It seems that the Federal Reserve will not stop fornicating with our free market capitalistic system until it is no longer free and capitalism is extinguished by over-regulation. Markets themselves can only function properly when there is a bond of trust between honest supply and demand. Fornicators sever the bond of trust and the Fed has become a serial fornicator. The Fed, complicit with the current and past chairman, egged on the current credit bubble with a ‘hear no evil – see no evil’ approach to lending standards. They have brought the financial markets to the abyss of collapse with their derivatives and swaps. They ignored the real estate mania such that it has unraveled into a real estate foreclosure barrage that has become the crisis of the day. But of course, every fornicator must have a consenting partner. That partner is us. We have accepted the Fed’s seduction of credit and thus allowed them to have their way with us. Sure, they may have liquored us up on big houses, fancy cars, and plastic money that is empowered by our simple signature. Our stock indices now have an implicit guarantee that the Fed is the ‘mother of all backstops’. We knew we would eventually have to sober up. We knew it was all wrong. Yet whenever the Fed called, we answered. Look at where it has gotten us.
The Fed has been working since day one to control our money. Why? For power and control. As Amschel Rothschild put it, “Permit me to issue and control the money of a nation, and I care not who makes its laws.” Complete control entails several steps. First, money has to be surrendered for currency. Money is real and it represents tangible assets. Currency is fiat and merely serves as a transactional medium. In that sense, currency is debt. How does one get a society to surrender its money for currency?
Simple. Step one. The value of the money has to be eliminated. It has to be disconnected from any associated or redeemable asset equivalent like gold. In other words, it has to be fiat-ized. This can best be accomplished through the orchestration of dreadful events that ultimately galvanize a society to respond in a way that produces an immediate need of capital. The finite nature of underlying assets limits the expansion of money. Currency, however, is limitless like all debt. When societies need a sudden increase in capital, they turn to currency.
Step two. The Federal Reserve was born in December of 1913 and World War I broke out six months later. One could argue that the Depression, World War II, Korea, Vietnam, the Gulf War, 9/11, and Iraq/ Afghanistan all produced immediate need for increased capital. If we had to fight with cash, we would all be peace-makers. With currency and the expansion of debt, our ability to respond monetarily became infinite. It seems the Federal Reserve was cooked up just in time! After all, the banks exist to lend. Real money is an exchange of assets. Fiat money is a confiscation of assets. Immediate capital needs are met by the central bank creating money to buy sovereign debt. But, the bank has a trick up its sleeve. The central bank creates enough money to buy the debt issuance but not enough for the issuer to pay the associated interest coupon. Thus more money has to be created for that and on and on we go. Eventually, the currency is worth nothing. The US is moving closer to this realization as each day passes.
Once the currency is completely devalued, the debt that caused the devaluation becomes the instrument of enslavement. Now the central bank is in charge. Step three. Currency is whatever they say it is. All the money becomes collateral for the currency that is issued. Control is complete. We now use Federal Reserve Notes or derivatives for currency. And, we mistakenly call them both, ‘capital’.
Step four. Along the way, the central bank conquers the government through debt expansion and the government becomes an extension of the bank. As such, the government switches allegiance from the people to the bank. Yet, the shift is so subtle it is lost on the masses. But if we watch closely, we can see hints that something is amiss. For instance, at the moment our Federal Reserve is busy stuffing its balance sheet with US Treasury bonds to take the place of bad mortgage paper bought from the bad banks. The Fed calls this exercise ‘quantitative easing’. Where do they get the money? They invent it. Are they profitable? Some would argue ‘no’ (the Fed even claims to be ‘non-profit’) but I would suggest that if any company could grow their balance sheet by a trillion dollars in a year, we should consider them pretty profitable. Back on point. Why inject more money at this point in time? Again, there is a war going on and it is about control. The Fed is selling a story of possible ‘deflation’ to justify the currency influx. Consider the following headline articles from Investor’s Business Daily, October 18, 2010.
Page 2: ‘Economy Coming Back – The growth rate of the ECRI’s leading US continues to improve.’
Page 2 (four inches lower): ‘US growth has “slowed down pretty dramatically”…’ according to Atlanta Fed chief Dennis Lockhart.
So which is it? Is the economy getting better or worse? Do we have inflation or deflation? Why does it matter? Fornication depends upon delivering a convincing line. The Fed has an agenda and it seems a bit disingenuous that the Fed is trying to foster more inflation now that millions of Americans have lost their homes, investments, and jobs. Inflation doesn’t do any good if you don’t own anything. But the banks own more real estate than private citizens. Aaahh - control.
A picture is worth a thousand words. So here it is. This is POMO (Permanent Open Market Operations) at work. The chart below is a picture of the DIA ETF for the week ending 9/24/2010. This is an intraday trading look at five days of the best September in 70 years showing us the influence of the Fed. The chart needs no explanation. I call it, 'the Fornicating Fed' pattern. Just gather all of your currency, put it in the stock casino of your choice, and let the Fed make you a winner.! Quantitative Easing II should be like an anabolic steroid for dopey stock investors that confuse skill with shill.
DIA – Intraday 9/20/2010 – 9/24/2010 10-minute bars
Chart courtesy StockCharts.com
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented.
Copyright ©2010 BMF Investments, Inc.
