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Old 05-13-2014, 04:31 PM  
Stewie Stewie is online now
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The great deceiver: The Federal Reserve

The great deceiver: The Federal Reserve


by Dr. Craig Paul Roberts



Is the Fed “tapering?” Did the Fed really cut its bond purchases during the three month period November 2013 through January 2014? Apparently not since foreign holders of Treasuries are unloading them.


From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.
Certainly Belgium did not have a budget surplus of $141.2 billion. Was Belgium running a trade surplus during a 3-month period equal to 29 percent of Belgium GDP?


No, Belgium’s trade and current accounts are in deficit.


Did Belgium’s central bank print $141.2 billion worth of euros in order to make the purchase?


No, Belgium is a member of the euro system, and its central bank cannot increase the money supply.


So where did the $141.2 billion come from?


There is only one source. The money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month.


In other words, during those 3 months there was a sharp rise in bond purchases by the Fed. The Fed’s actual bond purchases for those three months are $27 billion per month above the original $85 billion monthly purchase and $47 billion above the official $65 billion monthly purchase at that time. (In March 2014, official QE was tapered to $55 billion per month and to $45 billion for May.)


Why did the Federal Reserve have to purchase so many bonds above the announced amounts and why did the Fed have to launder and hide the purchase?


Some country or countries, unknown at this time, for reasons we do not know dumped $104 billion in Treasuries in one week.


Another curious aspect of the sale and purchase laundered through Belgium is that the sale was not executed and cleared via the Fed’s own National Book-Entry System (NBES), which was designed to facilitate the sale and ownership transfer of securities for Fed custodial customers. Instead, the foreign owner(s) of the Treasuries removed them from the Federal Reserve’s custodial holdings and sold them through the Euroclear securities clearing system, which is based in Brussels, Belgium.


We do not know why or who. We know that there was a withdrawal, a sale, a drop in the Federal Reserve’s “Securities held in Custody for Foreign Official and International Accounts,” an inexplicable rise in Belgium’s holdings, and then the bonds reappear in the Federal Reserve’s custodial accounts.


What are the reasons for this deception by the Federal Reserve?


The Fed realized that its policy of Quantitative Easing initiated in order to support the balance sheets of “banks too big to fail” and to lower the Treasury’s borrowing cost was putting pressure on the US dollar’s value. Tapering was a way of reassuring holders of dollars and dollar-denominated financial instruments that the Fed was going to reduce and eventually end the printing of new dollars with which to support financial markets. The image of foreign governments bailing out of Treasuries could unsettle the markets that the Fed was attempting to sooth by tapering.


A hundred billion dollar sale of US Treasuries is a big sale. If the seller was a big holder of Treasuries, the sale could signal the bond market that a big holder might be selling Treasuries in large chunks. The Fed would want to keep the fact and identity of such a seller secret in order to avoid a stampede out of Treasuries.

Such a stampede would raise interest rates, collapse US financial markets, and raise the cost of financing the US debt. To avoid the rise in interest rates, the Fed would have to accept the risk to the dollar of purchasing all the bonds. This would be a no-win situation for the Fed, because a large increase in QE would unsettle the market for US dollars.


Washington’s power ultimately rests on the dollar as world reserve currency. This privilege, attained at Bretton Woods following World War 2, allows the US to pay its bills by issuing debt. The world currency role also gives the US the power to cut countries out of the international payments system and to impose sanctions.


As impelled as the Fed is to protect the large banks that sit on the board of directors of the NY Fed, the Fed has to protect the dollar. That the Fed believed that it could not buy the bonds outright but needed to disguise its purchase by laundering it through Belgium suggests that the Fed is concerned that the world is losing confidence in the dollar.


If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. Political instability would rise.


If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills.


Its wars and hundreds of overseas military bases could not be financed.

The withdrawal from an unsustainable empire would begin. The rest of the world would see this as the silver lining in the collapse of the international monetary system brought on by the hubris and arrogance of Washington.




Dr Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal.

Last edited by Stewie; 05-13-2014 at 04:36 PM..
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Old 05-20-2014, 11:38 AM   #61
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Peter Schiff of Euro Pacific Capital discusses the Belgian Connection:

Just taking near the end because it's too long, but the link is provided, should anyone want it. I only skimmed read it, except for the end. I am just passing it along.

The Belgian head-scratcher may therefore be a simple case of central bank quid pro quo. In fact, on my radio program today, former Congressman Ron Paul shared my suspicions that there was indeed some type of “quid pro quo” coordination. While there is no smoking gun, the timing and scope of the buying is certainly suggestive of a coordinated effort. Confidence that the financial markets would stay stable during the tapering campaign was a critical element of the program’s success. Any panic in the bond market would cause yields to spike, which would have a strong negative effect on stock prices and economic confidence. If the fear persisted for more than a few weeks, the Fed would have been forced to an embarrassingly early backtrack. The lost credibility would have greatly limited the Fed’s latitude for further maneuver.

But what if the ECB started buying just as the Fed stopped? Better yet, what if the ECB purchases were larger than the taper? It would then appear that the Fed buying was simply a footnote in the current environment of ultra-low interest rates, not the driving force. It may not be coincidental that the Belgian buying began in earnest just as the tapering got underway. Something may in fact be rotten, and it’s not in Denmark…but several hundred kilometers to the southwest.

Rather than looking to explain the unusual spike in Belgian coffers, most market watchers are fixated by recent comments by Mario Draghi that the ECB is poised to launch a quantitative easing-style bond buying campaign in order to weaken the euro and to push up inflation in Europe. If that is the case, how long could the ECB be expected to fight a two-front monetary war…carrying water for the Fed while buying European bonds simultaneously? We must expect that any clandestine campaign by the Europeans to support Treasuries will have a brief shelf life, which could get even briefer if the ECB initiates their own QE.

It is a testament to the bovine nature of our financial media that this story is not being pursued strongly by all the power the fifth estate can muster. But who cares when rates are low and stock prices high? Have another chocolate. The Belgian ones are the best.


http://www.europac.net/research_analysis
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Old 05-20-2014, 11:45 AM   #62
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Quote:
Originally Posted by BucEyedPea View Post
Calling people "nuts" is use to crush dissent on a matter.

The same is done when the "racist" and "anti-semitic" charge is made.
It's actually what Aklinksy called for his followers to do.
Nope. Well, technically, any discussion involving different sides could be said to seek to "crush debate" since generally people are seeking to influence the other to their way of thinking. But I don't think that's what you mean, hence, "Nope."

As an avid user of the term, I'd say calling you nuts is a plea for you to re-examine your statements in the hope that you will realize the gaping hole in your assertion and/or argument where common sense, logic, or the actual facts of the matter should be.

You know what crushes debate? Ignoring. That's what Alinsky called on his followers to do. Ignore and repeat what you know is false is your standard operating procedure, and it is nuts.
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Old 05-20-2014, 11:47 AM   #63
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Quote:
Originally Posted by BucEyedPea View Post
And more often they're not--or exaggerated. The ones using them often are the real nuts though.A good example of ending a topic, at least in the mainstream media was Cliven Bundy.

I was gonna edit to those being "over-used" but you beat me.
I feel like you are saying this in order to crush debate.
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Old 05-20-2014, 11:53 AM   #64
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Quote:
Originally Posted by BucEyedPea View Post
And more often they're not--or exaggerated. The ones using them often are the real nuts though.
A good example of ending a topic, at least in the mainstream media was Cliven Bundy.

I was gonna edit to those being "over-used" but you beat me.
I agree that they're over-used, but let's agree that even if Ron Paul isn't a nut, he attracts more than his share of them. Present company excluded, of course.
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Old 05-20-2014, 12:02 PM   #65
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Quote:
Originally Posted by BucEyedPea View Post
[b]Peter Schiff of Euro Pacific Capital discusses the Belgian Connection:
@ someone citing Peter Schiff. He is a joke. His returns for the money he manages is a joke. It's not surprising that you still hold him out as some kind of authority.

It's even less surprising that you still don't understand that $100B in Treasuries wasn't actually sold. The Treasuries in question are no longer using the Fed as a custodian. Custody changes aren't the same as actually selling them.

Edit: and I just read his column. FFS, he is writing something that he either knows is false or should know is false. A change in custody is not the same as a buy and sell.
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Old 05-20-2014, 12:24 PM   #66
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Native's lazy sure, but the worst part is he doesn't even think he should back up any assertion he makes. He knows the truth but doesn't like revealing it to all his loyal subjects (so he thinks) on the board. Not going to bother even wasting 1 single keystroke explaining what he knows to fools on this board.


What he's really saying is: "I can't really explain my positions. And I really don't want to invite the challenges that it brings."
projection much?

sounds like a liar and coward that we all love - putin's magnificent pussy!!
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Old 05-20-2014, 12:30 PM   #67
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Quote:
Originally Posted by BucEyedPea View Post
Calling people "nuts" is use to crush dissent on a matter.
The same is done when the "racist" and "anti-semitic" charge is made.
It's actually what Aklinksy called for his followers to do.
but but but darling, nobody wants to crush your dissent (which is totally ****ing nuts on every level), they just want to marry you for your amazing combination of intellect and charm...
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Old 05-20-2014, 02:28 PM   #68
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Originally Posted by patteeu View Post
I agree that they're over-used, but let's agree that even if Ron Paul isn't a nut, he attracts more than his share of them. Present company excluded, of course.
That's true of the NeoCons too. They just carry the patina of acceptability. However, the NeoCon leaders are the true "nuts." Evil nuts at that. All one has to do is look at their results--conflict, death, destruction with no end in site. They lack conscience on it too. They see enemies everywhere which is truly a sociopathic trait. I am reading The Sociopath Next Door right now. It's no wonder most Americans are unhappy with our FP under Bushbama.
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Old 05-20-2014, 08:23 PM   #69
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Quote:
Originally Posted by BucEyedPea View Post
Calling people "nuts" is use to crush dissent on a matter. The same is done when the "racist" and "anti-semitic" charge is made.
It's actually what Aklinksy called for his followers to do.
Quote:
Originally Posted by BucEyedPea View Post
That's true of the NeoCons too. They just carry the patina of acceptability. However, the NeoCon leaders are the true "nuts." Evil nuts at that. All one has to do is look at their results--conflict, death, destruction with no end in site. They lack conscience on it too. They see enemies everywhere which is truly a sociopathic trait. I am reading The Sociopath Next Door right now. It's no wonder most Americans are unhappy with our FP under Bushbama.
Quote:
Originally Posted by BucEyedPea View Post
Calling people "nuts" is use to crush dissent on a matter. The same is done when the "racist" and "anti-semitic" charge is made.
It's actually what Aklinksy called for his followers to do.

.
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Old 05-28-2014, 05:24 PM   #70
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heh bump for a reminder of Stewie's economic brilliance.
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