Federal Reserve

I love how our government thinks that this will work. They don't even give a shit. Must be nice to be able to create money to get rid of debt.  I call this an epic fail and a let down to the American people.  

From Dan Celia:

 

Federal Reserve

   

  ...was formed with the goal and objective of controlling deflation and inflation, of setting policies controlling our monetary system and the banking system...and to prevent any catastrophic event in the market...     

    

I spent a few days this week at an investment conference and thereby had an opportunity to listen to, and speak to, some of the largest investment managers (mostly institutional) in the country. It was interesting to hear their perspective on the Fed. On the one hand, most of them indicated that the Fed now has $3.1 Trillion of U.S. debt on their balance sheet. On the other hand, they still talk about China owning so much of our debt. Is the problem really China? Of course, the problem is China from the standpoint that they could call in the debt at a

ny time and decide they want out, thus causing  chaos in our financial markets. But I have begun to wonder how much chaos it wouldtruly cause. My guess is that we would print the money, pay China off, and then shift that debt to the Fed by printing the $1.2 Trillion that we owe China. After all, they are already planning on taking another Trillion Dollars in debt from us this year. What is another Trillion? When it comes to the Fed, the fact is that we have a system that has gone awry to the say the least. The Fed is celebrating its 100th birthday this year. It was formed with the goal and objective of controlling deflation and inflation, of setting policies controlling our monetary system and the banking system...and here is the big thing: to prevent any catastrophic event in the market. It is interesting as we look at the reasons the Fed was formed by Woodrow Wilson. Wilson was a progressive who was concerned about inflation and deflation but primarily, of course, in having a watchdog that would avert any catastrophic event. The fact is that the Fed has done an absolutely pathetic job at all of this. It was deflation that was instrumental in creating the depression just 20 years or so after the Fed was formed. I think theymissed that one. We have had numerousrecessions - some very deep (like the one we are in now which the Fed has totally missed). As a matter of fact, in 2007, the Fed actually addressed the real estate market and the debt market and did notthink there was anything about which to be concerned, again missing a big one. The fact is that the Fed, who is supposed to be on the lookout for any catastrophic events, is instead causing the next catastrophic event. The part which I find most interesting is that the Fed, as we again saw w  ith Ben Bernanke last week, continues to whine about the fact that Congress needs to do something. The Fed, having all the powerof the monetary system, now also has the power of controlling Congress. But for some reason, they refuse to exercise that power. All 

the Fed would have to do is say "We are no longer buying any debt." Period. By those words alone, the government would have no choice but to act very quickly on cutting their currentspending. There is no chance that the Treasury could sell the kind of debt to foreign nations that the Fed is currently purchasing. If the Fed would agree to stop buying, then Congress would, of necessity, be forced to act. The problem, however, is that the Fed actually believes the scenarios under which it is working. They actually believe that they can control the economic system and avoid any more catastrophic events. It is difficult to expect the Fed to do anything that is really positive when they believe that they have all the power and all the control they need, and that they can continue on their current path.

 

The most amazing thing to me at the investment conference this week was thatno one seemed willing to address this, to talk about it, or even to make an attempt to understand the dangers in the financial markets that the Federal Reserve is creating.  

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