The Fed Has Even More Tricks Up Its Sleeve

An excerpt from Bob Chapman's weekly publication. September 10 2011:

Jackson Hole meeting was a failure, Bernanke the failure, The Fed is on its own plan, a deliberate witholding of funds, a sign of inflation to come, an unleashing of funds to come, elitists desperate for distractions, Fed to blame for its own problems, warnings of stagnation amid restructurings.

Many people believe the Jackson Hole was a non-event, a failure and it was. QE 3 was not announced, as we predicted. We believe that was being saved for mid-September when the $300 billion rollover in Treasury securities is completed. Mr. Bernanke has failed in a number of respects, the most glaring being zero interest rates for 2-years and no housing recovery. Even purchasing $1.3 trillion in toxic mortgages has only helped the banks. We still do not know what the Fed paid and what these bonds are worth. No matter what happens the Fed has to again purchase about $900 billion more Treasuries this new upcoming fiscal year. There is no way to avoid that and if they have to buy Agencies and more toxic bonds the figures will be higher. Auction failures cannot be tolerated. This will, of course, increase inflation in 2013 and 2014. Sales to consumers and profits will fall as a result.

Not so fast, the Fed still has more monetary ammunition most people haven’t thought about and it lying on its books. It is the funds that belong to member banks, some $2 trillion that banks have been refusing to put to work. We mentioned the beginning of the movement of these funds from the Fed to the banks just recently. Will this persist? We do not know, but we think it will. It is a natural answer to the funding problem, they perhaps had been deliberately held in abeyance. We believe this could in part solve the liquidity problem over the next year or more. The Fed has sent the word out to the banks. It is time to employ our secret weapon. As a result in July and August we saw what is tantamount to monetary stimulus, and do not forget this is monetization, money that has not as yet flowed into the system. That means its usage will be inflationary.

Heretofore, these funds were deliberately withheld from the system to be used at the perfect time. There were plenty of borrowers, but the banks did not lend, because they were told to wait for the right moment. The unleashing of these funds leveraged into the fractional banking system will cause damage and inflation, but they will provide temporary assistance to a failing economy. The Fed also needed some relief as their balance sheet grew close to 25%. The combination of Fed spending for treasuries, bank lending and perhaps some government spending, should reinvigorate the economy temporarily over the next year. Unemployment should decline slightly and consumption and personal debt should grow. We think Mr. Bernanke’s plan will fall far short, because like in the 1930s too much structural damage has taken place. Demand for goods and services will grow, but not as much as anticipated and as long as desired. This unfortunately leads to disruption within the system for no other reason than the previous systemic damage visited upon the economy. We are about to see a respite but not a permanent solution. America is headed for 2nd or 3rd world status and the Fed is trying to get us there as soon as possible.

If you really want to understand how desperate the elitists are you have to take notice of their control of the US media. Every time they can a big deal is made out of every happening, such as the recent tropical storm, Irene, or the BP disaster, or anything to shift attention away from the dreadful state of the economy, unemployment, CPI or anything financially negative. In NYC, Irene, gave Mayor Bloomberg the excuse to make NYC look like a nuclear attack was underway. He ordered the evacuation of NYC, closes off transportation when he knows few New Yorkers have cars. This is how desperate the elitists are. Any distraction is used to take people’s eyes off the real problem. The Bloomberg theatrics were beyond the stage. He threatened to jail anyone who did not heed his dictates. What a meathead. He should have stayed in Medford, MA, where my mother lived near his family in the Lawrence Estates. This shows you how far the elitists will go and how ridiculous they appear, just to use their power. At the end of the farce, the coast had rain and high winds. The interior suffered more. Irene was essentially a phony scare – on a par with their phony financial and economic remedies.

As the corporatist fascist model comes more into play and becomes more obvious Americans are going to take orders from a more progressively authoritarian government that will eventually become dictatorial. These bubbleheads will overact all the way, because their power base is rooted in Wall Street and banking. They use the same concept with these events as they do with the idiotic terrorist threat. The people in political authority in America are control freaks. They are all dummies and they know it, and they’ll be the first ones thrown by the elitist to the wolves. They are a ridiculous tragedy.

The elitists do not care who gets elected the next president. They own them all except Dr. Ron Paul. We are told that to win the presidency one needs $1 billion. This is incredible and it proves why we need a change in campaign laws to harness the power of all those behind the scenes that buy our elected members. No member of Congress votes the way they want too. As soon as elected they are raising funds for reelection and in that process sell their souls.

One of the interesting factoids we have come across is the accounting for the US dollars loss of purchasing power due to inflation over the period of the last 2 years; half of the men aged 30 to 50 years saw wages fall 27%. Today only 63.5% of men actually have a job of any kind. This is the second lowest figure since 1948. The members of that era now shortly are going to be asked to have their retirement cut, which they paid for, to supply the military industrial complex with more money for more wars. As it turns out the Illuminists and their purchased politicians have sold Americans out for the past 100 years.

Mr. Bernanke at the Fed has indicated that the culprit in this financial mess is none other than the US government. He is right in part, but the Fed has caused 90% of these problems. The Fed should have long ago been reabsorbed into the Treasury, especially after observing its performance over the past few years. The lying about what they had been doing in lending something close to $20 trillion and keeping it a secret. Not to be outdone, both the US dollar and the Euro are in serious trouble and both have to find new lower levels. Versus gold and silver, they are both off annually more than 20% versus gold and silver. We expect those performances over time will worsen. In the case of the euro we have to see what is accomplished with Germany and the loans to failing countries. No matter what the outcome both the Fed and the ECB will continue to create money and credit one way or another and in that process achieve little except a temporary solution and substantially more inflation. In Europe, interest rates are 1.5%; in the US they are zero. What does one do for an encore? Very simply, both the dollar and the euro are in a box and cannot get out. If it’s not QE 3 and stimulus 3 at least for the time being it is the banks lending money that was lent to them two years ago by the Fed. All of the Fed’s and ECB’ policies do not work. We know that already. Those who believe that the Fed and the EB don’t know what they are doing are wrong. Both central banks know exactly what they are doing. That is creating a framework for the financial and economic destruction of economies of the US, UK and Europe in order to bring about a New World Order. In order to not allow the system to fail can never heal itself. Insolvent banks were legally allowed to carry two sets of books with the approval of the US government, the Bank for International Settlements, the BIS, and the accounting rules group FASB. What is very important to realize here is that some of these banks that are insolvent own the Fed. As a result they tell the Fed how much money and credit they need, and as a result they flow to the banks in unlimited amounts. This has to end. Banks are holding assets that have little or no value. They hold 3.5 million foreclosed homes in inventory and over the next five years that number will be 8 to 10 million homes worth 20% to 30% less than they are worth today. Yes, the FDIC would cease to insure and government will do what it did in the 1930s, allow you to withdraw only 5% of your balance at a time. Your deposits would essentially be lost perhaps temporarily or maybe permanently. Now you can better realize how really dire the situation is.

Supposedly everyone dislikes the debt extension bill and this is the reason Congress went along with the concept of a “Super Congress.â€