of the voting members for the 2010 calendar year, and a list of the voting members for the year 2011 starting at the first meeting, January 25: 

The first seven names are the permanent members of the FOMC, while the last four names are the rotating members from the regional banks.

Clearly, the Board of Governors—because of their permanence—is where we should start our analysis. So let’s:

Ben Bernanke: Little needs be said about The Bernank—we know him all too well. Clearly in favor of Quantitative Easing in its various iterations. Here’s a video interview of him on 60 Minutes broadcast this past December—notice the trembling lips and trembling voice:

(Frankly, it was surprising that the bond and equity markets didn’t all crash to smithereens on the Monday following this interview.)

William C. Dudley: A former employee of Goldman Sach (1986–2007), where he held the post of Chief Economist for ten years, Dudley was hired by Timothy Geithner when he headed up the NY Fed; when Tinny Timmy went to Washington, Dudley assumed his old job. Close ties to Wall Street as well as hedge funds and private equity firms. He has supported The Bernank in all his foolish schemes—back in October 2010, he gave a speech where he said, “Viewed through the lens of the Federal Reserve’s dual mandate — the pursuit of the highest level of employment consistent with price stability — the current situation is wholly unsatisfactory.” This was the signal to Wall Street that QE-2 was a definite go. As the situation has not materially changed—unemployment steady at about 10%, “core inflation” at less than a percent—he will likely be at the vanguard for pressing for more QE, if QE-2 isn’t shown to be producing results when it expires in mid-year.

Elizabeth A. Duke: An up-from-behind-the-teller’s-window-by-her-bootstraps banker, Duke studied physics in college before switching to drama (I’m not kidding), graduating from Chapel Hill in ‘74. She worked as a teller, then rose rapidly through commercial banking, picking up an MBA at Old Dominion in ‘83 without interrupting her steady climb, with lots of positions in the local banking industry establishment. She’s a commercial banker—not an economist, not an investment banker: She’s a troops-on-the-ground community banker, housing being her thing; see this recent speech. She’s clearly in favor of keeping real-estate prices propped up in order to “stabilize” the economy—so she’s a hard-core supporter of QE insofar as it guarantees that real-estate prices will not “fall”. She recently declared that rising Treasury bond yields signalled, “If the market expects the economy to strengthen, investors ratchet back expectations for Fed purchases and reduce their bid for the assets, and rates rise.” Her blindspot is obvious: She doesn’t see the dangers of QE—so she will push for more of it, as it helps real-estate prices remain at their bubble level.

Sarah Bloom Raskin: A career government bureaucrat, Amherst College and Harvard Law, appointed by Barack Obama, her last post before taking a seat on the Board of Governors was as Maryland’s Commissioner of Financial Regulation. She assumed her post this past October, but considering her relative lack of experience, newness on the board, and the fact that she’s a career bureacrat, it is unsurprising that she voted in favor of QE-2. At this point, she seems to want to beef up the Fed’s regulatory responsibility over banks, if a recent speech is any indication. Then again, it could be an Obama Oration: Filled with promises that don’t mean squat. At this point, she’ll likely vote for an extension of QE-2 once it expires in June. (I’d like to write more about her, but she seems like the Democrats’ version of Katherine Harris—and just as boring: Another brunette suburban mom whom my mother would be friends with. BTW, Harris and Bloom shared an alma mater: Harvard.)

Daniel K. Tarullo: A law professor at Georgetown, his alma mater, but he’s been around: That think-tank-academia-advisory nether world of the Council on Foreign Relations, Princeton visiting professor, posts in the Clinton administration, “Deputy Assistant Advisor to the President”, up to and including Clinton’s envoy to the G-7/G-8. One listen to him, though, and you realize he is a complete fucking idiot—a windbag blowhard shit-for-brians stuffed shirt. See this video of a recent interview on CNBC. He seems to think spending is all that matters, that jobs creation will “catch up”, that there is no incipient inflation. He voted in favor of QE-2, though says he’d have a “high threshhold” about any extension. Yeah right: Blowhards always try pretending they’re tough, when they’re really just wimps

Kevin M. Warsh: The baby in the group (Stanford ‘92), he’s an attorney (Harvard Law ‘95) by training, appointed to fill a Fed Governor vacancy whose term expires in 2018—so he’ll be around for a while. He started his career with Morgan Stanley, eventually running their M&A department in less than seven years—impressive corporate climbing abilities. In 2002 he joined the Bush administration, becoming a Special Assistant to the President. Like a good Bush crony, he was rewarded with the Fed posting. The appointment was severely criticized, but Bush pushed it through, and Warsh charmed the other Fed governors, including Bernanke. What does that tell you? That he can suck the chrome off a trailer hitch—so therefore, he has no ideas or opinions of his own, following what’s popular among his peer group. A recent WSJ editorial he wrote was stunning in its blandness—all that clearly came through was his desire to see Federal government spending curtailed or cut. Strong ties to Wall Street, he’s also married to an Estee Lauder heiress—hence very wired to the NY money scene. Considered very savvy politically—obviously. And despite his mealy-mouthed editorial, he voted in favor of QE-2—and will likely vote for “extensions” of the policy.

Janet L. Yellen: A Brown A.B., Yale Ph.D. in economics, Yellen was the Fed President of the San Francisco Bank, and was only recently appointed to the Board of Governors—just this past October. But boy!, has she made an impact! She is The Bernank’s staunchest ally on QE-2. Starting her career in academia, in the economics department at UC Berkeley, she flitted through Democratic Party policy circles, landing jobs in the Clinton administration, including his Council of Economic Advisors, before landing in the San Francisco Fed. As an alternating regional member, she was part of the FOMC since 2009—and so was all gung-ho about QE, QE-lite, and the QE-2. (I can’t resist this: She’s married to George Akerlof, who shared the 2001 Nobel Prize in economics with Joseph Stiglitz, which makes me wonder: When they’re doing it, do either of them yell out, “Who’s your dirty little econometrician! Who’s your filthy little macroeconomist!”) Yellen is firmly in favor of QE-2, and has signalled she is thoroughly in favor of more QE, if necessary, viewing the likelihood of any inflationary ill effects as a phantom menace.

So much for the Board of Governors. 

Now of the past regional members, only Thomas Hoenig was clearly against Quantitative Easing, and the other novel approaches to monetary policy that the FOMC implemented with the start of the Global Financial Crisis in 2008.

But Hoenig is now out (he will still attend the meetings, of course, and can voice his position—but he cannot vote). So let’s look at the new FOMC members who will be assuming their places at the year’s first meeting this January 25:

Charles L. Evans: A zero, but at least a well-intentioned zero. A B.A. from UVA 1980, Ph.D. in economics from Carnegie Mellon, he backed William Dudley’s October speech—in fact, he’s believed to want even more QE, in order to reduce unemployment. He’s the poster boy for the If-All-You-Have-Is-A-Hammer-Every-Problem-Looks-Like-A-Nail School of monetary policy—more Fed stimulus in order to boost employment. The 10% U-3 rate clearly makes him bug-eyed—but though his heart is in the right place (and in fact the only FOMC member who voices serious concern about the unemploye—which is an ominous omen unto itself), Evans is clearly willing to go far beyond QE-2, for the sake of the unemployed. He’ll not only vote with Bernanke—he’ll be egging on more and more QE as the unemployment remains high.

Richard W. Fisher: Fisher’s a more interesting guy, at least on paper: Born 1949, raised in Mexico, Naval Academy, Harvard B.A., a couple of years at Oxford studying Latin American politics (that must’ve hurt), then an MBA from Stanford, before starting at Brown Brothers Harriman. He joined the Carter administration’s Treasury department, then rotated back to BBH, before striking out on his own with Fisher Capital. He went back into government during the second Clinton administration and worked out trade negotiations, specifically NAFTA; the Oxford stuff finally paid off. Then onto academia, paving the way for a Fed slot with the Dallas branch. So someone who has a lot of experience to draw upon—especially as he was a player in the Carter years, during the Iran Oil Shock and the spiralling inflation, plus his Latin American history probably serves him well, as he understand how inflation can spiral quickly out of control. He was very wary of QE-2, and is now firmly opposed to any measure to expand or extent QE; it’s unclear whether he’d actually like to cut short QE-2, though that is simply not going to happen.

Narayana Kocherlakota: He’s a geek, graduating from Princeton at 19 and getting a Ph.D. in economics from the University of Chicago at age 24. A round of high-level academic posts followed, culminating in his being named Minnesota Fed Chairman in 2009, at age 46. What does this tell you? He’s a guy who goes with whomever he perceives as powerful—an establishment lackey. Any criticism coming from him sounds hard, until you unpack it: For instance, he says that the Fed’s “failure” during the 2008–09 crisis was that the Fed did not “clearly articulate” the case for bailing out the banks—in other words, fitting right in with the Obama administration’s mindset (the mindset of our sorry age, really), according to Kocherlakota, it was all a PR problem, not an actual problem. Just a couple of weeks ago, he claimed that the Federal Reserve did not cause the housing bubble; in the same speech, he said he is “an agnostic” as to the causes of the bubble—in other words, like a lot of superstar economists, he has no idea what caused the Global Financial Crisis, considering it a Who-coulda-known-it phenomena. He is predicting 1.5% to 2% inflation for 2011. Though he’s pretending to be semi-on-the-fence, he is definitely in favor of more Fed liquidity measures, probably including (though he has not said this—yet) an indefinite extention of QE-2.

(I respect him the least because he’s the smartest of the bunch, yet is clearly an establishment suck-up: So he’ll have the brainpower to recognize what’s right, but will not have the balls to vote for what’s right—only for what’s expedient.)

Charles I. Plosser: With a B.S. in engineering (Vanderbilt ‘70), MBA and Ph.D University of Chicago (1972 and ‘76), Plosser spent most of his professional life as an academic, serving as the Dean of the business school of the University of Rochester, with various pit-stops in the private sector, advising various name companies, but always staying in Rochester. He is quite open about his opinion that he was in favor of the original QE in 2008–‘09, when the shadow-banking sector collapsed and there was an urgent need for liquidity. But since then, he’s been very leery of Fed interference in the economy. In a recent speech, Plosser said, “To suggest that monetary policymakers must act simply because fiscal policymakers were unable or unwilling to act is not the proper way to conduct policy.” Right on, my brother. He’ll vehemently oppose any further QE, as well as any efforts—blatant or stealth—to monetize the fiscal debt.

So bottom line: Of the current members of the FOMC, all save Plosser and Fisher were in favor of Quantitative Easing 2. And moving forward, it is easy to see how Bernanke can have a sizeable majority for any extension ot QE-2 into the indefinite future.

Looking at just the Board of Governors, they all genuinely and honestly believe QE-2 is the right policy—and since they are the undisputed majority, under Bernanke’s leadership, they clearly have every intention of making it work, no matter what.

So the shift in the regional chairs—though it adds one more vote against QE-3 or QE-4—does not significantly change the current direction of the FOMC.

(As an aside: Apart from Fisher, I find the narrowness of the thinking of this group rather startling; even Plosser, I’m sorry to say. It’s not that they’re team players sticking to a public script—they really and genuinely do not have many differences in outlook, regardless of their personal backgrounds. They focus on the same thing—spending and consumption—and play down the same thing—unemployment (except in the aforementioned case of Charles Evans). They see growth in GDP as the be-all-end-all, yet aside from Plosser, none of them show much of a reaction to the shocking levels of fiscal debt that the United States Federal government has incurred. And aside from Plosser and Fisher, they all summarily dismiss any suggestion of inflation. The mention of the word hyperinflation is enough to get them all to coolly dismiss the interlocutor. This narrowness of vision—this homogeneity—leaves them huge blind spots that seem quite obvious to others. Yet they are completely unaware of them: It’s not that they know they have blind spots, or even that they argue with people claiming they have blind spots—they dismiss and reject anyone who even suggests that they might be running blind. And these people are running the U.S.’s monetary policy. Mm-hmm.)

Why This Is All So Terribly Wrong

A central bank cannot be playing Russian Roulette with monetary policy: Yet it is obvious to anyone with half a mind that the Fed is running scared, doing whatever is necessary to prop up the U.S. economy. The very existence of such an ad hoc, unsustainable policy as QE-2 proves that they are running scared—and running blind.

Clearly, the Federal Reserve does not believe in capitalism. If it did, it would allow companies to fail—indeed, it would allow the economy to fail, get back up, dust itself off, and rebuild itself. Creative destruction: The pain that is an inevitable part of capitalism is exactly what the Fed is hell-bent on avoiding.

This is a policy mentality that started with the previous Fed chariman, Alan Greenspan, and the famed “Greenspan Put”: Easy Al’s willingness—nay, eagerness—to flood the markets with liquidity, in order to avoid even the slightest downturn in the economy . . . which retrospectively we all now realize created bubble after bubble, which eventually popped when the real-estate bubble went bust, and the shadow-banking sector (which the Fed was supposed to supervise and keep from becoming systemically dangerous) blew up, and threatened to swallow up the entire world economy.

Greenspan clearly did not believe in capitalism’s creative destruction—he tried everything in his power to stop it during the 20 years of his tenure. And he created the mentality within the Fed that said creative destruction had to be stopped.

Hence The Bernank. Hence the iterations of QE. Hence the Final Bubble—Treasury bonds: When that bubble pops, it will be all over for the dollar.

Hence, at this point in time, what the Federal Reserve and the FOMC have to do is increase interest rates, tighten money, and let the creative destruction of capitalism take place: Let those weak companies and zombie banks be wiped out, and start over.

This of course will never ever happen. And since it is clear from this brief survey that Ben Bernanke has the votes to continue adding more and more easing to his latest version of QE, there is very little that can be done: Once QE-2 is complete in June, it is likely that Bernanke will press for an extension of the policy (as his original statement regarding QE-2 outlined that he might), and continue in $75 billion monthly increments. This policy will inevitably end in tears: The Treasury bond bubble will burst, and inflation will gallop to unprecendented heights as there is a run on the dollar—a direct result of the QE policy.

Therefore, the next thing to be wondering about, regarding the Board of Governors, is whether they will raise rates aggressively against inflation, so as to halt inflation firmly and shore up the dollar; or whether they will raise rates as the Fed did pre-Volcker: Piecemeal, little by little, reacting to inflation rather than getting out ahead of it. (For a brief overview of the ‘79 crisis, and the Fed’s reaction to rising inflation during Volcker’s tenure and just before it, see my post Was Stagflation in ‘79 Really Hyperinflation?)

Considering the current composition of the Board of Governors, it will do whatever it can to avoid the short term pain. Therefore, interest rates will not rise, when inflation starts up for real. Therefore, when the Treasury bond bubble pops and the dollar begins collapsing, the Fed will not provide effective leadership in saving the American currency.


  1. From Kansas, Thank you for providing such a insightful introduction to these important individuals. Your spin on some of the personalities was enjoyable - nice break on a painful reality. --

  2. These guys want inflation. They are defenders of the status quo, which means a credit driven economy, where increasing levels of debt drive additional consumption resulting in nominal economic growth. The only way to return to the pre-crisis status quo is by using inflation to reduce the real value of debt. They are making a conscious policy decision to confiscate wealth from savers, and redistribute it to profligate debtors, by debasing the value of those debts in real terms. As you know, GL, the problem is in their overconfidence regarding their ability to put the inflation genie back in the bottle once it has been released. Though they may be well intentioned (even if you find their ulterior intent idealogically repugnant), their hubris is going to sink the whole ship when inflation gets beyond their control. This is all not to mention the unforeseeable second and third order consequences, such as the food inflation induced revolutions that are brewing and/or boiling over in some strategically important emerging markets.


  3. Charles Plosser wrote the following a few years ago. I've very much liked him since.

    "To insure the credibility of monetary policy, we should never ask monetary policy to do more than it can do." -Charles Plosser, FOMC

    Inflation might be a valid goal if Bernanke believes that the world is still at risk for a deflationary spiral. That possibility is looking slimmer every day.

    Right after WW-II, there was an explosion of inflation (20% one year). This is because there were wage and price controls all during the war. When those were lifted, natural economic forces took hold.

    This QE strategy is EXTREMELY dangerous, in my opinion. The explosion this time will likely be much bigger. Monster inflation may strike a fatal blow before the the US can tame it.


  4. GL

    In your earlier post about monetizing of 60% of the Federal government’s deficit, now you state it is 50%.

    Which is it 60% or 50% ?

  5. This comment has been removed by the author.

  6. China must be licking their chops. I wonder what Hu said to Uncle O behind closed doors and after the ringing in his ears stopped after listening to the schnauze (Streisand)? These guys, Reds, are poised to make the great leap forward again. They have very little regulations on their power generation, for example. I know first hand from working at the Rizhao Generating Station and observing how little they "scrub," their stack's effluent. The economic gloves are coming off here and they are gearing up for big changes.

    Will Republicans make much difference? I doubt it. Seems like the Chinese are treating America like we did with Britain and France after WW I.

    C deK

  7. I think your article is dead on target.

    That said, this very temporary correction on PM's means nothing whatsoever. (the paper vs the physical markets have been in disparity for quite some time now, anyways)

    Watch the prices of Rice, Corn and WHEAT, climb through the roof this year. By the end of Q2, (IMHO) those commodities will make the case for hyper inflation SO strongly, that only the thinking impaired or willfully stupid will fail to notice or realize selfsame.

    Real live, in real time, INFLATION. Btw, I expect the UE figures to deteriorate markedly by the end of Q2 as well. Particularly U6.

    THanks for your article, it provoked much thought upon my part.

    josef zack NY

  8. great insight, but I wish GL would also focus on who owns the FED. I know two, Barkleys, and HSBC. now why would we have foreign banks who own the FED? and why would foreign banks give a dam about the value of the dollar?

  9. GL,
    I believe the ICB will actually trigger a currency collapse chain reaction with their 51 billion Euro press run bailout yesterday.

    It was only a matter of time before other, and then "all", central banks crank up the presses. Now it's just a matter of how fast it spreads. Bonds or currencies, its all paper, and the terrible realization that it's all just as worthless as any other counterfeit hoard becomes once it's discovered to be counterfeit begins the global stampede to commodities. The lock is off the gate, and the herd is already quite uneasy.
    Somebody yell, "Hee-yahhh", I'm tired of waiting already. Let the great cleansing begin.

  10. What would happen if the Fed - at this stage of the game, with the amount of Debt - in all its permutations, 'got out in front of inflation'...?

    It doesn't take a hard swallow to figure out what would happen, which is why they are all in lockstep with each other.

    You don't have to be a genius to figure out that this is as much a SOCIAL (unrest) liability as it is an Economic one.

    These people aren't stupid or 'clueless'. They know our societal make-up is not what it was in the 1930's, and they know that the country would descend into a maelstrom that would make the Soviet collapse in 1990 look tame by comparison, if they were to 'get out in front of inflation'.

    It's been a Hobson's choice for a LONG TIME already. The only difference now is the rapid reduction in the amount of time they have before the 'choice' must be made.

    I would suggest the choice has already been made and they are buying time - along with the Federal Government, in order to figure out how they are going to handle the chaos that ensues once the currency flight takes place.

  11. GL,

    Excellent analysis of the people sitting at the helm of monetary policy.

    Did you see this paper?

    What do you think of the argument presented there?

  12. Thanks for your insightfull comments.

    Yes, unless a black swan lands on a FED meeting table, more QE is coming. My minor disagreement is: they will up the numbers. By May, it will be obvious their poison is not curing the economic patient. The conclusion will be that they haven't done enough. Result: Larger doses.

  13. They are socialists through and through.

    Their entire goal in life is to stop any one party or sector from being destroyed if they have the power to save it by leaching off the rest of society.

    And it's why no matter what they say now, if some big states and municipalities start going down, you can bet your decreasingly worthless dollar the fed will be in there trying to "help" those municipalities.

    and btw, using the chrome browser it is HARDER THAN HELL TO GET A COMMENT POSTED ON THIS BLOG

  14. I first want to echo this comment:

    "...and btw, using the... ...browser it is HARDER THAN HELL TO GET A COMMENT POSTED ON THIS BLOG "

    "Preview" goes nowhere.

    Thanks for the post; it helps me stay with my gameplan to be more certain that their gameplan is simply to "inflate their way out of the current problem."

    It's particularly helpful on a day when gold appears ready for a "triple bottom", at least according to my gameplan.

  15. Beware the true believer. True believers are more dangerous than evil people. Yes, as they say, "if it isn't working, we need more"! SImilar approach to that of "water-boarding".

    What's the road to hell paved with?

  16. QE seems to be like an opiate. Gives you a very pleasant feeling but it is addictive and deadly if too much is taken. OTOH, if you are Dr. Fed and you want a second opinion you see that Dr. Euro is treating his patients with a harsh regimen of austerity with only aspirin for the pain.

    So which treatment is better? Will the American patient die but more slowly and more comfortably than those in Dr. Euro's clinic or does Dr. Euro's treatment offer some hope of survival as unpleasant as the treatment maybe?

    To this question we need to consider the patients themselves. Small romantic nations on the periphery of Europe are expendable. They can used for clinical trials. Administering that kind of medicine to a superpower could be dangerous not only to the patient but to the hospital if the patient has an adverse reaction.
    Might be best to keep this kind of patient sedated as long as possible and hope for the best. The reason? Has a modern advanced economy ever gone through an economic collapse where there is no outside rescue possible and all government social safety net provisions are withdrawn?

    Weimar Germany perhaps but how extensive and ingrained were government programs in post WW1 Germany. Japan and Germany certainly collapsed in 1945 but being under foreign military occupation eliminated the possibility of chaos.
    We are really in uncharted waters now and that has to be considered.

  17. Hi guys,

    For your consideration: I got this from a reader, who asked to remain anonymous:

    "In regards to your excellent breakdown of the Fed, Charlie Plosser is a schemer. He talks a good game but he appears to be angling for a bigger job. He’ll come out against QE3.0 until “push comes to shove” then he’ll fold. I don’t know him personally but I got my MBA at UofR while he was a prof/dean. I’d prefer if you don’t use my name if you post this but I’ve followed him for awhile. "

    This is what the reader wrote to me. I checked him out, and he was indeed at Rochester when Charles Plosser was Dean. That being said, this is just an unverified opinion from a former student . . . but a lot of times, students know the teachers better than anyone.

    Take it for what it's worth: Maybe nothing, maybe something.


  18. Well, at least you are up to speed on the inworks of the FED. The problem is that most of those that could make a difference are either so engrossed within themselves, or are much to scared to voice an oppinion. Sounds like the same thing doesn't, so does the FED when you really start to get to the root of the problem.

    Of course everyone is scared to death of hyperinflation, who wouldn't be, I know I am. I worked for the World Bank group, and no I am not an economist or social advocate, who was against the all powerful group as a voice of reason. I had a loud voice that was drummed out at every turn of the way, which is exactly what the FED is doing now with the country as a whole. They drown out the small and loud voices.

    This is exactly where they want us. Before I worked at the WBG under Voelker and others I was in "Military Intelligence". Yeah, Yeah, I know its an oxymoran. I wrote scenarios, all kinds, which also included social actions. These scenarios pointed out how a group of zealots, or a grassroots organization, could be controlled or destroyed by simiply working within the group and coaxing opinon from members that brought doubt and fears to the surface. Placing controlled comments, never first hand to the group as a whole. The actions of an angry man is more easily controlled than one that is cool, clam, and using reason. Thus, America is on the verge of becoming that mass of the Angry man and sytematically being whipped by those that want him to continue in his selfdestructiveness.

    When the monetary bubble bursts, i.e. "Marital Law" will be the one controlling the Angry Man. But, who will be controlling the controller?

  19. someone who is in Australia, its sometimes easier to see A Big Picture, from the outside looking in.
    My take...the whole Fed money system is a slow motion money pyramid. A multi generational ponzi, set up in 1913. It was always known it would fail, in the future, and the future is NOW. The Fed marches to an entirely different drum to its advertised rationale. Its designed to be a BIG MOSQUITO. Quietly sucking all the blood out of the body, over a century. Exchanging worthless bits of paper for the blood/sweat/tears efforts of generations of hard working Americans. Its the ol Dracula in charge of the bloodbank routine.
    The Fed is stacked with those that will enable its parallel agenda. Always has been, where at all possible. Its a STEALTH BOMBER, black of heart. Can you say TOTAL deviousness, deceit, and sheer cunning.These things are very clear, doing research on the totally UNNECESSARY FED.From its poisoned waters (money supply) flows to all organizations and entities using money eg a poisoned society where fake substitutes real. It has just about done its full job...a compounding of real wealth/power/control away from citizens, and flowing to the top of the Black Pyramid. Untold wealth and power in the hands of a few, who operate in the shadows, benefitting from The Siphoning Machine. And seriously short circuiting the genuine endeavors of much of the world, linked to the USD. And America sleeps on. Til its all gone.

  20. As a layman and somebody who try’s to keep up with the ongoing destruction of western civilization, I’m a little leery of any organization this top heavy in academics. I don’t see anybody who had make a payroll make a product or sell a product or service. All I see are people who spent most of their working lives in Government, some collage, and a couple in Wall Street. Am I the only one who’s finds this worrying?

    Great post GL

  21. Sheesh - bad enough we have such a collection of Barnum & Bailey clowns in D.C., we have the same club directing the Fed. Boy-oh-boy, we are dead as a nation. Empire over. Rosetta Stone has a great Chinese program, BTW.

    Thanks for painting such a clear portrait of these misguided evil-doers. More incentive to get busy protecting myself and my loved ones. Only sensible action to take now.....

  22. As a tax payer I'm noting one very big problem. When they print they not only spend the money, but expect me to pay the money back to them. They issue the money and think they receive my I.O.U. for it. And I don't even get the fake money to spend, but someone in Washington decides what it buys. What it buys normally does me no good. I am not given the choice of whether I accept the dept or not nor am I allowed to spend the loan. Some bodies stupid if they think I'll do business under this kind of arrangement. Let's require the Federal Reserve to destroy all bonds purchased by their easing at no cost to the tax payer. That is the only thing even close to fair.

  23. I once heard Bernanke said that in response to the QE's effect on China that China should just adjust their exchange rate upward. I noticed that he was smiling, in a nasty manner. May be the whole exercise is to reduce the debt by printing money. Now, we have the biggest debtor coming to the door and ask for money. All that the biggest creditor can do is to show them a good time, with all the face they need. In order words, to shuffle them off.

  24. The composition of this board is laughable. Mostly Jewish (not of interest, just observation) and all academics one need only look to Weimar Germany to what this group has done in the past. NOT ONE FROM THE BUINESS WORLD except a gangster or two from a Wall Street toilet. Just despicable that the people would allow such a group of dopes destroy their country. Get rid of this group and disband the Federal Reserve, they do not represent the country; they represent the Goldman Sachs crime ring. ML

  25. It would have been interesting to read more about what secret societies the Fed governors are members of. I bet they're all buddies and related through family connections or through society orders, be it scull and bones, freemasons, bilderbergers, zionists etc...

    Maybe you can dig a bit more on that end?

  26. Decent enough idead behind the article: they are all blowhards. Even Bernank is backpeddling though on QE3, when he said "he see's signs of a sustainable economic recovery." We'll see, one must always think about incentives; and they no the heat is on them---why else, 60 minutes--and may try to vote simply to maintain some facade of sanity.

    Richard Fisher is the real real: just read his article titled "The Road to Fiscal Sanity?" It is excellent and he understands that QE will lead to Hyperinflation should it continue. Period. Read it: just google the title and you'll find it.

    The problem is that it doesn't matter what they vote for: our debt will have to be monetized beyone June '11 since there's no enough captial to plug our unfunded deficits. So it may not come via QE3 post June, but it nevertheless will come.

    The debt ceiling will be voted on within the next couple months: that is what will actually set the tone for which way the pedulum goes now. The Fed doesn't matter anymore unless congress gets there acts together at this point. No balancing of the budget will just ensure debt monetization.

    Watch the circus unfold. Volatility is coming.

  27. GL,

    Thank you for a very entertaining summary. I agree that Fisher replacing Hoenig as the FOMC's token hawk will change little - the FOMC have backed themselves into a logical corner. Namely, keep printing money until the unemployment rate comes down (and keep praying that inflation doesn't take off). Treasury bond yields are already backing up despite QE2 but the FOMC won't admit that their policy isin't working because none of them has a Plan B.
    Unless the FOMC gets lucky and the US economy starts to create jobs in a big way, it is going to be up to the Bond Market to teach Benny & the Fed a lesson. Just as the Bond Markets have recently taught Greece and Ireland a lesson - unfortunately it isin't pretty and a lot of ordinary people get hurt in the process.
    Keep up the good work.

  28. Debts of nations have always been inflated away by using QE to whatever degree necessary.

  29. I certainly appreciate your analysis, Gonzalo, but I think you and many others might be missing a crucial (if bleak) interpretation of what is being played. I suspect that all members of the Fed know exactly that this will end in an ultimate black hole. The game that they are playing is to make the game last as long as possible before the hole starts spinning uncontrollably. This has the advantage of drawing in as much money as possible from outside of the U.S., which will make the crisis much worse for everyone in the world. Then, when the cards are dealt out again, the U.S. takes a *less* exceptional position than they would right now (or two years ago). I think THAT'S the real game.

  30. The article is good. The Fed should have only been concerned with inflation, period. Alan Greenspan made a huge mistake. I think this present bunch will continue to compound the error. Let failures fail, let bubbles pop, let those who make mistakes pay the price of mistakes, not the taxpayer.

  31. Love the 60 minutes clip. You know why unemployment is 10% Ben? Because we suck. We don't make anything we need in America except housing, food, shitty cars and shittier movies. Unemployment should be 10% and the only reason it was higher a few years ago was because Wall Street robbed pension funds to build unaffordable houses and an industry was temporarily built to support it.

  32. Interesting blog post. I think you would be better off researching the FINANCIAL STABILITY BOARD of the BANK OF INTERNATIONAL SETTLEMENTS, in case you don't know what that is.... as in the most powerful corporation in the world, and the most powerful body ruling over world markets (read: manipulation across 169 coordinated central banks, including our own central bank, the US Federeal Reserve).

    Why focus on just one central bank in the US? You now have 168 other central banks to research. Start at the top. Go straight to the BANK OF INTERNATIONAL SETTLEMENTS and do not Pass "Go."

    Then research the two financial arms of the United Nations -- the World Bank and the IMF -- who controls those? Hint: The World Bank was envisioned and created by two communists.

  33. They are making a conscious policy decision to confiscate wealth from savers, and redistribute it to profligate debtors, by debasing the value of those debts in real terms.The Fed does not matter any more unless congress gets there acts together at this point.


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