The Fed Is Reducing Our Value As A Nation

Logistics Monster

Alex Jones interviews former Goldman Sachs managing director Nomi Prins about the pillaging of the average American by the Federal Reserve and the big banks that has occurred in the effort to prop up the big banks. They cover S&P’s warning about America’s debt, the Obama administration trying to stop the warning from being issued, and what is coming down the road for us.

I call it financial homicide by the banks, and Geithner is sort of the accomplice because under him, the Treasury Dept. increased the Treasury debt by $4 trillion dollars. So for him to come around and say, ‘oh, by the way, if you; Congress, don’t increase the debt cap by, whatever amount, whether it’s a penny or a trillion, it doesn’t matter, the idea is that if we don’t incur more debt, our debt will become less worthy, which is just a.) not logical, and b.) how Geithner has operated thru the bailouts and since he’s been Treasury Secretary, which is to continue to deny that much of the debt problem, most of the debt problem, arguably all of the debt problem, has happened because of this imparting of debt to bailout Wall Street, to subsidize the financial system, to go back and forth between the Fed who buys the debt, the Treasury increases the debt, the Fed buys the debt, and has this sorta back and forth ball going between them which only decreases our value as a nation. Our entire book, our balance sheet as a nation, and the Fed will continue to do this.

We know that when June comes along, the Fed is going to go from QE 2 to QE whatever, they might call it something else; they will find ways to continue to throw this ball back and forth.

Nomi Prins, Former Goldman Sachs Managing Director: Bankster Collusion and Bailouts




HEARING OF THE SUBCOMMITTEE ON
DOMESTIC MONETARY POLICY &
TECHNOLOGY

Statement and Testimony of Lewis E. Lehrman
Chairman, The Lehrman Institute
Prepared for March 17, 2011 Hearing

I. Monetary policy, the Federal Reserve, the Budget Deficit, and Inflation
Since the expansive Federal Reserve program of Quantitative Easing began in late 2008, oil prices have almost tripled, gasoline prices have almost doubled. Basic world food prices, such as sugar, corn, soybean, and wheat, have almost doubled. Commodity and equity inflation, financed in part by the Fed’s flood of excess dollars going abroad, has profound effects on the emerging markets.

But in many emerging countries, food and fuel make up 25-50% of disposable income. Families in these countries can go from subsistence to starvation during such a Fed-fueled commodity boom.

The Fed credit expansion, from late 2008 through March 2011 -- creating almost two trillion new dollars on the Fed balance sheet -- triggered the commodity and stock boom, because the new credit could not at first be fully absorbed by the U.S. economy in recession. Indeed, Chairman Bernanke recently wrote that Quantitative Easing aimed to inflate U.S. equities and bonds directly, thus commodities indirectly. But some of the excess dollars sought foreign markets, causing a fall in the dollar on foreign exchanges. With Quantitative Easing the Fed seems to aim at depreciating the dollar. In foreign countries, such as China, financial authorities frantically purchase the depreciating dollars, adding to their official reserves, issuing in exchange their undervalued currencies. The new money is promptly put to work creating speculative bull markets and booming economies.

The emerging market equity and economic boom of 2009 and 2010 was the counterpart of sluggish growth in the U.S. economy during the same period. But the years 2011 and 2012 will witness a Fed- fueled economic expansion in the United States. Growth for 2011, in the United States, will, I believe, be above the new consensus of 3.5% -- unless there is an oil spike, combined with even greater catastrophe in Japan. The Consumer Price Index (CPI) will be suppressed because unemployment keeps wage rates from rising rapidly; the underutilization of industrial capacity keeps finished prices from rising rapidly. Inflation has shown up first in commodity and stock rises.

For Congress the irony could be that euphoria -- always caused by renewed, gradual inflation -- may set in once again, disarming potential budget and monetary reforms.
But commodity and stock inflation inevitably engenders social effects, not only financial effects.

Inflationary monetary and fiscal policies have been a primary cause of the increasing inequality of wealth in American society. Bankers and speculators have been, and still are, the first in line, along with the Treasury, to get the zero interest credit of the Fed. They were also the first to get bailed out. Then, with new money, the banks financed stocks, bonds, and commodities, anticipating, as in the past, a Fed-created boom. The near zero interest rates of the Fed continue to subsidize the large banks and their speculator clients. A nimble financial class, in possession of cheap credit is able, at the same time, to enrich themselves, and to protect their wealth against inflation.

But middle income professionals and workers, on salaries and wages, and those on fixed income and pensions, are impoverished by the very same inflation that subsidizes speculators and bankers.

Those on fixed incomes earn little, or negative returns, on their savings. Thus, they save less. New investment then depends increasingly on bank debt, leverage, and speculation. Unequal access to Fed credit was everywhere apparent during the government bailout of favored brokers and bankers in 2008 and 2009, while millions of not so nimble citizens were forced to the wall, and then into bankruptcy. This ugly chapter is only the most recent chapter in the book of sixty years of financial disorder.

Inequality of wealth and privilege in American society is intensified by the Fed-induced inflationary process. The subsidized banking and financial community, combined with an overvalued dollar -- underwritten by China -- have also submerged the manufacturing sector, dependent as it is on goods traded in a competitive world market. In a word, the government deficit and the Federal Reserve work hand in hand, perhaps unintentionally, to undermine the essential equity and comity necessary in a constitutional republic. Equal opportunity and the harmony of the American community cannot survive perennial inflation.

If the defect is inflation and an unstable dollar, what is the remedy?

Read the rest of the testimony.